challenger diversified property group (asx:cdi) · challenger diversified property group (asx:cdi)...

Challenger Diversified Property Group (ASX:CDI) Results for the year ended 30 June 2013 Trevor Hardie Fund Manager

Tim Evans Assistant Fund Manager 6 August 2013

2

Outline

Key highlights

Vision and strategy

Trevor Hardie Fund Manager

Financial results Tim Evans Assistant Fund Manager

Portfolio performance

Key highlights

Trevor Hardie Fund Manager

Key highlights

4

Key highlights

• Strong business metrics Earnings and distributions growth achieved

• Portfolio enhancement Actively repositioning portfolio

• Improved leasing Focused approach and progress providing earnings growth

• Active capital management Efficient cost of capital • Guidance FY14 epu and dpu increasing by 4%

Full year 30 June 2013 > Highlights

Strategy continues to deliver

5

Strong business metrics

Earnings and distribution growth achieved

Full year 30 June 2013 > Highlights 1. Normalised epu calculated as normalised earnings divided by weighted average units on issue. Refer to page 31 for detailed reconciliation between net profit after tax (statutory) and normalised earnings. 2. Normalised epu guidance makes no allowance for a performance fee or asset sales/acquisitions.

FY13 normalised

EPU1 up 3% to 20.8 cents

(21.5 cents pre performance fee )

FY13 DPU up 6%

to 17.8 cents

Like-for-like net property income

up 3%

Statutory NPAT up 9%

Entire debt refinanced

and margin down 33 bps

Occupancy

up to 95.7%

WALE stable at 4.9

years

FY14 normalised EPU guidance

22.3 cents up 4%2

on FY13

FY14 DPU guidance 18.5 cents up 4%

on FY13

6

Delivering enhanced returns Attractive yield supported by strong fundamentals • CDI distribution yield

– ~180 bps spread to S&P/ASX 200 Property index

– ~370 bps spread to 10 year government bond rate

• Yield supported by

– improving occupancy – stable WALE – conservative balance sheet

Relative yield3

CDI trading metrics

Implied earnings yield1 9.0%

Implied distribution yield1 7.5%

NTA 30 June 2013 $2.74

Discount to NTA2 9.7%

1. Implied earnings and distribution yield based on FY14 guidance and 5 August 2013 closing price of $2.47. 2. Based on 5 August 2013 closing price of $2.47. 3. Source: UBS Limited and company data.

2.0%

4.0%

6.0%

8.0%

10.0%

Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13

CDI distribution yieldS&P/ASX 200 Prop Index distribution yieldAust 10 Yr Bond Rate

Full year 30 June 2013 > Vision and Strategy

Vision and strategy

8

Full year 30 June 2013 > Vision

Vision and Strategy

Our Strategy Capital management

Actively manage capital structure to deliver an efficient cost of capital

Our Strategy Portfolio enhancement Actively manage and add value to a diversified and

environmentally sustainable portfolio

Our Strategy Leasing

Actively manage tenant relationships and expiries

to provide sustainable rental income growth

Our Vision Be the preferred

mid-cap Australian diversified REIT and a

member of the S&P/ASX 200 Property Index

9

Full year 30 June 2013 > Strategy

Portfolio enhancement Actively repositioning portfolio

Office

Retail

Industrial

• Maximise exposure to efficient leasing markets • Continue upgrades and refurbishment • Diversify tenant exposure

