GLOBAL AND DOMESTIC CAPITAL TRENDS IN COMMERCIAL REAL ESTATE Glen Dogan

Head of Sales

and Relationship Management

PERPETUAL CORPORATE TRUST

2

AGENDA

• GLOBAL CAPITAL FLOWS

& TRENDS

• APAC CAPITAL FLOWS &

TRENDS

• AUSTRALIA’S CAPITAL

FLOWS & TRENDS

- 30%

- 9% 11%

14%

5% 50%

35%

5%

Q2

1H17 CHANGE IN TRANSACTION VOLUME

3 Source: Real Capital Analytics, Global Capital Trends, 1H 2017

INCREASE

>25%

10 to 25%

0 to 10%

DECREASE

0 to -10%

-10 to -25%

< -25%

During 1H17 Hong Kong overtook

Tokyo to become Asia’s largest

marked for income-producing

transactions.

U.S. volume slowed as fewer

megadeals transacted, accounting for

only 21% of volume in 2Q17 versus

32% in 2015.

U.K. volume in 2Q17 grew because of increased

activity in London, where two-thirds of capital

originated overseas.

Investors balking at high prices

and owners holding onto stock

hurt investment volume, which

dropped by 35% YOY in 1H17.

France in 2Q17 was suffering political uncertainty and

for the first time sat outside Europe’s top five markets.

-46%

32%

-21%

H1

STALLING GLOBAL MOMENTUM

4

Canada

United States

Mexico

Brazil

Japan

China

Hong Kong

Singapore

South Korea

Taiwan

India

Australia

South Africa United Kingdom

Germany

France

Sweden

Netherlands

Spain

Italy

Russia

Switzerland

Norway Poland

Finland

Denmark

Austria

Belgium

Ireland

Czech Republic

-100%

-50%

0%

50%

100%

150%

-150% -100% -50% 0% 50% 100% 150%

Vo

lum

e C

han

ge

12 M

ths T

hro

ug

h Q

2’1

7 v

s 1

2 M

ths T

hro

ug

h Q

2’1

6

Volume Change H1’17 vs H1’16

Source: Real Capital Analytics, Global Capital Trends, 1H 2017

1H17 GLOBAL TRADE ROUTES Rank Source Destination Vol ($m) YOY Chg

1 U.S. Germany 6,668 185%

2 China U.S. 4,999 12%

3 Singapore U.S. 3,496 71%

4 Hong Kong U.K. 3,092 100%

5 U.S. U.K. 2,978 -46%

6 Germany U.S. 2,234 -17%

7 U.S. Japan 1,834 24%

8 U.S. Netherlands 1,710 -16%

9 South Korea Germany 1,619 n/a

10 U.S. Italy 1,618 29%

11 U.S. France 1,313 -29%

12 Canada U.K. 1,302 23%

13 Japan U.S. 1,260 79%

14 U.S. Spain 1,249 -16%

15 Hong Kong Canada 871 301%

16 Israel U.S. 859 -20%

17 China U.K. 701 -38%

18 Singapore Australia 636 -22%

19 Singapore U.K. 621 -75%

20 Hong Kong U.S. 607 55%

1

2

3

4

5 6

7

8

9

10

11

12

18

13

19

20

14

15

17

16

From Americas

From Europe

From Asia Pacific

From Middle East

Route Rank

USA

DEU

CHN

SGP

HNG

JPN KOR

NLD GBN

Source: Real Capital Analytics, Global Capital Trends, 1H 2017

2017 TOP 30 MARKETS MOST ACTIVE METROS 1H17

6

20,180

15,112

14,759

11,866

8,269

8,064

8,010

7,783

6,515

6,207

5,854

5,801

5,699

5,262

5,041

4,954

4,928

4,918

4,683

4,568

4,289

4,190

3,818

3,678

3,631

3,469

3,390

3,279

3,260

2,998

-40%

-7%

0%

0%

5%

1%

27%

-3%

27%

-33%

43%

50%

-33%

6%

11%

58%

78%

41%

-38%

-56%

-26%

59%

3%

-16%

16%

-42%

48%

-30%

45%

Market Sales Volume ($m) YOY

NYC Metro

LA Metro

London Metro

SF Metro

Hong Kong

Boston Metro

Dallas

DC Metro

Atlanta

Tokyo

Shanghai

Singapore

Miami/So Fla

Amsterdam/Randstad

Berlin-Brandenburg

Frankfurt/Rhine-Main

Rhine-Ruhr

Houston

Chicago

Paris

Seattle

Madrid

Austin

Phoenix

Seoul

Denver

Charlotte

Sydney

Orlando

Yokohama

Source: Real Capital Analytics, Global Capital Trends, 1H 2017

2016 TOP 30 MARKETS CROSS BORDER CAPITAL ONLY

7

17,769

17,711

8,242

6,620

6,133

5,702

5,652

4,686

4,584

3,982

3,776

3,681

3,547

3,188

3,032

2,997

2,657

2,615

2,601

2,540

2,435

2,368

2,342

2,273

2,094

2,027

1,962

1,921

1,880

1,836

Global Continental

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16

0%

10%

20%

30%

NY’s Global Share Edges

London in 2016

Market Sales Volume ($m)

