industrial investment review fy2014-15

I N D U S T R I A L

Accelerating success.

I N V E S T M E N T

R E V I E W 2 0 1 4 / 1 5

2015 RETAIL INVESTMENT REVIEW2 2015 INDUSTRIAL INVESTMENT REVIEW2

04 INDUSTRIAL & LOGISTICS - THE DEMAND ENVIRONMENT

06 YEAR IN REVIEW

10 INDUSTRIAL TRANSACTION TRENDS

16 MAJOR TRANSACTION OVERVIEW BY STATE

22 CASE STUDIES

22 ALTIS PORTFOLIO

23 MCPHEE PORTFOLIO

24 VALAD PORTFOLIO

25 KMART DISTRIBUTION CENTRE IN TRUGANINA

26 INDUSTRIAL & LOGISTICS SECTOR OUTLOOK

28 VALUATION OUTLOOK

29 INVESTMENT OUTLOOK

32 YOUR INDUSTRIAL AND VALUATION SERVICES SPECIALISTS

C O N T E N T S

2 2014/15 INDUSTRIAL INVESTMENT REVIEW

I N T R O D U C T I O N

THE ASSET CLASS OF CHOICE FOR SAVVY INVESTORS

Investment in the industrial and logistics sector has scaled new heights in the last 12 months. A total of 266 industrial and logistics properties worth $6.45 billion changed hands over the 2014-15 financial year, a significant uplift from the $4.12 billion worth of transactions over the preceding financial year. Yield compression was recorded across Australia and in particular in Sydney, Melbourne and Brisbane, as competition for assets intensified.

The last 12 months also saw the highest value single asset industrial transaction of the last eight years comprising the $253 million Coles Chilled Distribution centre in Eastern Creek. Brokered by Colliers International, this deal set a new benchmark indicative yield of 5.6 percent for a super prime asset. This transaction is indicative of investor appetite for distribution and logistics facilities, reflecting the changing nature of the Australian industrial and logistics sector and its evolution away from manufacturing towards the transition and delivery of often imported goods to domestic businesses and households.

Investment sales over the last 12 months have been focused on eastern seaboard markets but weight of capital has been felt nationally. REITs, super funds and sovereign wealth funds have been active buyers, with privates seizing the opportunity afforded by current sales conditions to become net sellers over the period. Well located assets with long WALEs and strong covenant remain the buyers' choice and have been the most hotly contested.

The Australian industrial and logistics sector is now a truly global market. Offshore investors worldwide are actively scouring the nation for opportunities, enticed by strong capital returns, freehold titles, yields which remain much higher than other international markets, solid underlying property fundamentals and sizeable population and employment growth. The falling Australian dollar will continue to increase the attraction of industrial property for offshore capital.

Looking forward, the strong sales environment is expected to persist. This is based on the enduring favourable spread between prime industrial yields and the 10-year government bond rate, which remains considerable despite yield compression over the last 12 months. The market will be restricted only by a lack of quality stock coming to market which may ensure that total sales volumes for 2015-16 are lower than those witnessed over the last 12 months. Further yield sharpening could eventuate.

We have pleasure in presenting to you our Australian Industrial Investment Review. We look forward to assisting you with your industrial investment needs or broader property requirements over the coming 12 months.

MALCOM TYSON MANAGING DIRECTOR INDUSTRIAL

SAS LIYANAGEANALYSTRESEARCH

A Colliers International Publication 3

Tenant enquiry for industrial floorspace has improved over the last 12 months. The changed nature of the industrial market as a result of the offshoring of manufacturing has seen, the transport and logistics sector take over as the industrial tenant powerhouse. Transport and logistics tenancies now demand the greatest industrial floorspace of all industry types due to their requirement to store and transit goods from suppliers to customers.

Retail sales are a major driver of industrial and logistics demand. As retail spending increases, the need to ship retail goods from offshore and domestic producers to shopfronts or directly to consumers grows. This has a direct impact on the demand for industrial property, as the industrial floorspace required to warehouse and manage the logistics for these goods increases accordingly.

The latest ABS consumer data from May 2015 indicates that retail trade grew 0.3 percent during the month, leading to an annual increase of 4.3 percent. This is the strongest rate of growth since 2014. By retail sector the current strength in spending is being led by growth in household goods retailing, which is growing at an annualised rate of 9.5 percent and is being driven by house price growth and low interest rates. This has stimulated heightened occupier demand for storage, distribution centre and logistics floorspace and is being reflected in investment sales.

In terms of the broader economy, the moderation in mining sector investment has been offset by significant housing construction activity which has been positively impacting on industrial tenant demand. The population of Australia has grown by an estimated 325,400 people over the 2014-15 financial year (FY) to reach over 23.8 million at 30 June 2015, a 1.4 percent annual increase. Population growth together with demographic change has been driving demand for dwellings. This has led to a divergence in Australian capital cities between average incomes and house prices.

To help alleviate housing affordability issues State Governments are placing strong emphasis on delivering additional residential supply. As a result construction activity in the residential sector has been significant, benefiting suppliers as well as increasing wider economic activity. Housing construction creates demand for material providers, wholesale retailers transport and logistics as well as creating demand for household goods. Over the last 12 months an estimated 14,411 new dwellings have been completed in Sydney alone and pipeline residential development is sizeable. The latest ABS data demonstrates that building approvals have been trending upwards since July 2014 with 220 092 dwellings approved nationally since then including 18 724 new dwellings in June 2015.

I N D U S T R I A L & L O G I S T I C S T H E D E M A N D E N V I R O N M E N T

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Source: ABS/Colliers Edge

Source: ABS/Colliers Edge

Current Annual Growth Rate 4.7%

10 Year Average Growth Rate 4.5%

5.9 6

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National Unemployment Seasonally Adjusted NATIONAL UNEMPLOYMENT SEASONALLY ADJUSTED

DEMAND FORSPACE IS BEING DRIVEN BYTRANSPORT& LOGISTICS

RETAILSALES

$6.45BILLION

INVESTMENT SALESIN 2014/15

TRANSACTED IN2014/15 WORTH

MAJOR DRIVER OFINDUSTRIAL& LOGISTICS

UP FROMLAST YEAR

HISTORIC HIGH $24.25MIN 2014/15

$19.90M IN 2014/15

113PROPERTIES

PORTFOLIOS

OFFSHOREINVESTORS

BN

WERE THE DOMINANTINDUSTRIALPROPERTIES

FRASERSCENTREPOINT

THE LARGESTPURCHASER OF

INDUSTRIALASSETS IN 2014/15

LARGEST INDUSTRIALTRANSACTION DURING 2014/15 WAS

AVERAGE DEAL SIZE

COLES CHILLED DISTRIBUTION CENTRE

64 INDUSTRIALASSETS WORTH$2.63 BILLION

OVER 2014-15 FY

AVERAGE INDUSTRIALDEAL SIZE 2014-15 FY


56%

BY VALUE53%

TRADED42%

$5.13M BILLIONACROSS 188 SALES

2ND HALF

$1.32M BILLIONACROSS 78 TRANSACTIONS

1ST HALF

INSTITUTIONS

BY VALUE

BN

BN

Demand for space in the industrial sector is being driven by the transport and logistics sector;

Retail sales are a major driver of industrial and logistics demand;

Investment in the industrial sector (>$5 million) reached historic highs in 2014/15 at $6.45 billion – up 56 per cent on 2013/14;

Portfolios have been a major feature of the industrial investment landscape in 2014/15 with 11 portfolios transacted worth $1.34 billion;

The largest industrial transaction to occur during 2014/15 was the sale of the Coles Chilled Distribution Centre at Eastern Creek for $253 million;

The average deal size increased from $19.90 million in 2013/14 to $24.25 million in 2014/15 – up 24 per cent;

2H 2014 recorded $5.13 billion across 188 sales, while the 1H 2015 saw $1.32 billion across 78 transactions;

Institutions were the dominant purchasers of industrial property during 2014/15 accounting for 73 per cent of sales by total value;

The $1.40 billion Frasers Centrepoint takeover of Australand made them the single largest purchaser of industrial assets in 2014/15;

New South Wales remains the locomotive driving industrial investment recording $3.45 billion sales across 113 properties – accounting for 53 per cent of the total by value and 42 per cent by number of properties traded;

Offshore investors acquired 64 industrial assets worth $2.63 billion over 2014/15 or 41 per cent of all sales by value;

The average deal size to offshore buyers was $41.1 million compared with $18.9 million for domestic buyers.