• Continue to enhance the Jam Factory – Village Cinema refurbishment

• Activate development potential at Innaloo Cinema Centre

• Secure lease pre-commitment for The Junction, Stage 3

• Continue master planning for Foray Street and Toll Drive

Non core • Hi-tech office – short to medium term exit with

sale of Todd Road and Taylors House • France - medium term, staged exit to maximise

unitholder value

31 Queen Street, Melbourne, VIC

10

Improved leasing


Focused approach and progress providing earnings growth

• Progress made in a challenging market – 187 Todd Road – ~5,000 sqm leased

to Pacific Brands to 2022 – Jam Factory – Village Cinema lease

extended to 2029 – Forum Cisco – further extension of

Cisco’s ~7,100 sqm lease to 2019 – 2-10 Toll Drive – ~6,200 sqm tenant

secured to 2018 • Occupancy at 95.7%, up from 94.3%

at December 2012 – FY14 expiries low at 2.8%

• WALE stable at 4.9 years

Future expiries de-risked

5.9% 6.0% 5.7%

2.4%

4.3%

2.8%

0%

1%

2%

3%

4%

5%

6%

7%

8%

Vacant FY14As at 30 Jun 12 As at 31 Dec 12 As at 30 Jun 13

Leasing deals completed in FY13

Lease deals 26

Area 30,655 sqm

Gross rent $9.2m

Percentage of gross rent 10%

Retention rate 72%

11

Active capital management


Efficient cost of capital

Debt facility • Refinanced entire $300m

– weighted average margin reduced by 33 bps

– weighted average term increased from 1 year to 3.2 years

– no refinancing until FY16 – cost of debt continues to reduce

Other initiatives • Unit consolidation completed in

August 2012 • Capital redeployed from buy back to

other value add initiatives in FY13 • Balance sheet gearing within target

range of 25% to 35%

Debt maturity profile1

Cost of AUD denominated debt

1. Pro forma balance sheet gearing and debt maturity profile after allowance for payment of 2H13 distribution ($19.7 million) in August 2013 and includes bank guarantees issued by CDI ($1 million).

90 110 76

24

-

50

100

150

FY14 FY15 FY16 FY17 FY18

$m

Drawn Undrawn

5.8%

6.0%

6.2%

6.4%

6.6%

6.8%

7.0%

7.2%

30-Jun-11 31-Dec-11 30-Jun-12 31-Dec-12 Current

Financial results

13

• Net property income up 2% – on like-for-like basis up 3%2

• Finance costs reflect higher average debt balance in FY13

• Growth in normalised epu reflects – higher property income – lower operating expenses

59 61 63

50

55

60

65

FY11 FY12 FY13

$m

Operating results

Full year 30 June 2013 > Financial results

Earnings driven by higher property income

Operating results1 FY13 FY12

Net property income2 - $m 67.2 66.0

Financing costs - $m 14.3 13.3

Normalised earnings - $m 44.5 44.8

Statutory net profit after tax - $m 39.3 36.2

Normalised earnings per unit3 - cents 20.8 20.2

Normalised earnings per unit pre performance fee – cents 21.5 20.2

Distribution to unitholders - $m 38.1 36.6

Net tangible asset per unit $2.74 $2.73

Net property income2 – like-for-like

1. Refer to page 31 for detailed Income Statement. 2. Refer to page 36 for a reconciliation of net property income. 3. Normalised epu calculated as normalised earnings divided by weighted average units on issue.

14

FY13 normalised epu


Strategy delivering earnings growth

• Higher net property income driven by portfolio repositioning and leasing • Full year benefit of unit buy back generated 0.3 cpu accretion • Operating expenses reduced following successful outcome from the Aulnay rental litigation • Debt increased to fund developments • Normalised epu 21.5 cents (pre performance fee) exceeds upgraded FY13 guidance

20.2

21.5 20.8

0.7 0.3

0.6 (0.3) (0.7)

18.0

19.0

20.0

21.0

22.0

23.0

FY12 epu Highernet property income

Buy backaccretion

Reducedoperating expenses

Higher debtand other

FY13 epupre performance fee

FY13performance fee

FY13 epu

cent

s pe

r uni

t

15

FY13 distribution


6% growth in distribution per unit

FY13 FY12 Distribution to unitholders 17.8 16.8 Available funds from operations (AFFO) 18.7 17.1 AFFO payout ratio 95.2% 98.3%

Distribution to unitholders 17.8 16.8 Normalised earnings 20.8 20.2 Normalised earnings payout ratio 85.6% 83.2%