NYC Metro

London Metro

Paris

Amsterdam/Randstad

Berlin-Brandenburg

SF Metro

LA Metro

Sydney

Hong Kong

Dublin

Singapore

Shanghai

DC Metro

Seoul

Melbourne

Rhine-Ruhr

Munich

Chicago

Milan

Saxon Triangle

Miami/So Fla

Frankfurt/Rhine-Main

Prague

Dallas

Tokyo

Copenhagen

Seattle

Warsaw

Atlanta

Manchester Metro

Source: Real Capital Analytics, Global Capital Trends, 1H 2017 Source: Real Capital Analytics, CPPI TM Global Cities

RCA CPPI™ GLOBAL CITIES: MARKET MOMENTUM

8

Pri

ce

YO

Y C

ha

ng

e

Volume YOY Change

-40% -30% -20% -10% 0% 10% 20% -10%

-5%

0%

5%

10%

15%

20%

25%

New York Paris

London

Tokyo

Melbourne

Toronto

Chicago

Nordic A

Los

Angeles

Boston

Hong

Kong

Sydney

San Franisco

Amsterdam

German A

Washington

Singapore

Bubble sized past four quarters volume

Source: Real Capital Analytics, CPPI TM Global Cities

BUYER COMPOSITION

9

34.0% 41.0%

34.0%

43.0% 37.0%

18.0%

13.0%

13.0%

10.0% 15.0%

23.0% 18.0% 26.0% 13.0%

21.0%

22.0% 25.0% 24.0%

28.0%

25.0%

6.0%

2013 2014 2015 2016 2017 2017

User/Other

Private

REIT/Listed

Institutional

Cross-Border

Source: Real Capital Analytics, CPPI TM Global Cities

ASIA PACIFIC

China 11%

Japan 14%

Australia - 35%

Hong Kong 5%

Singapore 50%

ASIA PACIFIC CAPITAL TRENDS

11

DECREASE

INCREASE

>25%

10 to 25%

0 to 10%

0 to -10%

-10 to -25%

< -25%

1

2

3

4

5

Source: Real Capital Analytics, Asia Pacific Capital Trends, 1H 2017

ASIA CAPITAL FLOWS

12

0%

10%

20%

30%

40%

50%

60%

'08 '09 '10 '11 '12 '13 '14 '15 '16 '17

Sh

are

of

Glo

ba

l C

ros

s-B

ord

er

Flo

ws

, R

oll

ing

12 M

on

th

Asia-Pacific Europe North AmericaAvg Cap

Rate

10 Yr

Bond

Spread

(bps)

US 6.5% 2.3% 415

Australia 6.3% 2.6% 369

France 6.3% 0.8% 547

Germany 6.0% 0.5% 554

U.K 5.9% 1.3% 466

Spain 5.0% 1.5% 349

Japan 5.0% 0.1% 493

Canada 5.0% 1.8% 323

Hong

Kong

2.9% 1.5% 139

Singapore 2.8% 2.1% 66

Source: Real Capital Analytics, Asia Pacific Capital Trends, 1H 2017

APAC CAPITAL TRENDS BY PROPERTY TYPE

13

TRANSACTIONS BY PROPERTY TYPE

Investments in Asia Pacific income-producing properties rose 5% YOY in 1H17.

109%

Apartment

8%

Retail

-3%

Industrial

-8%

Hotel

-8%

Office

Q2’17 Volume ($B)

H1’17 Volume ($B)

13.9

30.3

3.0

6.3

7.4

12.1

4.6

10.4

2.7

4.8

Income

Properties

Dev

Site

Grand

Total

31.6

63.9

130.9

239.7

162.4

303.5

Source: Real Capital Analytics, Asia Pacific Capital Trends, 1H 2017

AUSTRALIA

Country 2015 2016 2017 (YTD)