01 02 03 04 05

08 09 10 11 12

06 07


Industrial rental growth over the last 12 months has been moderate. This is typical of the sector and reflective of the volume of industrial and logistics land available plus the speed with which new product can be delivered to the market. Stronger demand conditions thus trigger supply additions which tapper the extent of effective rental growth. Notwithstanding this, the quality of industrial and logistics product being developed continues to improve and makes a more appealing case to investors. Industrial and logistics tenants continue to seek scale, modern product with high clear-span warehousing and good proximity to transport links.

An upturn in employment has also been assisting economic growth and the industrial and logistics sector. 249,000 jobs were added to the Australian economy in the 12 months to June 2015, albeit the majority of these jobs were part-time. Unemployment was 6.0 percent at June 2015, lower than anticipated by the Reserve Bank of Australia (RBA) and Treasury. Notwithstanding this, the rate of unemployment remains well above the 10-year average of 5.2 percent.

Industrial and logistics demand is strongly correlated with Gross Domestic Product (GDP) performance. The latest ABS National Accounts data indicates that GDP grew by 2.3 percent over the year to March 2015, marginally above that expected by most economists. In seasonally adjusted terms, the main contributors to GDP growth by industry were net exports (0.5 percentage points) and final consumption expenditure (0.4 percentage points). Although investment in the mining sector has declined, the quantity of exports has increased as lower commodity prices have encouraged a greater output by exporters companies attempting to maintain cash-flow.

A further boost to the industrial demand environment has been provided by Federal and State Government commitments to major new infrastructure expenditure. Projects such as the $8 billion North West Rail Link, $10 billion WestConnex and $6 billion Badgerys Creek Airport in Sydney, the $11 billion Melbourne Metro project and the $4 billion Brisbane airport expansion provide businesses with confidence on future demand growth. This creates direct demand for warehouses and logistics through which construction materials must move between the supplier and their customer, as well as supporting the long term sustainability of industrial markets served by more efficient transport infrastructure.


RETAILSALES

$6.45BILLION




UP FROMLAST YEAR


$19.90M IN 2014/15

113PROPERTIES

PORTFOLIOS

OFFSHOREINVESTORS

BN


FRASERSCENTREPOINT




AVERAGE DEAL SIZE



OVER 2014-15 FY



56%

BY VALUE53%

TRADED42%


2ND HALF


1ST HALF

INSTITUTIONS

BY VALUE

BN

BN













01 02 03 04 05

08 09 10 11 12

06 07


RETAILSALES

$6.45BILLION




UP FROMLAST YEAR


$19.90M IN 2014/15

113PROPERTIES

PORTFOLIOS

OFFSHOREINVESTORS

BN


FRASERSCENTREPOINT




AVERAGE DEAL SIZE



OVER 2014-15 FY



56%

BY VALUE53%

TRADED42%


2ND HALF


1ST HALF

INSTITUTIONS

BY VALUE

BN

BN













01 02 03 04 05

08 09 10 11 12

06 07

750 Princess Highway, Tempe, NSW: Sold on behalf of Valad


Investment in the Australian industrial and logistics sector reached historic heights over the last 12 months. A total of $6.45 billion of industrial assets (of $5 million or greater) changed hands between 1 July 2014 and 30 June 2015, the 2014-15 FY. This is 56 percent or $2.33 billion greater than the $4.12 billion of industrial transaction volumes for the 2013-14 FY. Indeed it was the greatest volume of industrial and logistics transactions ever recorded by Colliers International since our sales database began in 2007.

Over the 2014-15 FY a total of 266 properties were purchased compared to 207 in the previous 12 months. The average deal size increased from $19.90 million in the 2013-14 FY to $24.25 million in the 2014-15 FY, equivalent to growth of +$4.35 million or +22 percent increase in typical deal value.

Examining activity within the 2014-15 FY, it is evident that the first half of 2015 has been notably quieter in terms of both the number of the deals and the total volume of sales. A total of 78 deals worth $1.32 billion transacted in the first half of 2015 compared to 188 deals worth $5.13 billion in the second half of 2014. Comparing like for like sales, deals volumes in the first half 2015 are lower than the exceptionally strong sales conditions we saw in the first six months of 2014. The first half of 2014 saw 113 properties transact for a combined total of $1.87 billion.

Low sales volumes have correlated with increasing demand which has been placing downward pressure on yields in most markets. Well-located vanilla assets with strong covenant and long WALE remain highly sought after. Industrial facilities situated in gentrifying areas and which have potential residential upside achieved the sharpest pricing over the 2014-15 FY, albeit such assets are not being purchased on their industrial potential.

The greatest value sale over the 12 month period was the acquisition of a Coles chilled distribution centre at the M7 Business Hub in Eastern Creek, Sydney, NSW. This was acquired by Singaporean based Mapletree Logistics Trust for $253 million on 30 June 2015, subject to Foreign Investment Review Board (FIRB) approval, from joint vendors Goodman/ Brickworks Limited. The asset comprises a 55,395sqm logistics

Y E A R I N R E V I E W

Table 1 - Top Australian Industrial Buyers by Value (2014-15 FY)

Rank Purchaser Total Purchase Value Number of Properties

1 Frasers Centrepoint $1.40 bn 34

2 Propertylink $429.25 m 19

3 Charter Hall $347.08 m 12

4 Mapletree Logistics Trust $253.00 m 1

5 Mirvac Group $224.10 m 5

6 KWAP Pension Fund / Logos $223.42 m 3

7 DEXUS $213.20 m 3

8 Payce Consolidated $202.30 m 3

9 Aqualand $170.00 m 1

10 360 Capital IND Fund $139.88 m 5

facility on a 19 year lease to Coles with a reputed 5.6 per cent initial yield. This shows the penchant for buyers to seek distribution and logistics investment opportunities which is a trend explored in detail subsequently in this Investment Review.


RETAILSALES

$6.45BILLION




UP FROMLAST YEAR


$19.90M IN 2014/15

113PROPERTIES

PORTFOLIOS

OFFSHOREINVESTORS

BN


FRASERSCENTREPOINT




AVERAGE DEAL SIZE



OVER 2014-15 FY



56%

BY VALUE53%

TRADED42%


2ND HALF


1ST HALF

INSTITUTIONS

BY VALUE

BN

BN













01 02 03 04 05

08 09 10 11 12

06 07


RETAILSALES

$6.45BILLION




UP FROMLAST YEAR


$19.90M IN 2014/15

113PROPERTIES

PORTFOLIOS

OFFSHOREINVESTORS

BN


FRASERSCENTREPOINT




AVERAGE DEAL SIZE



OVER 2014-15 FY



56%

BY VALUE53%

TRADED42%


2ND HALF


1ST HALF

INSTITUTIONS

BY VALUE

BN

BN













01 02 03 04 05

08 09 10 11 12

06 07


Examining the profile of industrial purchasers, institutions were dominant accounting for $4.71 billion of transactions in the 2014-15 FY or 73 percent of the total. Institutions purchased 132 of the 266 properties over the period, equivalent to 50 percent of total properties. This reflects their preference for higher value purchasers. The $1.40 billion Frasers Centrepoint takeover of Australand in October 2014 saw this institutional investor crowned as the largest single purchaser of Australian industrial assets over the 2014-15 FY.

In second place was Propertylink with $426.25 million of industrial acquisitions covering 21 properties, including the VALAD and Equity Commonwealth portfolios. Propertylink favoured opportunities in eastern seaboard capitals but made one acquisition in Perth.