AFFO & normalised earnings payout ratios

• AFFO exceeds distribution to unitholders – lifecycle capex and leasing costs are

funded from operating earnings

• FY13 normalised earnings payout ratio 86%

• Medium term objective to lift normalised

earnings payout ratio with progress on portfolio enhancement and leasing

1. AFFO aligned with Property Council Australia methodology. For full reconciliation refer to page 33.

75%

80%

85%

90%

95%

100%

FY10 FY11 FY12 FY13Normalised earnings payout ratio AFFO payout ratio

16

21.5 22.3

0.7

0.4 0.3 (0.6)

18.0

19.0

20.0

21.0

22.0

23.0

FY13 epu(pre performance fee)

Higher netproperty income

Lowerdebt costs

Normalisedoperating costs

Other FY14 epu(pre performance fee)

guidance

cent

s pe

r uni

t FY14 guidance


Guidance represents a 4% increase in epu and dpu

• Higher net property income from contracted rental increases and leasing progress • Lower debt costs due to lower base interest rates and lower margin following debt refinance • Operating costs normalising post release of the Aulnay rental litigation provision in FY13 • Other includes improved contribution from Domain car park and FX movements • FY14 distribution guidance of 18.5 cents, up 4%

1. Normalised epu guidance makes no allowance for a performance fee or asset sales/acquisitions.

1

17

Improved debt metrics

30 June 2013

Australia France Consolidated

Borrowings – A$1 219m 55m4 274m

Pro forma balance sheet gearing1 26.4% 96.7% 30.8%

Facility gearing2 (total liabilities to total tangible assets)

29.5% 99.7% 34.0%

Proportion hedged 88.9% 0.0% 71.2%

Weighted average hedged term - years 3.5 0.0 3.5

Cost of drawn debt (including margin) 5.9% 1.6% 5.1%

Weighted average undrawn commitment fee 0.8%

Interest cover ratio3 3.8

Weighted average term of available debt (years) 3.2

Strong balance sheet

Full year 30 June 2013 > Financial results 1. After allowance for payment of final distribution ($19.7 million) in August 2013. Balance sheet gearing 29% as at 30 June 2013. 2. Consolidated facility gearing covenant 50%. 3. Facility interest cover ratio covenant 2.0 times. 4. A$ / € spot rate of 0.704 as at 30 June 2013.

• Average cost of Australian drawn debt 5.9%, down from 6.4% – average margin of 1.5% on drawn debt

• Incremental cost of drawing additional Australian debt 3.4%, down from 4.0%

• Potential for cost of debt to reduce as interest rate hedges roll off

Interest rate hedge profile

-

50

100

150

200

250

2.00%

3.00%

4.00%

5.00%

6.00%

notio

nal h

edge

d - $

m

CDI hedged amount (RHS) CDI hedged rate (LHS)

Swap curve (LHS)

Portfolio performance

19

Full year 30 June 2013 > Portfolio performance

State of play Subdued leasing fundamentals

Office

Retail

Industrial

• Investment demand for prime well leased stock expected to continue • Vacancy up across majority of markets • Business confidence remains low • Incentives up across most markets and expected to remain elevated

• Cinema MAT growth of 6% across CDI portfolio • Subdued consumer confidence • Food and beverage stable sales • Positive renewal spreads across CDI portfolio

• Leasing activity remains patchy • Rental growth expected to be subdued • Strengthening demand for well leased prime stock by domestic players • Yields may compress further

