To Be Australia's Best and Most Highly Regarded

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To Be Australia's Best and Most Highly Regarded Charter Hall Group Hall Charter Annual ReportAnnual 2016 “To be Australia’s best and most highly regarded property investment and funds management business.” Annual Report Charter Hall 2016 Group DAVID HARRISON COLLABORATIVE MANAGING DIRECTOR & GROUP CEO PERFORMANCE $17.5b FUM 28.7% 30.4cps OEPS 10.5% 11.2% Distribution per security of 26.9 cents Throughout the report we have rich video / content available on your smart 1 Download the 2 Scan the 3 Discover interactive phone/tablet free Layar app page content OUR ACCESS DEPLOY MANAGE INVEST STRATEGY Access to equity from Creating value through Property funds Investing alongside We use our property expertise to wholesale, retail and attractive investment management, asset our capital partners. listed investors. opportunities. management, leasing access, deploy, manage and invest and development services. equity in our core real estate sectors – office, retail and industrial – to create value and generate superior returns for our customers. 1 YEAR OUR VISION $1.5 b $3.7b $17.5b $1.1b To be the smart property choice. gross equity raised total transactions FUM property investments with cap rate 6.46% $3.0 b 296 and discount rate 7.9% OUR GOAL acquisitions properties To be Australia’s best and most highly regarded $0.7b 2,550 property investment and funds divestments tenants management business. 5 YEAR $6.8 b $12.6 b $9.0 b 8.8 yrs gross equity raised transactions FUM growth weighted average lease expiry $9.3 b 98 2.3yrs acquisitions additional properties $3.3 b divestments Charter Hall Group COVER IMAGE 1 Shelley Street, Sydney NSW INSIDE FRONT COVER IMAGE Truganina Logistics Park, Vic ABOUT US About Us 01 2016 Highlights 02 As a property funds and investment manager Chair’s Report 04 we own and manage 296 office, retail and MD & Group CEO Letter 06 industrial and logistics properties on behalf Group Performance 08 Office 10 of our institutional and retail investors. Industrial & Logistics 12 Our integrated business model, coupled with our highly skilled team across Retail 14 investment management, asset management, property management, and People and Culture 16 project delivery produces sustainable returns for our investors and positive Sustainability 18 experiences for our tenant customers, people and the community. Executive Team 20 Charter Hall Group is a stapled security comprising a share in Charter Hall Board of Directors 22 Limited (CHL), the operating funds management business, and a unit in Financial Report 25 Charter Hall Property Trust (CHPT), which predominantly co-invests in Investor Information 107 the funds and partnerships managed by the Group. Corporate Directory 108 Annual Report 2016 1 GROUP TOTAL SECURITYHOLDER RETURN GROSS EQUITY RAISED HIGHLIGHTS 1 25.5% $ 1.5 b STATUTORY PROFIT AFTER TAX NET TANGIBLE ASSETS PER SECURITY $ 215.2m $ 3.04 $97.3m 10.1% FUNDS UNDER MANAGEMENT (FUM) PROPERTY INVESTMENTS $17. 5 b $1.1 b Net $56 million invested alongside 28.7% our capital partners 34.3% 25.5% 23.1% 22.2% 20.3% 19.1% 12.7% 10.5% 9.7% 1 YEAR P.A. 3 YEAR P.A. 5 YEAR P.A. TOTAL PERFORMANCE OVER 1, 3, 5 YEARS (% P.A.)1 Charter Hall Group securityholders S&P/ASX 200 Property Accumulation Index Mercer/IPD Wholesale Pooled Property Funds Index 1 Source: MSCI/IPD, UBS and S&P/ASX. CHC and S&P returns are shown to 12 August 2016. 2 Charter Hall Group IPD returns are shown to 30 June 2016. SECTOR OFFICE INDUSTRIAL RETAIL HIGHLIGHTS PAGE 10 PAGE 12 PAGE 14 FUM FUM FUM $8.1 b $4.5b $4.9b PORTFOLIO PORTFOLIO PORTFOLIO 48 87 161 OCCUPANCY OCCUPANCY OCCUPANCY 98% 99.9% 98.5% WALE WALE WALE 6.4yrs 9.6yrs 9.2yrs 2016 HIGHLIGHTS Annual Report 2016 3 Welcome to the Charter Hall Group Annual Report 2016. I am pleased to report that we have had another very active year across the Group. Our solid growth was driven by a clear focus on our strategy to access, deploy, manage and invest capital, which has achieved significant funds under management growth of 28.7% to $17.5 billion. CHAIR’S REPORT TOTAL Dear securityholders, Both earnings streams performed very well, SECURITYHOLDER with property investment operating earnings RETURN Sustained performance is essential for the long-term of $78.5 million, up 26.4%, and property funds success of an investment manager. Our strategy to management operating earnings increasing 25.5% co-invest in the funds we create aligns our interests 25.7% to $71.4 million. with those of our capital partners. We are proud to highlight that Charter Hall continues to rank as Our ability to access multiple equity sources one of the highest performing A-REITs in the ASX delivered a total of $1.5 billion in gross equity and 200 Property Accumulation Index over one, three $3.7 billion in transactions. These equity inflows GROWTH IN and five years, with a total securityholder return of were broadly diversified across the various funds OPERATING 25.5%, 20.3% and 34.3% per annum1 respectively. and equity sources, with our wholesale and retail EARNINGS funds management businesses both continuing We paid a total distribution per security of 26.9 cents to grow strongly. 