In third place by total volume of acquisitions was Charter Hall who spent $347.08 million on 12 properties situated in Sydney, Melbourne, Brisbane and Adelaide.

In terms of property sellers, institutions were less prolific, accounting for 53 percent of all vendors by value and 39 percent by the number of assets sold. By contrast privates represented 44 percent of all industrial vendors by value and 59 percent by the number of assets sold. These figures are skewed by the Frasers Centrepoint takeover of Australand. If this institutional vendor is excluded, the prevalence of privates as sellers of industrial property over the 2014-15 FY comparative to institutions is far greater. Privates are counter-cyclical, preferring to sell their properties when the market is hot and acquire during downturns. Current conditions are encouraging privates to sell to capitalise on strong pricing. The occurrence of sale and leaseback transactions is also increasingly evident as industrial businesses become both lessee and seller, using the opportunity to liberate capital for reinvestment whilst securing long-term access to property.

Neighbourhood Other CBD Large Format Retail

Regional Sub-Regional Themed

Source: Colliers Edge

+26%

2013/14 2014/15

157

020406080

100120140160180

No.

of S

ales

125

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Sales Volumes 2013/14 Vs 2014/15

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2014 H2 2015 H1

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Sales Transactions 2013/14 Vs 2014/15

Neighbourhood Other CBD Large Format Retail

Regional Sub-Regional Themed


+26%

2013/14 2014/15

157

020406080

100120140160180

No.

of S

ales

125

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Sales Volumes 2013/14 Vs 2014/15

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2013/14 FY 2014/15 FY

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Sales Transactions 2013/14 Vs 2014/15

SALES VOLUMES 2013/14 VS 2014/15

SALES TRANSACTIONS 2013/14 VS 2014/15


RETAILSALES

$6.45BILLION




UP FROMLAST YEAR


$19.90M IN 2014/15

113PROPERTIES

PORTFOLIOS

OFFSHOREINVESTORS

BN


FRASERSCENTREPOINT




AVERAGE DEAL SIZE



OVER 2014-15 FY



56%

BY VALUE53%

TRADED42%


2ND HALF


1ST HALF

INSTITUTIONS

BY VALUE

BN

BN













01 02 03 04 05

08 09 10 11 12

06 07DEMAND FORSPACE IS BEING DRIVEN BYTRANSPORT& LOGISTICS

RETAILSALES

$6.45BILLION




UP FROMLAST YEAR


$19.90M IN 2014/15

113PROPERTIES

PORTFOLIOS

OFFSHOREINVESTORS

BN


FRASERSCENTREPOINT




AVERAGE DEAL SIZE



OVER 2014-15 FY



56%

BY VALUE53%

TRADED42%


2ND HALF


1ST HALF

INSTITUTIONS

BY VALUE

BN

BN













01 02 03 04 05

08 09 10 11 12

06 07


RETAILSALES

$6.45BILLION




UP FROMLAST YEAR


$19.90M IN 2014/15

113PROPERTIES

PORTFOLIOS

OFFSHOREINVESTORS

BN


FRASERSCENTREPOINT




AVERAGE DEAL SIZE



OVER 2014-15 FY



56%

BY VALUE53%

TRADED42%


2ND HALF


1ST HALF

INSTITUTIONS

BY VALUE

BN

BN













01 02 03 04 05

08 09 10 11 12

06 07


RETAILSALES

$6.45BILLION




UP FROMLAST YEAR


$19.90M IN 2014/15

113PROPERTIES

PORTFOLIOS

OFFSHOREINVESTORS

BN


FRASERSCENTREPOINT




AVERAGE DEAL SIZE



OVER 2014-15 FY



56%

BY VALUE53%

TRADED42%


2ND HALF


1ST HALF

INSTITUTIONS

BY VALUE

BN

BN













01 02 03 04 05

08 09 10 11 12

06 07


RETAILSALES

$6.45BILLION




UP FROMLAST YEAR


$19.90M IN 2014/15

113PROPERTIES

PORTFOLIOS

OFFSHOREINVESTORS

BN


FRASERSCENTREPOINT




AVERAGE DEAL SIZE



OVER 2014-15 FY



56%

BY VALUE53%

TRADED42%


2ND HALF


1ST HALF

INSTITUTIONS

BY VALUE

BN

BN













01 02 03 04 05

08 09 10 11 12

06 07


Examining the top sellers of Australian industrial property in 2014-15 FY, Australand dominates as a result of the Frasers Centrepoint take-over. In second place was TPG Capital with the sale of assets belonging to the Ingham's Enterprises chicken production portfolio. In third place was the Goodman Group with $291.93 million of sales through seven assets located in Melbourne (five), Sydney (one) and Adelaide (one). Goodman also took a share in the sale of the Coles chilled distribution centre with Goodman Australia Industrial Fund / Brickworks Limited taking out the fourth spot as a result. Portfolio sales have been strong over the last 12 months which is reflected in the top 10 vendors of industrial property over the 2014-15 FY.

REIT 49%

Private 15%

Institution 24%

Developer 9%Owner Occupier/Other 3%

REIT 44%

Private 44%

Institution 9%




State 3%

Volume 58%

Volume 42%

No. Deals 75%

No. Deals 25%

Offshore versus Domestic Industrial Buyers 2014-15 FY

Domestic Offshore

Buyer Transaction (by value)

Vendor Profile (by Value)

BUYER PROFILE (BY VALUE)

REIT 49%

Private 15%

Institution 24%


REIT 44%

Private 44%

Institution 9%




State 3%

Volume 58%

Volume 42%

No. Deals 75%

No. Deals 25%


Domestic Offshore


Vendor Profile (by Value) VENDOR PROFILE (BY VALUE)


RETAILSALES

$6.45BILLION




UP FROMLAST YEAR


$19.90M IN 2014/15

113PROPERTIES

PORTFOLIOS

OFFSHOREINVESTORS

BN


FRASERSCENTREPOINT




AVERAGE DEAL SIZE



OVER 2014-15 FY



56%

BY VALUE53%

TRADED42%


2ND HALF


1ST HALF

INSTITUTIONS

BY VALUE

BN

BN













01 02 03 04 05

08 09 10 11 12

06 07


RETAILSALES

$6.45BILLION




UP FROMLAST YEAR


$19.90M IN 2014/15

113PROPERTIES

PORTFOLIOS

OFFSHOREINVESTORS

BN


FRASERSCENTREPOINT




AVERAGE DEAL SIZE



OVER 2014-15 FY



56%

BY VALUE53%

TRADED42%


2ND HALF


1ST HALF

INSTITUTIONS

BY VALUE

BN

BN













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08 09 10 11 12

06 07

Analysing sales on a state by state basis, NSW remains the locomotive driving industrial investment. By value New South Wales recorded $3.45 billion of industrial sales covering 113 properties in the 2014-15 FY, accounting for 53 percent of total sales by value and 42 percent of the number of properties traded. Victoria was ranked second nationally in terms of both transaction values, with $1.48 billion or 23 percent of all industrial sales in 2014-15 FY, as well as the number of properties sold (72 properties or 27 percent of total national deals in the 2014-15 FY). Queensland was ranked third with $1.17 billion of sales from 57 properties, reflecting a market share of 18 percent and 22 percent for transaction volumes and the number of properties respectively.

New South Wales also recorded the highest average sale price per asset of $30.5 million. This compares to an average sales price of $20.6 million per asset in Queensland and Victoria, $15.1 million per asset in Western Australia, $7.8 million per asset in Tasmania and $5.2 million per asset in the Northern Territory.

Coles Distribution Centre: Sold on behalf of Goodman


Offshore buyers acquired $2.63 billion of industrial property over the 2014-15 FY or 41 percent of all property by value. The Frasers Centrepoint takeover of Australand accounted for $1.40 billion (53 percent) of property brought by offshore purchasers. Excluding the takeover some $1.23 billion of industrial property was sold to offshore parties during the period. This is likely to under-represent the true impact of offshore purchases over the last 12 months given the partnership arrangements which apply in some transactions whereby offshore investors funnel capital through local groups to buy industrial property.