20

Portfolio overview – 30 Jun 2013 Australian portfolio

French portfolio

Total portfolio

Total property portfolio - $m 803.1 55.82

858.9

Number of investment properties 22 5 27

Portfolio weighting - % (by value) 93.5 6.5 100.0

Net lettable area - sqm 328,599 42,759 371,358

Average age of properties - years 15.1 10.4 14.8

Occupancy - % 95.4 100.0 95.7

WALE - years 4.9 4.2 4.9

Weighted average capitalisation rate - % 8.35 8.12 8.33

Portfolio valuations - $m Valuation

30 Jun 2013

Market cap rate

30 Jun 2013

Market cap rate

31 Dec 2012

Office portfolio 509.1 8.40% 8.35%

Retail portfolio 144.7 7.82% 8.02%

Industrial 111.0 8.53% 8.54%

Hi-tech office 38.3 9.16% 9.34%

Total Australian portfolio 803.1 8.35% 8.37%

French portfolio

55.82 8.12% 8.13%

Total 858.9 8.33% 8.35%

Portfolio overview


Strong portfolio metrics

Portfolio metrics • Occupancy 95.7% • WALE 4.9 years Valuation • Market cap rates tightened marginally

to 8.33% (December 2012 8.35%) • Total property valuations remained

flat from December 2012 – fair value movement of investment

properties held at 30 June 2013 was a $4.8 million reduction from December 2012

NABERS energy rating • 3.7 star weighted average1

1. Applicable to rated buildings. 2. Converted at 30 June 2013 spot rate 0.704.

21

Lease expiry profile


Actively managing expiries

• Vacancies down from 5.7% at December 2012 to 4.3% at June 2013

4.3%

Retail Expiry, 0.5% Retail Expiry, 1.2%

Minor Expiry, 0.2%

Minor Expiry, 0.9% Minor Expiry, 0.4%

31 Queen Street, 1.1%

31 Queen Street, 1.4% 31 Queen Street, 1.4% The Forum, Verizon, 1.6%

The Forum, Verizon, 1.4%

187 Todd Road, 0.5%

Makerston House, 0.9%

Makerston House, 2.0%

6 Foray Street, 1.7%

Executive Building, 2.6%

The Forum, Cisco, 2.1%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

Vacant FY14 FY15

2.8%

12.8%

4.3%

22

Rent review profile


Provides built-in growth through fixed and CPI increases • Majority of portfolio has fixed or CPI

rental reviews over next three years • 87% of portfolio subject to rental

reviews in FY14

Review type FY14 rental proportion

(%) Rent reviews

Fixed 68% Average 3.6%

CPI 11% Last CPI 2.4%1

French CCI/ILAT 6% Last CCI 1.8%2

Last ILAT 1.7%3

Market 2% n/a

Total 87%

Rent review profile

Long term lease expiry profile

1. June 2013 ABS All Cities. 2. French CCI for 12 months to Q113. 3. French ILAT for 12 months to Q113.

68% 69% 70%

11% 11% 11% 6% 6% 6% 2% 2%

13% 12% 13%

0%

20%

40%

60%

80%

100%

FY14 FY15 FY16

No reviewMarket reviewFrench CCI / ILATCPI reviewFixed review

4.3% 2.8% 12.8%

17.0% 12.2%

50.9%

0%

20%

40%

60%

Vacant FY14 FY15 FY16 FY17 FY18 andbeyond

% e

xpiry

by

gros

s in

com

e

Key highlights

24

Key highlights

• Strong business metrics Earnings and distributions growth achieved

• Portfolio enhancement Actively repositioning portfolio

• Improved leasing Focused approach and progress providing earnings growth

• Active capital management Efficient cost of capital • Guidance FY14 epu and dpu increasing by 4%

Full year 30 June 2013 > Highlights

Strategy continues to deliver

25

Full year 30 June 2013 > Contacts

Contacts

www.challenger.com.au/cdi

Tim Evans Assistant Fund Manager Tel: + 61 (0)2 9994 7131 Email: [email protected]

Trevor Hardie Fund Manager Tel: + 61 (0)2 9994 7546 Email: [email protected]

Appendices

27

Appendices

Portfolio metrics • Diversified investment portfolio 28 • Tenant diversification 30 Financial results • Income statement 31 • Distribution statement 32 • Available Funds From Operations 33 • Net property income – Australia 34 – France 35 – reconciliation 36 Capital management • Hedge profiles 37 Management fees 38 Important notice 39