China $6,334 $7,105 $1,833

United States $3,372 $5,216 $1,643

Singapore $5,124 $2,994 $4,030

Hong Kong $1,679 $1,211 $543

Japan $16 $1,109 $28

France $0 $970 $0

South Korea $452 $748 $584

United Kingdom $304 $734 $242

Germany $796 $574 $235

Switzerland $260 $417 $181

CROSS-BORDER REAL ESTATE CAPITAL TRACKER

15

$2.8b

$3.9b

$1.4b

$274m

$386m

Source: Real Capital Analytics data as at 30 September 2017

Volume in $ Millions

Total crossborder flows for the first 3 quarters of 2017

coming in at $9.338b well down on the full year 2016

flows of $21.083b

$385m

CROSS-BORDER ASSETS BY STATE

16

$0

$1,000

$2,000

$3,000

$4,000

Offce Industrial Retail Hotel Development

Sydney

Melbourne

Brisbane

Perth

US $Millions

Source: Real Capital Analytics data as at 30 September 2017

TREND TRACKER OFFICE

17

$10b

$5b

Vo

lum

e in

AU

D$

2011 2013 2015 2017

Source: Real Capital Analytics 2017, Volume displayed as 12 Month Totals. Includes property or portfolio sales $10 million or greater.

2009

Office Volume

1H17

Sydney 7.0b

Melbourne 4.9b

Brisbane 2.8b

Perth 0.5b

TREND TRACKER OFFICE CAP RATES

18 Source: Real Capital Analytics 2017, Volume displayed as 12 Month Totals. Includes property or portfolio sales $10 million or greater.

5.00%

6.00%

7.00%

8.00%

9.00%

10.00%

Cap Rate

1H17

Sydney 5.4%

Melbourne 5.9%

Brisbane 6.8%

Perth 7.5%

TOP TRANSACTIONS AUSTRALIA BY PRICE (AUD)

19

$423m

$1.4b

$696m

$336m

$360m $1.445b

$828m

$670m

Property Name Location Price ($AUDm)

Volume ($AUDm)

Cap Rate (%)

Buyer

MLC Centre Sydney $1,445 $723 4.5 DEXUS

839 Collins Street Docklands $423 $423 5.3 Invesco Australia,

Challenger Financial

Olderfleet Bldgs Melbourne $828 $414 4.8 Suntec RE Inv. Trust

Hill Rd Wentworth

Point $360 $360

N/A (development

site)

Sekisui House

International Towers

Sydney Tower 1 Barangaroo $1,400 $350 Varies Multiple

311 Spencer Street Melbourne $696 $348 6.4 Keppel REIT

Source: Real Capital Analytics data as at 30 September 2017

MLC CENTRE

SYDNEY

20

$1.4b sales price

$723m volume

4.5% cap

DEXUS

CBD offices & retail

21

$423m sales price

$423m volume

5.3% cap

Invesco, Challenger

CBD property

839 Collins st

DOCKLANDS

22

Olderfleet

Building

MELBOURNE

$828m sales price

$414m Volume

4.8% Cap

Suntec RE Inv Trust

CBD offices & retail

23

Hill road

Wentworth

point NSW

$360m Sales price

$360m Volume

Sekisui House

Development site to be

residential apartments

24

$1.4b Sales price

$350m Volume

CBD Offices & retail

International

Towers Sydney Tower 1

BARANGAROO

25

311 Spencer

Street

MELBOURNE

$696m Sales price

$348m Volume

6.4% Cap

Keppel REIT

CBD Offices

0 1,000 2,000 3,000 4,000

Blackstone

Charter Hall REIT

AMP Capital

DEXUS

Ascendas REIT

GPT

Mirvac Group

ISPT

AXA Group

UniSuper (AUS)

0 1,000 2,000 3,000 4,000

Goodman Group

Brookfield AM

Frasers Centrepoint

Vicinity Centres

Lend Lease

DEXUS

GPT

Mirvac Group

GIC

NSW Government

TOP BUYERS AND SELLERS

26 Source: Real Capital Analytics data as at 30 September 2017

By disposition (AUD, m) in prior 24 months By acq (AUD, m) in prior 24 months

Buyers Sellers

THANK YOU

PERPETUAL INVESTMENTS

FUM – $31.5 billion

PERPETUAL PRIVATE

FUA – $13.3 billion

PERPETUAL CORPORATE TRUST

FUA - $658 billion

Source: Perpetual Financials as at 30 June 2017

We are one of Australia’s most

experienced wealth managers and

leading trustee groups.

PERPETUAL 130 YEARS OF HISTORY

CONTACT US

This presentation has been prepared by Perpetual Corporate Trust services are provided by Perpetual Corporate Trust Limited ABN 99 000 341 533 AFSL 392673 Perpetual Limited ABN 86 0000 431 827 and its subsidiaries. Perpetual Limited and certain of its subsidiaries act as Authorised Representatives of Perpetual Trustee Company Limited ABN 42 000 001 007, AFSL 236643. This presentation contains general information only, and is not intended to provide you with financial advice.

IMPORTANT NOTE