A total of 64 of the 266 Australian industrial properties sold over the 2014-15 FY went to offshore purchasers, a penetration rate of 24 percent. The proportionally lower share of properties sold to offshore buyers comparative to their share of deal value reflects their preference for pricier prime assets. The average deal value of offshore buyers over the period was $41.1 million per transaction which compares to $18.9 million per transaction for domestic buyers.

REIT 49%

Private 15%

Institution 24%


REIT 44%

Private 44%

Institution 9%




State 3%

Volume 58%

Volume 42%

No. Deals 75%

No. Deals 25%


Domestic Offshore


Vendor Profile (by Value)

OFFSHORE VERSUS DOMESTIC INDUSTRIAL BUYERS 2014-15 FY


RETAILSALES

$6.45BILLION




UP FROMLAST YEAR


$19.90M IN 2014/15

113PROPERTIES

PORTFOLIOS

OFFSHOREINVESTORS

BN


FRASERSCENTREPOINT




AVERAGE DEAL SIZE



OVER 2014-15 FY



56%

BY VALUE53%

TRADED42%


2ND HALF


1ST HALF

INSTITUTIONS

BY VALUE

BN

BN













01 02 03 04 05

08 09 10 11 12

06 07DEMAND FORSPACE IS BEING DRIVEN BYTRANSPORT& LOGISTICS

RETAILSALES

$6.45BILLION




UP FROMLAST YEAR


$19.90M IN 2014/15

113PROPERTIES

PORTFOLIOS

OFFSHOREINVESTORS

BN


FRASERSCENTREPOINT




AVERAGE DEAL SIZE



OVER 2014-15 FY



56%

BY VALUE53%

TRADED42%


2ND HALF


1ST HALF

INSTITUTIONS

BY VALUE

BN

BN













01 02 03 04 05

08 09 10 11 12

06 07


RETAILSALES

$6.45BILLION




UP FROMLAST YEAR


$19.90M IN 2014/15

113PROPERTIES

PORTFOLIOS

OFFSHOREINVESTORS

BN


FRASERSCENTREPOINT




AVERAGE DEAL SIZE



OVER 2014-15 FY



56%

BY VALUE53%

TRADED42%


2ND HALF


1ST HALF

INSTITUTIONS

BY VALUE

BN

BN













01 02 03 04 05

08 09 10 11 12

06 07

Excluding the Frasers Centrepoint deal, 29 industrial properties were sold to investors based offshore. 48 percent of these deals were located in New South Wales. 71 percent of the total offshore purchases by value related to assets in New South Wales. This demonstrates the preference of overseas buyers for exposure to industrial property in New South Wales and primarily Sydney. 66 percent of all offshore purchased properties were acquired by offshore institutions (excluding Frasers Centrepoint) with 34 percent being acquired by offshore privates. Many of the sales to privates related to industrial properties with residential upside. The most active offshore buyers by country, once Singapore based Frasers Centrepoint is excluded, were based in China (34 percent of total sales by value), followed by Singapore (32 percent of total sales by value) and Malaysia (18 percent of total sales by value). Offshore purchasers of Australian property therefore remain largely Asian based, although enquiry is now evident from investors based through the world.

Coles Distribution Centre: Sold on behalf of Goodman


The industrial investment landscape in Australian has been going from strength to strength over the last 12 months. Low industrial vacancy and limited new construction has seen improvements in the leasing environment and the reliability of capital returns. Coupled with historically low interest rates and a falling Australian dollar, the market continues to see investors place capital in industrial facilities. Investor appetite for prime and secondary assets is strong however the buyer profile for each differs.

This section explores four key transactional trends which have permeated the industrial investment market in the 2014-15 FY. These are: portfolios; global investor demand; investors moving up the risk curve; and interest in distribution and logistics assets.

PORTFOLIOS

Portfolios have been a major feature of the industrial investment sales landscape, offering access to immediate size and scale that would otherwise take years of acquisition to achieve. Investors have demonstrated a willingness to pay a premium for portfolios and vendors have sought to capitalise on the strong demand environment by bringing such opportunities to market. Over the 2014-15 FY, 11 portfolios have transacted, achieving a total sales value of $1.34 billion from the industrial component alone. This is equivalent to 21 percent of total industrial sales by value over the 12 month period.

Major portfolio sales included:

• Altis Property Partners portfolio - This Colliers International brokered $224.1 million deal saw Mirvac acquire a portfolio of four properties in New South Wales and one asset in South Australia for $224.1 million. The portfolio offered a WALE by income of 7.2 years and was sold on a 7.09 percent blended yield;

• VALAD portfolio - This was a $137.9 million transaction brokered by Colliers International in October 2014 showing an overall yield of 8.3 percent. The portfolio comprised six properties located in New South Wales, Victoria and Queensland. The portfolio offered 113,100sqm of floorspace and a 6.1 year WALE by income. It was acquired by Propertylink and UK based M&G Real Estate;

• Super Retail portfolio - In October 2014 Malaysian pension fund Kumpulan Wang Persaraan (KWAP) via Logos Property acquired two industrial properties from Pitt Street Real Estate Partners for $153.3 million. The two assets were situated in Sydney and Brisbane and fully leased to the Super Retail Group. These deals set new yield benchmarks in their respective markets.

I N D U S T R I A L T R A N S A C T I O N A L T R E N D S

8 Brabham Drive, Huntingwood, NSW: Part of the Altis Portfolio - Sold on behalf of Altis Property Partners


Pension Fund / Logos (6.09 percent reversionary yield); and 713 Elizabeth Street, Waterloo which was brought by a Chinese developer Alpha Trio (6.33 percent) based on residential redevelopment upside.

In the numerous industrial properties Colliers International has marketed and sold over the 12 months, strong interest from offshore parties has been evident. Offshore interest is emerging from countries that have not previously been attracted to the Australian industrial opportunities including American, Korean, Japanese, Canadian and UK based investors such as M&G Real Estate.

Offshore funds have been encouraged to explore industrial investment opportunities in Australia based on:

• Relatively high yields by global standards and particularly in comparison to government bond rates;

• Attractive returns which have outperformed other asset classes;

• The freehold nature of industrial assets in Australia;

• Transparency of real estate transactions;

• Relative economic stability; and

• The proxy function Australia is deemed to perform to China.

Offshore purchasers have typically comprised sovereign wealth funds and pension funds, for example the Malaysian KWAP Pension Fund / Logos who acquired three assets (including one portfolio) for $223.4 million, US-based Invesco who acquired the Kmart Distribution Centre, Truganina for $94.1 million and the Singaporean Keppel DC REIT who brought two data centres, one each in Sydney and Brisbane, for a combined total of $74.0 million.

Singaporean based investors were responsible for the majority of offshore transactions, spending $1.80 billion on Australian industrial property and accounting for 73 percent of all offshore acquisitions. China was the second largest overseas purchaser with $347 million of acquisitions.

Similar to the Altis and Valad portfolios, these sales represented investors trading their stock to capitalise on market conditions. Other portfolios such as the $70 million McPhee Distribution Services represented owner occupiers selling their assets in a sale and leaseback agreement. These deals provide vendors with capital to redeploy within their businesses whilst securing a long-term lease-holding to meet their requirements.

The high level of investor interest in industrial property has led to higher levels of other forms of activity such as mergers and acquisitions (M&A). These occur comparatively less frequently but as with portfolio sales allow investors to gain quick access to size and scale. In total portfolios and M&A activity accounted for 43 percent of total Australian industrial sales by volume over the last 12 months.

GLOBAL INVESTOR DEMAND

Industrial investment over the last 12 months was dominated by domestic parties, however the presence of offshore investors is evident. Offshore investors acquired $2.46 billion of Australian industrial property, equivalent to 39 percent of all transactions. The majority of this activity was attributable to the Frasers takeover of Australand. Excluding the Australand takeover, purchasers of industrial property by offshore groups remain relatively subdued compared to previous years. However, the period is characterised by new entrants to the market acquiring high value trophy assets. An increase in the occurrence of offshore groups partnering up with local groups to purchase assets, for example M&G Real Estate providing funding to Propertylink to purchase the VALAD portfolio, was also apparent.