Table of contents

Full year results 30 June 2013 > Appendices

Innaloo Cinema Centre, Woodlands, WA

28

59% 19%

18%

4%

OfficeRetailIndustrialHi-tech office

25%

14%

13%

38%

10%

AAAAA+ → A- BBB+ → BBB- BB+ → B- NR

33%

35%

3%

29%

GovernmentListedMulti InternationalPrivate

25%

25% 30%

5%

3% 3%

2% 7%

NSWACTVICQLDSAWATASFrance

Diversified investment portfolio


Geographic diversification (by value)

Tenant credit rating1 (by gross income)

1. Tenant credit rating based on Challenger internal ratings using rating agency methodology.

Sector diversification (by value)

Tenant diversification by type (by gross income)

29

Diversified investment portfolio


25% 25%

30%

5% 3% 3%

2%

7%

-

$50

$100

$150

$200

$250

$300

NSW ACT VIC QLD SA WA TAS France

Val

ue ($

m)

Geographic Sector Diversification

Office Retail Industrial Hi-tech office

59%

19% 18%

4%

-

$100

$200

$300

$400

$500

$600

Office Retail Industrial Hi-tech office

Val

ue ($

m)

Sector Geographic Diversification

NSW ACT VIC QLDSA WA TAS France

30

Tenant diversification


Top 20 tenants1

1. Percentage of portfolio income based on annualised rent at 30 June 2013.

Rank Tenant name Tenant industry Property(s) %

1 ABS Government ABS House 9.8%

2 DIAC Government DIAC Building 6.7%

3 IP Australia Government Discovery House 6.2%

4 Village Cinemas Cinema Jam Factory, CCW, Innaloo 5.4%

5 Elders Diversified Elder House 4.2%

6 The Greater Union Organisation Cinema Jam Factory, CCW, Innaloo 3.5%

7 Bunzl Distribution The Junction, Stage 2 3.2%

8 Taylors College Education Taylors House 3.0%

9 Cisco Systems IT The Forum, Cisco 2.9%

10 State of Tasmania Government Executive Building 2.6%

11 KW Doggetts Distribution The Junction, Stage 1 2.3%

12 Toll Transport Distribution 1-9 & 12 - 30 Toll Drive 2.1%

13 State of Qld (Qld Police) Government Makerston House 2.0%

14 FlexiGroup Financials The Forum, Cisco 1.9%

15 IFC Distribution Foray Street 1.7%

16 Spotlight Stores Retail Spotlight 1.7%

17 Inteva Manufacturing Sully 1.6%

18 Bricoman Retail Aulnay 1.4%

19 Exel Distribution Beziers 1.3%

20 GRDF Government Gennevilliers 1.2%

Total 64.7%

Industry representation

33%

15% 12% 9% 8% 7% 5% 4% 3% 2% 1% 0%

10%

20%

30%

40%

% o

f gro

ss in

com

e

31

Income statement

Full year results 30 June 2013 > Appendices The above reconciliation has been extracted from the Directors’ Report and has been prepared in accordance with the normalised earnings framework detailed in the segment note of the 30 June 2013 Financial Report. CDI’s external auditor has reviewed the normalised earnings calculation for compliance with the normalised earnings framework.

Income statement 30 June

2013 30 June

2012

$’000 $’000

Rental income 75,477 73,598

Other property income 11,233 11,727

Income from operating business activities 7,509 7,277

Interest income 136 497

Revenue 94,355 93,099

Property related expenses (19,544) (19,366)

Expenses from operating business activities (8,812) (6,523)

Property expenses (28,356) (25,889)

Finance costs (14,312) (13,313)

Responsible Entity’s and Manager’s fees (5,958) (4,395)

Operating expenses (649) (2,067)

Trust expenses (20,919) (19,775)

Fair value movement of derivatives held 1,414 (10,081)

Fair value movement of investment properties sold (1,804) (770)

Fair value movement of investment properties held (5,508) (655)

