Pendal Monthly Commentary Pendal Australian Listed Property Portfolio January 2021

Market commentary Portfolio overview Australian Listed Property Portfolio The Australian Real Estate Investment Trust (AREIT) Investment The strategy employs a bottom up, index was down 4.1% in January, underperforming the strategy fundamental approach to build a diversified portfolio of Australian listed property shares. broader market by 440bp. Returns were impacted by a rising bond rate with Australian 10-year bonds +16bp to Investment The objective of the Model Portfolio is to objective outperform the S&P/ASX 300 A-REIT 1.11%. Year-rolling AREITs are down 14%, (Sector) (TR) Index on a rolling 3 year period. underperforming the broader market by 10.9%. Benchmark S&P/ASX 300 A-REIT (Sector) (TR) Globally REITs (in USD terms) were down 1.1% for the Number of stocks 8-15 (14 as at 31 January 2021) month and down 9.8% year rolling. Singapore was the Sector limits Cash 2-10% best-performing market (-3.9%) and New Zealand (- Dividend Yield 4.60%# 22%) the worst.

The month’s best-performing REITs for the period Top 10 holdings included Group (+6.5%) driven by continuing Code Name Weight strong detached dwelling sales, Unibail Rodamco Westfield (+6.1%) on new management appointments GMG 22.20% and Ingenia (+2%) on no news. SGP Stockland Trust Group 10.74% The worst-performing REITS included Group (- SCG 9.08% 9.8%) on a sluggish return to CBD office/retail, DXS Property Group 8.76% Growthpoint (-8.3%) on no news and Shopping Centres CHC Charter Hall Group 7.60% (-7.5%) on no new news. MGR Mirvac Group 7.14% Vicinity released valuations that showed its centres down VCX 5.66% 4% ($570 million) with CBD centres worst impacted (- GPT GPT Group 5.53% 8.6%) and Chadstone down 2%, with cumulative falls across the portfolio down 15% from the peak. CLW Charter Hall Long Wale Reit 4.41% SCP Shopping Cent Austl Prop 4.05% Macquarie Bank announced it had sold its office development at 39 Martin Place in to Investa Source: Pendal as at 31 January 2021

Property Group and a JV partner for $800 million. There Top 5 overweights versus S&P/ASX 300 are no leasing pre-commitments for the development (30,000 sqm) and it was reportedly well below the Code Name Weight previously contracted price of $950 million to ISPT. CLW Charter Hall Long Wale Reit 2.47% Data continues to be very strong in Australia with CHC Charter Hall Group 2.42% employment +50k and the unemployment rate falling CQR Charter Hall Retail REIT 2.23% 80bp to 6.6%. FTE employment was +35.7k and PTE IAP IAPF Group 2.14% was +14.3k. SGP Stockland Trust Group 2.07% House prices rose 0.7% in January — the fourth consecutive monthly increase. Top 5 underweights versus S&P/ASX 300 Global bond yields rose, driven by vaccine optimism and Code Name Weight a pick-up in oil prices (+7.3%) with US-10 year bonds SCG Scentre Group -2.48% +17bp to 1.09%. GMG Goodman Group -2.06% The was +1% to 77.5c. BWP BWP Trust (not held) -1.71% WPR Waypoint Reit (not held) -1.65% NSR Reit (not held) -1.46% Source: Pendal as at 31 January 2021

#The Portfolio’s dividend yield represents the weighted average 12-month forward-looking dividend yield of the portfolio holdings (excluding cash), as at the date of the Factsheet. Each individual security’s dividend yield is calculated using market consensus Dividend Per Share (DPS) before tax and franking credits, collated by Pendal and divided by the closing market price of the security as at the date of the Factsheet. The portfolio dividend yield therefore is only an estimate, and does not reflect the actual returns of the Fund, which will be affected by market movements in the price of individual securities, the returns on other assets such as cash holdings and variances of individual security's actual dividends from the forecasted DPS.

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Performance

1 month 3 month 6 month 1 year 3 year Since inception*

Pendal Australian LPT -4.00% 8.80% 16.64% -8.47% 7.97% 7.18%

S&P/ASX 300 A-REIT (Sector) (TR) -4.07% 8.93% 15.92% -13.33% 5.54% 6.07%

Active return 0.07% -0.14% 0.72% 4.86% 2.43% 1.10%

Source: Pendal as at 31 January 2021 *Since Inception – 17 March 2015 Performance returns are pre-fee. Investors should contact their platform provider for applicable fee rates. Past performance is not a reliable indicator of future performance.