The most expensive industrial asset traded was to an offshore party, the Coles chilled distribution centre, Eastern Creek ($253.0 million) brought by Mapletree out of Singapore. This was the first time Mapletree had acquired an Australian industrial property.

Some of sharpest yields were also recorded for properties acquired by offshore purchasers, including the Coles distribution centre, Eastern Creek (5.6 percent reversionary yield reported); 133-145 Lenore Drive, Erskine Park by KWAP

9-10 John Morphett Drive, Erskine Park NSW: Part of the Valad Portfolio - Sold on behalf of Valad


INVESTORS MOVING UP THE RISK CURVE

Weight of capital, strength of demand and scarcity of quality stock has driven down yields across almost all industrial submarkets in Australia for prime grade assets. Vanilla assets offering size, location, strong covenant and long WALE are most sought after, particularly those with a distribution or logistics slant. As a result of the level of competition for prime assets, smaller syndicators and high net worth individuals are being priced out of the prime market and are being forced up the risk curve. Such investors have demonstrated a willingness to take on leasing or refurbishment risk at the same time in secondary trade stock in order to place capital in the industrial market. These investors are searching for value-add opportunities to secure a higher rate of return on more affordable secondary assets.

As a result, yield outcomes on secondary grade assets have also demonstrated tightening. Over the last 12 months lowering yields are evident on comparable assets which sold previously with longer WALE, providing an indication of how fast the market is moving. A good example of this is provided by two Investec purchases over the 2014-15 FY.

66 Glendenning Road, Glendenning, Sydney, was acquired by Investec for $19.17 million in April 2015. This 16,461sqm industrial facility is fully leased to McAlpine Hussman and offered a 4.64 year WALE. The investment achieved an equivalent reversionary yield of 7.73 percent. Colliers International brokered this deal and the property was well received by the market with a number of parties showing interest at the level traded. The property comprised an early 1990s industrial facility and well located and established industrial precinct of Glendenning.

Investec purchased a facility at 165-169 Newton Road, Wetherill Park, Sydney, four months prior in December 2014. This facility

was fully leased to Horan Steel and offered an 11.1 year WALE. It transacted for $18.5 million at a yield of 7.86 percent. The asset comprises a freestanding purpose built industrial office and warehouse facility extending to a gross lettable area (GLA) of approximately 12,529sqm incorporating a warehouse component of approximately 11,827sqm (94 percent of the GLA), an office and amenities component of approximately 702 square metres (6 percent of the GLA) together with approximate on grade parking for 36 vehicles.

The yield movement in these two secondary grade assets is indicative of the compression in the market which has been emerging. A comparable secondary asset traded today may show an even tighter yield.

The strength of demand is further demonstrated by the $44 million purchase of 2 Simblist Road, Port Botany, which formed part of the ACFS portfolio, by Altis in December. Despite this being for 19-year ground lease only and the associated investment risk as a result, a relatively low 10.97 per cent initial yield was achieved. This property is located at the southern end of Friendship Road at the corner of Simblist Road at Molineux Point, Port Botany and provides 40,000sqm of GLA floorspace. The quality and uniqueness of the property was of most appeal to Altis. Also exemplifying investors moving up the risk curve was an asset situated at 13 Ferndell Street in Granville which was initially sold in April 2013 and then re-traded in November 2014. In this period the yield compressed from 9.89 percent to 8.16 percent.

The sales evidence of pricing and price movement for secondary grade assets is evidence that investors are prepared to take on greater levels of risk in order to access industrial stock given the competitive nature of the investment sales market. Investors are chasing yield and are moving up the risk curve to succeed in making an acquisition.

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Source: Colliers Edge/IPD

6%

7%

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8%

8%

9%

9%

10%

10%

11%

Mar

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Jul-

05

Nov

-05

Mar

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Jul-

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-07

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-11

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-12

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12

Nov

-12

Mar

-13

Jul-

13

Nov

-13

Mar

-14

Jul-

14

Nov

-14

Mar

-15

Primary & Secondary Yields

Sydney Prime Brisbane Secondary Melbourne Prime

Sydney Secondary Brisbane Prime Melbourne Secondary


PRIMARY & SECONDARY YIELDS


WAREHOUSING AND LOGISTICS ARE KING

The strongest pricing over the last 12 months has been achieved for distribution warehousing and logistics assets. The highest value assets traded over the 2014-15 FY have been state of the art warehouses that facilitate the shipment of products into Australia and ultimately out into the hands of the consumer.

This reflects the modern picture of the industrial market in Australia. The majority of manufacturing has moved offshore to economies with cheaper labour costs however the domestic transport, distribution and logistics sector has expanded as a result. This sector is now the major industry occupier of large industrial floorspace given the growing need to transport and distribute goods from other countries to domestic purchasers, the increase in domestic retail expenditure and the prevalence of international retailers with global supply chains.

Reflecting this, investors have a strong taste for transport, distribution and logistics properties, particularly where they have strong covenant and extended WALE. Institutions in particular have sought opportunities in distribution and logistics investments.

The sale of the super prime 55,395sqm Coles chilled distribution centre at 3 Roberts Road, Eastern Creek, NSW on 30 June 2015 was the highest value industrial sale of the year at $253 million. It set a new yield benchmark of 5.6 percent. The strength of covenant, 19 year WALE and the use of the site as a distribution centre ensured this sale was hotly contested by a number of parties.

Other major distribution and logistics transactions over the 2014-15 FY included:

• Kmart Distribution Centre, 2-12 Banfield Court, Truganina (Victoria). This 76,900sqm facility sold for $95 million in December 2014 in a Colliers International brokered deal. Invesco acquired the asset from the Goodman Group at a 6.50 percent yield;

• Wyong Regional Distribution Centre, 2 Woolworths Way, Warnervale (New South Wales). In July 2014 this 53,400sqm facility sold for $69.8 million on an 8.3 percent yield. This asset was off-loaded by Arena to 360 Capital as part of the Arena Portfolio;

• Laverton Distribution Centre, 13-19 William Angliss Drive, Laverton North (Victoria). AMP Capital Investors spent $49 million in August 2014 to gain ownership of this asset at a 7.55 percent yield. It comprises a 56,112sqm facility previously owned by the Goodman Group.

The McPhee Portfolio sale also evidences the strong demand for distribution and logistics facilities which exists. McPhee Transport disposed of three properties under a sale and leaseback agreement in February 2015 via Colliers International. These properties were situated at: 127 Orchard Road, Chester Hill, New South Wales (sold for $37 million at a 7.03 percent reversionary yield); 16-28 Transport Drive, Somerton, Victoria (sold for $22.3 million at a 7.01 percent reversionary yield); and 51 Musgrave Road, Cooper Plains, Queensland (sold for $10.7 million at a 7.99 percent revisionary yield). This portfolio was acquired by Cache Logistics Trust based out of Singapore.