Fair value movements (5,898) (11,506)

Foreign exchange loss (146) (374)

Net profit before tax 39,036 35,555

Income tax credit 288 596

Net profit after tax 39,324 36,151

Reconciliation of net profit after tax to normalised earnings

30 June 2013

30 June 2012

$’000 $’000

Net profit after tax 39,324 36,151

Adjusted for: Straight-lining of rental income (827) (2,894)

Fair value movement of derivatives held (1,414) 10,081

Fair value movement of investment properties sold 1,804 770

Fair value movement of investment properties held 5,508 655

Fair value movements 5,898 11,506

Foreign exchange loss 146 374

Property, plant and equipment depreciation 262 240

Income tax credit (288) (596)

Normalised earnings 44,515 44,781

Normalised earnings per unit (cents)

20.8 20.2

32

Distribution statement

Full year results 30 June 2013 > Appendices 1. The above table has been extracted from the Directors’ Report and has been prepared in accordance with the normalised earnings

framework detailed in the segment note of the 30 June 2013 Financial Report. CDI’s external auditor has reviewed the normalised earnings calculation for compliance with this framework.

Distribution statement 30 June 2013 $’000

30 June 2012 $’000


Non-cash expenses

Amortisation of borrowing costs 432 805

Amortisation of incentives 4,135 2,971

Other transfers per distribution policy Debt establishment costs (915) (1,240)

Life-cycle capital expenditure (4,191) (3,206)

Tenant incentives (4,440) (7,349)

Income tax expense (128) (30)

Total income available for distribution 39,408 36,732

Less: Current year undistributed income carried forward (1,298) (152)

Distribution to unitholders 38,110 36,580

Distribution per unit (cents) 17.8 16.8

• CDI’s distribution policy is to distribute accounting profit earned from operating activities (“normalised earnings”), adjusted for non-cash expenses, leasing costs, debt establishment fees and life-cycle capital expenditure, subject to the ongoing objective to distribute an amount which results in CDI not being subject to income tax

• Realised gains from the sale of assets will be distributed on a discretionary basis which will be determined with regard to capital management strategies, market conditions and tax consequences

33

Available Funds From Operations

Available Funds From Operations (AFFO) 30 June 2013

$’000 30 June 2012

$’000


Add/(deduct):

Life-cycle capital expenditure (4,191) (3,206)

Amortisation of incentives 4,135 2,971

Tenant incentives (4,440) (7,349)

Available Funds From Operations 40,019 37,197

Distribution to unitholders 38,110 36,580

AFFO payout ratio 95.2% 98.3%

• Calculation aligned with Property Council of Australia (PCA) methodology released in June 2013


34

Net property income – Australia Australian portfolio 30 June 2013 30 June 2012 Variance

$'000 $'000 $'000 % Office ABS House, Belconnen, ACT 7,624 7,414 210 3% 31 Queen Street, Melbourne, VIC 6,676 6,603 73 1% DIAC Building, Belconnen, ACT 5,352 5,237 115 2% The Forum, Cisco, St Leonards, NSW 5,015 4,929 86 2% Discovery House, Woden, ACT 4,873 4,749 124 3% Makerston House, Brisbane, QLD 3,197 3,717 (520) (14%) The Forum, Verizon, St Leonards, NSW 1,834 1,229 605 49% Elder House, Adelaide, SA 2,865 2,759 106 4% Executive Building, Hobart, TAS 1,836 1,774 62 3% Office total 39,272 38,411 861 2% Retail Jam Factory, South Yarra, VIC 5,835 5,007 828 17% Century City Walk, Glen Waverley, VIC 2,452 2,529 (77) (3%) Innaloo Cinema Centre, Innaloo, WA 1,900 1,795 105 6% Kings Langley, Kings Langley, NSW 820 773 47 6% Retail total 11,007 10,104 903 9% Industrial The Junction Stage 2, Enfield, NSW 2,492 - 2,492 - The Junction Stage 1, Enfield, NSW 1,749 1,676 73 4% 6 Foray Street, Fairfield, NSW 1,125 767 358 47% Spotlight, Laverton North, VIC 1,264 1,241 23 2% 12-30 Toll Drive, Altona North, VIC 1,229 1,263 (34) (3%) 2-10 Toll Drive, Altona North, VIC 525 608 (83) (14%) 1-9 Toll Drive, Altona North, VIC 313 294 19 6% Industrial – total 8,697 5,849 2,848 49% Hi-tech office Taylors House, Waterloo, NSW 2,388 2,404 (16) (1%) 187 Todd Road, Port Melbourne, VIC (41) (248) 207 83% Hi-tech office total 2,347 2,156 191 9% Sold properties 75 Talavera Road, North Ryde, NSW - 838 (838) (100%) Giffnock Avenue, North Ryde, NSW (135) 459 (594) (129%) Pacific Brands, Port Melbourne, VIC - 99 (99) (100%) Sold properties total (135) 1,396 (1,531) (110%) Australia total 61,188 57,916 3,272 6%