Top 5 contributors – monthly Top 5 detractors – monthly

Value Value Code Name Code Name Added Added IAP IAPF Group 0.16% SGP Stockland Trust Group -0.10% CLW Charter Hall Long Wale Reit 0.08% URW Unibail-Rodamco-Westfield CDI (not held) -0.09% CNI Centuria Capital Ltd (not held) 0.07% CHC Charter Hall Group -0.08% ARF Arena Reit 0.05% INA Ingenia Communities Group (not held) -0.07% CMW (not held) 0.04% SCP Shopping Cent Austl Prop -0.07% Top 5 contributors – 1 year Top 5 detractors – 1 year

Value Value Code Name Code Name Added Added GMG Goodman Group 1.31% SGP Stockland Trust Group -0.38% VCX Vicinity Centres 1.03% BWP BWP Trust (not held) -0.33% URW Unibail-Rodamco-Westfield CDI (not held) 0.73% VVR Reit (not held) -0.30% SCG Scentre Group 0.42% RFF Rural Funds Group (not held) -0.23% CHC Charter Hall Group 0.39% DXS Dexus Property Group -0.20% Source: Pendal as at 31 January 2021 Underweight positions are in italics.

Strategy performance and outlook The portfolio performed broadly in line with the index in January. The overweight in residential play Stockland detracted, as did the underweight in retail mall owner Unibail-Rodamco-Westfield. This was offset by the position in Charter Hall Long WALE REIT and in Irongate. The AREIT sector is priced on an FY22 dividend yield of 4.5%, a 340bp spread over 10-year bonds, above its LT average of 200bp. We expect AREIT earnings to slowly recover and all dividends to resume in CY21 as State borders reopen, businesses recover and activity broadly picks up. NTAs are expected to soften in the short term with discretionary mall values likely to come under pressure. Gearing across the sector is relatively low at 26%. We expect extraordinarily low interest rates to provide support for asset values.

New stocks added and/or stocks sold to zero during the month

Sell Waypoint REIT (WPR) to zero

We adjusted exposures in the Australian Listed property model ahead of reporting season, increasing exposure to residential property and neighbourhood-style shopping centres. This was funded with a reduced exposure to retail malls. We also sold out of the position in Waypoint REIT (WPR).

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WPR — formerly VIVA Energy REIT — owns a portfolio of petrol stations and convenience properties across Australia.

There was an attraction in its relatively defensive earnings stream during the volatility of recent times. But we now see it as a funding source for opportunities where more upside is emerging — and we have liquidated the position.

We also raised capital via a reduction in GPT Group (GPT) and Vicinity Centres (VCX). Both have proportionately large exposure to retail property and have outperformed in the last quarter as the Victorian lockdown ended and the outlook for a vaccine-driven recovery improved.

While sales in Melbourne retail malls are recovering, foot traffic growth remains muted. GPT has additional exposure to the Melbourne office market, which also remains under pressure as people continue to work from home even as the lockdown has lifted. These issues were likely to provide a headwind for management outlooks as we went into reporting season.

Conversely, the residential market is flying and we have deployed capital here into Stockland Group (SGP).

New house sales in December were almost double that of November as people took advantage of the federal government’s HomeBuilder grant. Stockland (SGP) is the biggest listed player in the residential house market and has historically been very sensitive to shifts in new house sales. The government has announced the HomeBuilder scheme will be extended to the end of the first quarter 2021, suggesting further earnings tailwinds for SGP.

We also added to the portfolio’s neighbourhood-style shopping centre exposure, increasing the positions in Charter Hall Retail REIT (CQR) and Shopping Centres Australia Property Group (SCP).

Supermarket sales are strong, helped by food price inflation, with the December quarter up 9% on the same quarter in 2019. This provides a strong tailwind for the landlords.

Speciality stores in the centres also tend to be more defensive, with a greater exposure to non-discretionary areas such as haircuts and pharmacies rather than the apparel stores which dominate larger malls.

For example sales from the speciality portfolio for CQR only fell 0.5% in 2020.

For more information contact your key account manager or visit pendalgroup.com

This monthly commentary has been prepared by Pendal Institutional Limited ABN 17 126 390 627, AFSL 316455 (Pendal) and the information contained within is current as at the date of this monthly commentary. It is not to be published, or otherwise made available to any person other than the party to whom it is provided. This monthly commentary relates to the Pendal Australian Listed Property Portfolio, a portfolio developed by Pendal. The portfolio composition for any individual investor may vary and the performance information shown may differ from the performance of an investor portfolio due to differences in portfolio construction or fees. Performance figures are shown gross of fees and are calculated by tracking the value of a notional portfolio. Past performance is not a reliable indicator of future performance. This monthly commentary is for general information purposes only, should not be considered as a comprehensive statement on any matter and should not be relied upon as such. It has been prepared without taking into account any recipient’s personal objectives, financial situation or needs. Because of this, recipients should, before acting on this information, consider its appropriateness having regard to their or their clients’ individual objectives, financial situation and needs. This information is not to be regarded as a securities recommendation. The information in this commentary may contain material provided by third parties, is given in good faith and has been derived from sources believed to be accurate as at its issue date. While such material is published with necessary permission, and while all reasonable care has been taken to ensure that the information in this commentary is complete and correct, to the maximum extent permitted by law neither Pendal nor any company in the Pendal group accepts any responsibility or liability for the accuracy or completeness of this information.