66 Glendenning Road, Glendenning, NSW: Sold on behalf of SAS Trustee Pty Ltd



Coles Chilled Distribution Centre 253,000,000

The Lakes Business Park 153,500,000

St Leonards Corporate Centre 150,000,000

Fmr Reckitt Benckiser site 95,000,000

133-145 Lenore Drive 79,531,029

38-46 Bernera Rd 70,050,000

Wyong Regional Distribution Centre 69,800,000

Junction Industrial Park 62,300,000

9-10 John Morphett Dve 61,750,000

7 Lenore Ln 58,520,155

52-54 O'Dea Ave 56,000,000

Gateway Estate 55,000,000

Quarry West Corporate Park 50,500,000

James Hardie-Rosehill 50,000,000

713 Elizabeth St 46,700,000

ACFS Port Botany 44,000,000

IC2 43,290,811

James Hardie Bldg 42,500,000

Mcphee Logistics Chester Hill 37,000,000

2-28 McPherson St 33,100,000

Kmart Distribution Centre 94,100,000

Melbourne Markets 77,400,000

Gateway Business Park 63,000,000

Laverton Distribution Centre 49,000,000

32-58 William Angliss Dve 43,500,000

Estate One 39,250,000

1500 Ferntree Gully Rd 36,550,000

99-110 Mills Rd 36,500,000

Patrick Autocare 35,500,000

Inghams 33,585,972

72-76 Cherry Ln 29,000,000

Dandenong Logis Industrial Estate 24,000,000

65-75 Strezlecki Ave 23,500,000

Linfox Warehouse 22,300,000

215 Browns Rd 20,800,000

2-10 Interchange Dve 20,075,000

235 Hume Highway 20,025,000

Brooklyn Industrial Estate 19,650,000

42-44 Garden St 19,000,000

Inghams Enterprise 18,600,000

M A J O R T R A N S A C T I O N S

F Y E 2 0 1 5 S A L E S V O L U M E R E C O R D

N S W SALES TOTAL V I C SALES TOTAL

$6,317,000,000$3.39 BILLION $1.45 BILLION


1 Griffin Crescent 73,840,472

Inghams Enterprise 56,600,000

Inghams Cleveland 37,300,000

470 Lytton Rd 31,000,000

Australian Container Freight Services 31,000,000

iseek Data Centre 30,742,505

Yamaha Motors Warehouse 27,000,000

Bradnam's Windows & Doors 25,000,000

Green's Foods 23,875,000

149 Kerry Rd 22,172,000

Fmr Bunnings Distribution Centre 21,275,000

Kingsford Smith Corporate Park 20,700,000

964 Beaudesert Rd 20,345,000

7-9 French Ave 18,650,000

Burnside Business Park 17,450,000

Hills Richlands 15,600,000

35 Evans Rd 15,050,000

285 Lavarack Ave 14,500,000

Inghams 12,400,000

100 Pickering St 12,250,000

Fmr Matilda Bay Brewery 36,000,000

Inghams 26,410,000

1000 Abernethy Rd 25,000,000

7 Modal Crs 16,638,606

Bentley Data Centre 11,700,000

Integrated Health Care Laboratory 11,500,000

10 Clarke 9,800,000

175 Bannister Rd 9,019,136

2 Jones St 7,800,000

50 Great Eastern Highway 6,500,000

20-28 Colin Jamieson Dve 5,250,000

19 Leadership Way 5,112,109

Inghams Enterprise Facility 39,500,000

Inghams Edinburgh Park 26,554,930

103-109 West Ave 14,750,000

29 Morrow Rd 11,500,000

34 Jonal Dr 10,200,000

47 Old Mill Ct 8,200,000

Automotive Components Warehouse- Rocherlea 11,519,554

82 Tasman Hwy 7,879,237

Automotive Components Warehouse- Mowbray 3,868,656

Berrimah Industrial 5,170,000

Q L D SALES TOTAL WA SALES TOTAL

NT SALES TOTAL

SA SALES TOTAL

TAS SALES TOTAL

$6,317,000,000$1.15 BILLION $170 MILLION

$5 MILLION

$125 MILLION

$15 MILLION

NEW SOUTH WALESSydney remains the most active industrial sales market in Australia. In total $3.44 billion of stock above $5 million transacted over the last 12 months, covering 113 properties of which all bar one related to the Sydney metropolitan area. This compares to $1.62 billion of sales in the 2013-14 FY. Sydney accommodated the single largest industrial transaction of the last 12 months which was the $253 million Coles chilled distribution centre at Eastern Creek. Institutional investors favour the Sydney market with two-thirds of all industrial sales over the period by value attributable to such purchasers. Offshore purchasers accounted for 41 percent of all transactions in NSW by value.

Yields for prime industrial property in Sydney vary across submarket but averaged out at 7.28 percent overall in Quarter 2 2015. 12 months prior average prime yields were at 7.8 percent, showing yield compression of 52 basis points over the period. Prime capital values also increased over the period from an average of $1,838/sqm in Quarter 2 of 2014 to $1,906/sqm in Quarter 2 of 2015, an increase of $69/sqm or 4 percent.

Weight of capital and strength of demand drove down yields across all submarkets for prime and secondary grade assets. Large vanilla assets with an optimum location, strong covenant and long WALE were most sought after. The level of competition for prime assets forced investors up the risk curve where they were capable of accessing higher yielding stock but where they must also accept greater leasing or refurbishment risk.

Sydney is experiencing an unprecedented surge in transport infrastructure spending, assisted by the stabilisation of the NSW State Government following the State election in March. Big ticket projects include WestConnex, NorthConnex, Badgerys Creek airport, Moorebank Intermodal and the North West Rail Link. A total of $68.6 billion in infrastructure funding was committed to New South Wales in the latest State budget. This infrastructure will directly support jobs and prompt expansion in associated businesses, driving future industrial demand. It also provides investors with confidence in the long-term opportunities afforded by the State's industrial and logistics sector.

Sydney's industrial landscape has undergone significant change in recent years, as the growing population has led to the urbanisation of many centrally-located industrial suburbs

such as Redfern, Moore Park and Alexandria. This has displaced industrial occupiers and forced them to move further afield. The urban activation of Sydney is having a dramatic impact on the supply of industrial property and changing the profile of many traditional industrial areas. For some time developers have been buying up industrial land, with the long term view of having these assets rezoned and redeveloped into Sydney's newest residential hotspots. Many of these industrial assets are older and lower grade, so they are ripe for redevelopment and conversion to a higher-yielding, better use residential development.

Residential development opportunities continue to stimulate industrial investment activity in Sydney, particularly in the Sydney south submarket. A total of 12 deals related to sites with residential upside potential (11 percent of all deals in New South Wales) were signed during the 2014-15 FY.

M A J O R T R A N S A C T I O N O V E R V I E W B Y S T A T E

SYDNEY METROPOLITAN AREA – PRIME INDUSTRIAL INVESTMENT SALES METRICS

Average Yields Average Capital Values ($/sqm)

Quarter 2 2014 Quarter 2 2015 Change (p.p) Quarter 2 2014 Quarter 2 2015 Change

Sydney west 7.45% 7.00% -0.45 $1,550 $1,624 +$74

Sydney south 7.88% 7.00% -0.88 $2,350 $2,400 +$50

Sydney south west

7.75% 7.25% -0.50 $1,350 $1,350 -

Sydney north 8.13% 7.88% -0.25 $2,100 $2,250 +$150

Average 7.80% 7.28% -0.52 $1,838 $1,906 +$69


No. of Sales

NSW

VIC

QLD

SA

WA

ACT

TAS

4933

4

3928

3049

4

1114

814

0

NT 00

7

2013/14 2014/15

2013/14 2014/15

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

NSW NT QLD SA TAS VIC WA

Tran

sact

ion

Volu

me

(Mill

ions

)

Industrial Sales Volume by Market 2015-14 FY versus 2013-14 FY


INDUSTRIAL SALES VOLUME BY MARKET 2015-14 FY VERSUS 2013-14 FY


Sydney is a land-constrained market, with boundaries of national parks to the north and south, the Blue Mountains to the west, and the coast to the east. Any excess land within these constrains will experience competing interest from residential and industrial uses.

Other examples include three purchases by Payce Consolidated of industrial sites in Auburn and Melrose Park for a total value of $202.3 million. These sites are zoned for employment purposes but are well positioned to accommodate residential uses in the future. This shows the willingness of developers to purchase industrial stock speculatively, taking on planning risk to pursue residential conversion in the medium term. As with the industrial market fierce competition for residential development sites has forced some local developers up the risk curve.

1029 Bourke Street and 723 Elizabeth Street, Waterloo, NSW: Sold on behalf of Bricktop No.7 Pty Ltd


VICTORIAVictoria recorded the second greatest volume of industrial sales of all States over the 2014-15 FY, with 72 properties changing hands for a total of $1.48 billion. All except two of these properties were situated in Melbourne. Total sales volumes in the last 12 months were up 17 percent or $0.21 billion on the $1.27 billion of sales recorded in the 2013-14 FY.