35

Net property income – France


French portfolio 30 June 2013 30 June 2012 Variance

€’000 €’000 €’000 %

Sully, Sully sur Loire 889 1,089 (200) (18%)

Aulnay, Aulnay sous Bois, Paris 700 681 19 3%

Beziers, Villeneuve les Beziers 739 713 26 4%

Gennevillers, Gennevilliers, Paris 627 656 (29) (4%)

Tours, Parcay-Meslay, Tours 413 449 (36) (8%)

French total 3,368 3,588 (220) (6%)

36

Net property income – reconciliation Reconciliation to financials 30 June 2013 30 June 2012 Variance

($'000) ($'000) ($'000) % Australia 61,188 57,916 3,272 6% Straight–lining of rental income 2,105 2,425 (320) (13%) AIFRS prior year adjustment (604) - (604) -% Total Australia 62,689 60,341 2,348 4%

France (Euro €) 3,368 3,588 (220) (6%) AUD/EUR 0.795 0.770 Total France 4,236 4,660 (424) (9%) Realised gains on income forwards 241 958 (717) (75%) Total net property income 67,166 65,959 1,207 2%

Financial report Rental income 75,477 73,598 1,879 3% Other property income 11,233 11,727 (494) (4%) Property related expenses (19,544) (19,366) (178) 1% Total net property income 67,166 65,959 1,207 2%


Like for like analysis 30 June 2013 30 June 2012 Variance

($'000) ($'000) ($'000) % Australia 61,188 57,916 3,272 6% The Junction Stage 2, Enfield, NSW (2,492) - (2,492) -% Sold properties 135 (1,396) 1,531 (110%) Total Australia 58,831 56,520 2,311 4%

France (Euro €) 3,368 3,588 (220) (6%) AUD/EUR – consistent rate 0.795 0.795 Total France 4,236 4,513 (277) (6%)

Total net property income 63,067 61,033 2,034 3%

37

Hedge profiles

CDI interest rate risk policy • CDI’s interest rate risk policy is to

– effectively hedge interest rates on a minimum of 60% of expected debt (30 June 2013 72%)

– for a term between weighted average term of available debt and WALE (30 June 2013 hedge maturity 3.5 years)

• Weighted average hedged rate 4.63%


$A denominated hedges

Notional Hedge rate Maturity date

$20.0m 4.16% Sep 2015

$40.0m 5.07% Feb 2016

$20.0m 3.77% Jun 2016

$20.0m 4.15% Feb 2017

$20.0m 4.88% Feb 2017

$25.0m 4.81% Apr 2017

$12.5m 4.66% Oct 2017

$12.5m 4.85% Oct 2017

$25.0m 4.90% Jul 2018

$195.0m 4.63% 3.5 years

38

Management fees

• Management agreements published on CDI website

• Management expense ratio 81.41 bps (including performance fee of $1.5 million - 17.2 bps)

• Transactional fees are payable only for offshore acquisitions/divestments as detailed in the PDS. No fees are payable on domestic acquisitions/divestments

• For full details refer to the CDI PDS, Constitution and Management Agreement at www.challenger.com.au/cdi

Full year results 30 June 2013 > Appendices 1. Excludes non-recurring provisions and legal fees and calculated based on average total assets during the period.