26.2% for the year, an increase of 11.2%, delivering a strong return for our investors. Maintaining a strong balance sheet With a strong balance sheet including nil debt, a cash Growth in FUM delivering strong returns position of $145 million and look-through gearing of The 2016 financial year has seen Charter Hall deliver 25.3%2, we are well placed to capitalise on current solid growth in our Australian platform, where the market conditions. Our strong balance sheet provides Group delivered a 26.2% increase in operating the business with capacity to co-invest further in earnings to $124.7 million, driven by growth in funds current and new funds and partnerships as well as under management. Our business is focused on two underwrite the launch of new retail funds for the key earnings streams: the earnings generated from Charter Hall Direct business. the services provided by our integrated property funds management platform, and property investment A new structure to support future growth income generated by co-investing alongside our capital In February, after more than 10 years of successful partners in our property funds and partnerships. joint leadership, the Board appointed David Harrison as Managing Director and Group CEO (MD/CEO) of Charter Hall Group and David Southon elected to step down as Joint Managing Director (JMD). The decision to move to a single MD/CEO structure was taken by the Board and the JMDs to support the continued growth of the Group. 4 Charter Hall Group DISTRIBUTION OPERATING EARNINGS PER SECURITY GROWTH PER SECURITY GROWTH 26.9 30.4 24.2 27.5 22.3 25.3 20.2 22.9 18.2 20.7 FY12 FY13 FY14 FY15 FY16 FY12 FY13 FY14 FY15 FY16 David Harrison’s property expertise, his ability in Our participation in the Property Male Champions matching investor appetite with quality investment of Change program is key to this work, with initiatives products, and commitment to driving a customer such as growing the talent pool and offering role focused approach to all aspects of the business, flexibility being key areas of focus. means he is well placed to lead Charter Hall through We are also proud to be taking a stand and raising our next phase of growth. the profile of domestic violence as a significant social As one of the founders of our business, David Southon and business issue through the recent launch of our has led the Group through exciting and challenging Domestic Violence Policy. Together with Sutherland phases over the past 25 years, including Charter Hall’s Shire Family Services, we created the social and digital transformation into a listed, fully integrated property media campaign ‘Pull Ya Head In’ to encourage males investment management group. On behalf of the to speak up to other males and call them out on Board and our people, I thank him for guiding the unacceptable behaviour toward women. growth and maturity of the Group, his wisdom, and for the wonderful legacy he leaves us. Evolving our sustainability approach Our integrated business model now incorporates A strong Board of Directors a shared value approach, incorporating business, with a diverse skill set economic, social and environmental outcomes into The Charter Hall Board is also focused on succession our operations and developments. The shared value and renewal. framework focuses on the themes of eco-innovation, place creation and wellbeing and will continue to This year, we have also seen the resignation of produce sustainable returns for our investors and independent Non-Executive Director David Deverall, positive experiences for our tenants, our people and who served nearly four years on the Board and on the community. Creating a sustainable future for the Audit, Risk and Compliance Committee as Chair. our stakeholders and the communities in which we Karen Moses has been appointed to the Group as operate is a key part of our goal to be Australia’s best a Non-Executive Director, effective 1 September. and most highly regarded property investment and Karen’s appointment brings a deep skill set to the funds management business. Board, gained from more than 30 years’ corporate experience in the energy industry spanning oil, Outlook gas, electricity and coal commodities, both within Looking ahead to FY17, we believe sound property Australia and overseas. fundamentals and the attractiveness of commercial property will continue to drive growth in a low inflation, Further details relating to the Board are included in low interest rate environment.
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