The greatest value deal was the acquisition by Invesco of the Kmart Distribution Centre in Truganina. The property was sold by Goodman Group for $94.1 million on a yield of 6.5 percent. The asset is a state of the art 76,938sqm logistics facility built in 2011 with a long term lease until February 2026. Colliers International transacted the deal.

Other large transactions included: Melbourne Markets in Epping; and the Gateway Business Park, Mount Waverley. The Melbourne Markets site in Epping was sold by Hansen Yucken on behalf of the Victorian State Government to Propertylink for $77.4 million. The deal covered five separate logistics warehouses connected to the new Melbourne Markets, which will accommodate the relocated Melbourne Wholesale Fruit and Vegetable Market from Footscray Road, west Melbourne. The Gateway Business Park, 495-501 Blackburn Road, Mount Waverley was acquired by EG Funds Management from AMP Capital for $63 million in October 2014. This deal exhibited an 8.60 percent initial yield and a capital value of $2,656/sqm.

On average, prime grade yields have compressed from 7.47 percent to 7.34 percent over the last 12 months across the Melbourne metropolitan area. However, super prime assets with long lease terms and exceptional tenant covenants, such as the Kmart Distribution Centre, attract sub 6.5 percent yields. Demand for assets is such that we expect yields to compress further to reach 7.15 percent at June 2016 across the prime grade market overall.

As with Sydney, Melbourne's industrial market constitutes of a number of submarkets, each with unique characteristics which change the nature of the investment sales deals.

The City Fringe continues to undergo structural change, where existing development sites are sold for residential conversion. In Abbotsford, two sites owned by the Wyllie Group at 2-6 Southampton Crescent and 32 Duke Street were sold in November 2014 to Shandong HYI, a major Chinese developer for a total of $20.7 million.

Melbourne north is a focus for transport and logistics operations. In the latter half of 2014 and early months of 2015, a number of major occupiers have announced they are investing in the precinct. In June 2014, Toll Group announced that the largest freight sorting facility in Australia will be built in Tullamarine at Melbourne Airport. September 2014 saw the announcement that TNT will build a 38,000sqm facility on a 12.1 hectare site in the same area. Both facilities are due to

MELBOURNE METROPOLITAN AREA – PRIME INDUSTRIAL INVESTMENT SALES METRICS



City fringe 7.38% 7.13% -0.25 $1751 $1,826 +$75

North 7.75% 7.75% -0.00 $1,019 $1,019 -$0

West 7.45% 7.18% -0.27 $976 $1,053 +$77

South East 7.38% 7.38% -0.00 $1,159 $1,159 -$0

Outer East 7.38% 7.25% -0.13 $1,153 $1,152 -$1

Average 7.47% 7.34% -0.13 $1212 $1242 +$30

Kmart Distribution Centre, Truganina, VIC: Sold on behalf of Goodman


BRISBANE METROPOLITAN AREA – PRIME INDUSTRIAL INVESTMENT SALES METRICS



Australia TradeCoast

8.00% 7.15% -0.85 $1,456 $1,573 +$117

North 8.13% 7.63% -0.50 $1,385 $1,410 +$25

South 8.00% 7.50% -0.50 $1,300 $1,333 +$33

South West 8.13% 7.63% -0.50 $1,262 $1,311 +$49

Yatala 8.25% 7.63% -0.62 $1,212 $1,213 +$1

Average 8.10% 7.51% -0.59 $1,323 $1,368 +45

be operational by the end of 2015. In another major logistics deal for Melbourne's north industrial market, Mainfreight has purchased an 11 hectare site at MAB's Alliance Business Park in Epping where they plan to build a 36,000sqm training facility, as well as two other commercial buildings. The presence of the new Melbourne fruit and vegetable market at Epping is stimulating interest in the area, such as the $77.4 million Hansen Yucken / Victorian State Government deal mentioned previously, as infrastructure drives investment.

The Melbourne west industrial market was the key sales driver over the 2014-15 FY. This submarket accommodated the $94.1 million sale of the Kmart Distribution Centre in Truganina. Other sales included 13-19 William Angliss Drive, Laverton which was sold in September 2014 for $49 million for a yield of 7.55%. Demand from investors for well tenanted investment stock in the west is still very strong.

QUEENSLANDQueensland witnessed industrial deals worth $1.17 billion in the 2014-15 FY. This compares to $0.69 billion for the previous financial year showing a strong capital investment volume increase of +$0.48 billion or +70 percent between the financial

years. This increase in sales volumes reflect continued strong demand being experienced by Brisbane from domestic and offshore investors for institutional grade assets. This is having a tightening effect on prime and, to a lesser extent, secondary yields as some investors are forced up the risk curve. Appetite is strongest for well-located vanilla assets offering long term WALE and strong covenants.

Excluding title changes as a result of the Frasers Centrepoint acquisition of Australand, the top three industrial investment sales over the last 12 months by value in Queensland were part of portfolio sales. The highest value sale was 1 Griffin Crescent, Brendale, which was brought by KWAP Pension Fund / Logos for $73.84 million as part of the Super Retail Group portfolio sale. This deal exhibited a 6.77 percent yield on a 50,300sqm building area and a capital value of $1,468/sqm. The asset was subject to a 12.92 year WALE at the time of sale.

Charter Hall's purchase of 50 Murrarie Road, Murrarie, was the second largest non-Frasers Centrepoint related sale in Queensland over the period. This asset formed part of the Ingham Enterprise portfolio and was brought for $56.60 million in October 2014. The Australian Container Freight Services (ACFS) property on Curlew Street, Port Brisbane, came in at third. This provided 26,800 of built area and was brought by Altis for $31.0 million as part of the ACFS portfolio.

Curlew Street, Port Brisbane, QLD: Part of the ACFS Portfolio - Sold on behalf of ACFS


PERTH METROPOLITAN AREA – PRIME INDUSTRIAL INVESTMENT SALES METRICS



Core 7.75% 7.25% -0.5 $1,323 $1,207 -$116

North Region 7.75% 7.25% -0.5 $1,323 $1,207 -$116

South Region 7.75% 7.25% -0.5 $1,323 $1,207 -$116

East Region 7.75% 7.25% -0.5 $1,323 $1,207 -$116

Average 7.75% 7.25% -0.5 $1,323 $1,207 -$116

WESTERN AUSTRALIAA total of $196.52 million of industrial and logistics property was purchased in Western Australia in the last 12 months with 13 properties exchanged. This is down on investment volumes for the previous financial year which saw property worth $242.98 million transact.

Industrial and logistics property vendors were largely privates who accounted for 52 percent of all the assets brought to market by value. Institutions were the most active buyers, acquiring 51 percent of all stock by value. The acquisition of the 2.9 hectare former Matilda Bay Brewery site at 130 Stirling Highway, North Fremantle was the highest value sale over the period at $36 million. This was acquired in August 2014 by Chinese developer 3 Oceans Property for residential conversion from private owner the McGillivray Family.

The Western Australian economy is experiencing challenging conditions, despite strong export volumes. This is reflective of falling commodity prices and a decrease in associated mining investment, well away from their peak levels. This has implications for the State's industrial and logistics sector. Western Australian institutional-grade industrial assets have continued to show robust returns over the 2014-15 FY.

In the State as a whole 57 percent of sales by value were due to portfolio sales or company acquisitions. This highlights the recent importance of portfolio and M&A activity in driving Brisbane industrial sales activity. Reflective of this activity, institutions dominated industrial investment over the period, accounting for 67 percent of all properties sold but 83 percent by the value of deals ($965 million). Given the prevalence of Singaporean investors this buyer group accounted for 39 percent of all transactions by value, compared to 52 percent for Australian-based buyers. Owner occupiers in Brisbane were seen to capitalise on prevailing investment conditions with sale and leaseback activity evident.

Prime industrial grade assets in Brisbane represent stable and strong investment opportunities. Current industrial reversionary yields average 7.51 percent overall and have compressed by an average of 59 basis points over the last 12 months.