Fee type Calculation

Base management fee 0.5% of gross assets of CDI per annum, payable in cash.

Performance fee

5% of first 2% outperformance against S&P/ASX200 Property Accumulation Index, and 15% of any outperformance thereafter, capped at 0.25% of gross assets per annum (capped with no carry forward), payable in cash at the end of each financial year. Calculation replaces the financial year end closing price with the final 20 day VWAP for both CDI and the constituents of the S&P/ASX 200 Property Accumulation Index.

Management fees

Disclaimer: The material in this presentation is provided by Challenger Listed Investments Limited (ABN 94 055 293 644) (AFSL 236887) (“Challenger” or “CLIL”), as Responsible Entity of the Challenger Diversified Property Trust 1 (ARSN 121 484 606) and the Challenger Diversified Property Trust 2 (ARSN 121 484 713) which together comprise the Challenger Diversified Property Group (“Group”). The material is general background information about the Group’s activities and is current at the date of this presentation. It is information given in summary form and does not purport to be complete. It is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any particular investor. These individual circumstances should be considered with professional advice when deciding if an investment is appropriate. Any investment in CDI is subject to investment risk and other risks, including possible loss of income and principal invested. None of CLIL, Challenger Management Services Limited (ABN 29 092 382 842)(AFSL 234678)(“CMSL”), Challenger Limited (ABN 85 106 842 371) or any other member of the Challenger Limited group of companies gives any guarantee or assurance as to the performance of CDI or the repayment of capital. Nothing in this presentation should be considered a solicitation, offer or invitation to buy, subscribe or sell any, or a recommendation of, financial products. All reasonable care has been taken to ensure that the facts stated and opinions given in this presentation are fair and accurate. To the maximum extent permitted by law, the recipient releases CLIL, each member of the Challenger Limited group of companies, their directors, officers, employees, representatives and advisers from any liability (including, without limitation, in respect of direct, indirect or consequential loss or damage or loss or damage arising by negligence) arising in relation to any recipient relying on anything contained in or omitted from this presentation. Any forward looking statements included in this presentation involve subjective judgment and analysis and are subject to significant uncertainties, risks and contingencies, many of which are outside the control of, and are unknown to, CLIL. In particular, they speak only as of the date of these materials, they assume the success of CDI’s business strategies, and they are subject to significant regulatory, business, competitive and economic uncertainties and risks. Actual future events may vary materially from forward looking statements and assumptions on which those statements are based. Given these uncertainties, recipients are cautioned not to place undue reliance on such forward looking statements. Any past performance information provided in this presentation is not a reliable indication of future performance. CLIL does not receive any specific remuneration for any general advice which may be provided to you in this presentation. However, CLIL and CMSL receive trustee and management fees as issuer and manager of CDI, respectively. For more details on fees contained in this presentation, please refer to the 30 June 2013 Financial Report along with the Constitution and Management Agreement on CDI’s website www.challenger.com.au/cdi (under the Corporate Governance tab). Financial advisers may receive fees or commissions if they provide advice to you or arrange for you to invest in a Challenger product (including CDI). CLIL and its associates may have an interest in the financial products referred to in this presentation and may earn fees or other benefits as a result of transactions in any such financial products. Members of the Challenger Limited group of companies and their officers and directors may hold securities in CDI from time to time. This presentation is not audited. In preparing this presentation, management has had its external auditor prepare a review statement in relation to specific matters pertaining to the normalised profit framework, as described in the Directors’ Report and segment note of the Financial Report, presented herein for management’s purposes. This statement has been included in the document for the information of readers; however it should not be relied upon by any party other than the directors and management of the Group.

Important notice

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