Compared to Sydney and Melbourne, yields in Brisbane are softer by 50 to 100 basis points across submarkets and prime/ secondary grade assets. As the intrinsic investment risk is not necessarily reflective of this yield differential, starved investors and the impact of weight of capital chasing prime assets is expected to drive further yield compression in Brisbane. Yields are expected to follow suit to Sydney and Melbourne and tighten by up to 50 basis points over the next 9 months.

Matilda Bay Brewing Company, 130 Stirling Highway, North Freemantle, WA: Sold on behalf of the McGillivray Family


Investor demand for large prime institutional-grade assets that are tenanted or vacant with good leasing prospects remains high in the low interest rate environment, resulting in yields tightening for this class of asset. Recent transactions are showing market yields of between seven percent and eight percent. Colliers International stresses, however, that this is evident mainly in institutional-grade assets.

Yields and capital values in the second quarter of 2015 averaged 7.25 percent, reflecting a 50 basis point compression over the last 12 months. It is notable that average prime industrial net face rents softened over the last 12 months which may have influenced the direction of yields, particularly given that yields compressed whilst capital values declined over the same period.

Average yields for prime and secondary industrial assets in Perth are expected to remain at their current level over the next 12 months.

SOUTH AUSTRALIABased on the Colliers International sales database $124.96 million of industrial property of greater than $5 million transacted over the 2014-15 FY. This was achieved through seven deals giving an average deal price of $17.85 million. All of these sales related to the second half of 2014 and there have been no major industrial transactions to date in 2015. Compared to the 2013-14 FY this was a lower volume of sales, with $280.20 million of industrial property having sold over the preceding 12 months, more than double the level for the 2014-15 FY.

Adelaide prime industrial yields averaged 8.08 percent in Quarter 2 of 2015. Prime industrial yields have exhibited compression of 37 basis points since Quarter 2 of 2014 although capital values fell over the period in the market as a whole. As with Perth, prime net face rents decreased over the 12 months to June 2015, from an average of $108/sqm to $101/sqm, equivalent to a $7/sqm or 6 percent reduction. This reflects tenant demand side factors.

Portfolios and company acquisitions made a big impact on this market over the 2014-15 FY. Four of the seven deals related to portfolios or M&A, which was equivalent to $90.51 million or 72 percent of the total value of transactions over the period. These sales included:

• Inghams Edinburgh Park, 27-35 Sturton Road, Edinburgh, which was acquired by Charter Hall on a 7.8 percent initial yield;

• Inghams Enterprise Facility, 1122-1136 Port Wakefield Road, Burton, which was acquired by Ascot Capital for $39.50 million at an 8.4 percent yield;

• 34 Jonal Drive, Cavan which was brought by Mirvac as part of the Altis Property Partners portfolio for $10.20 million on a 7.90 percent initial yield; and

These transactions have boosted the amount of institutional investment in industrial property within the Adelaide market. Institutional investment has grown over the last three years, with some institutional investors recapitalised and looking for opportunities to purchase in Adelaide. This has resulted in yield compression for prime grade assets within the key industrial markets.

Despite improving investment and leasing market conditions, certain precincts face challenges in Adelaide over the medium term. The closure of the Holden car plant and the uncertainty surrounding the future of the submarines contracts is likely to restrain demand in the Techport and the outer north market. With the imminent closure of Holden in 2017 the outer north market is expected to see vacancy increase in the short term. This is through the withdrawal of the Holden site once production ceases and the risk of suppliers to Holden located in the area also vacating at the same time.

There are however opportunities in this market with a significant supply of inexpensive development ready land and continued improvements to infrastructure making this an attractive option for design and construct projects for growth industries such as logistics. There are also opportunities for occupiers to secure quality prime grade accommodation, most which are less than ten years old, for very attractive rents.

ADELAIDE METROPOLITAN AREA – PRIME INDUSTRIAL INVESTMENT SALES METRICS



Outer North 8.50% 8.25% -0.25 $1,088 $1,030 -$58

Inner North 8.50% 8.00% -0.50 $1,353 $1,375 +$22

West 9.50% 9.00% -0.50 $1,323 $1,207 -$116

Outer South 7.75% 7.25% -0.50 $816 $861 +$45

Inner South 8.00% 7.88% -0.12 $1,531 $1,460 -$71

Average 8.45% 8.08% -0.37 $1,222 $1,187 -$36

34 Jonal Drive, Cavan, South Australia: Part of the Altis Portfolio - Sold on behalf of Altis Property Partners


Date December 2014

Vendor Altis Property Partners

Purchaser Mirvac

Sale Price $224,100,000

Total Tenants Various

Total Income $15,881,642 per annum

Total Site Area 118,760 sqm

Total Building Area 86,670 sqm

Blended WALE 7.2 years by income

Blended Yield 7.09%

ALTIS PORTFOLIOThe Altis Property Partners portfolio comprised of five industrial assets which were purchased by Mirvac in December 2014 for $224.1 million. Four of the assets where located in Sydney and one was situated in Adelaide. Colliers International received a total of 30 enquiries for the entire portfolio from domestic and offshore investors. The portfolio consisted of the following properties: 39 Herbert Street, St Leonards, Sydney ($150 million); 39 Britton Street, Smithfield, Sydney ($20.5 million); 8 Brabham Drive, Huntingwood, Sydney ($20.1 million); 34 Anzac Avenue, Smeaton Grange, Sydney ($23.3 million); and 34 Jonal Drive, Cavan, Brisbane ($8.5 million plus a further $1.7 million for 11,370sqm of vacant land).

C A S E S T U D I E S

39 Herbert Street, St Leonards, NSW: Part of the Altis Portfolio - Sold on behalf of Altis Property Partners


Date February 2015

Vendor McPhee Distribution Services

Purchaser Cache Logistics Trust

Sale Price $70,000,000

Tenants McPhee and Linfox

Total Income $5,060,084 per annum



Blended WALE 9.5 years by income

Average Capital Value $1,568/sqm

Blended Yield 7.23%

MCPHEE PORTFOLIOSingapore's Cache Logistics Trust entered the Australian market through the acquisition of the McPhee Distribution Services portfolio for $70 million in February this year. Three eastern seaboard properties constituted this portfolio which was acquired on a sale and leaseback arrangement. The transaction exhibited a blended yield of 7.23 percent. The portfolio comprised: 127 Orchard Road, Chester Hill, Sydney ($37.0 million); 16-28 Transport Drive, Somerton, Melbourne ($22.3 million); and 51 Musgrave Road, Cooper Plains, Brisbane ($10.7 million).

127 Orchard Road, Chester Hill, NSW: Part of the McPhee Portfolio - Sold on behalf of McPhee Distribution Services


Date October 2014

Vendor VALAD Property Group

Purchaser Propertylink and M & G Real Estate

Sale Price $137,940,000

Tenants Various



Average Capital Value $1,220/sqm

Total Net Income $11,523,071 per annum fully leased

Blended WALE 5.5 years by area/ 6.1 years by income

Blended Yield 8.3%

VALAD PORTFOLIOThe VALAD industrial portfolio was sold by Colliers International to Propertylink and M&G Real Estate in October 2014 for a total of $137.94 million. The portfolio strategically positioned across three major Australian markets. The portfolio comprised six assets situated in Sydney, Melbourne and Brisbane as follows: 9-10 John Morphett Drive, Erskine Park, Sydney ($61.75 million); McCredie Street, Smithfield, Sydney ($18.88 million); 65-75 Strezlecki Avenue, Sunshine West, Melbourne ($23.50 million); 164-166 Newton Road, Wetherill Park, Sydney ($14.90 million); 848 Boundary Road, Richlands, Brisbane ($12.11 million); and 37-53 Eurora Street, Kingston, Sydney ($6.80 million).

9-10 John Morphett Drive, Erskine Park NSW: Part of the Valad Portfolio - Sold on behalf of Valad Property Group


Date December 2014

Vendor Goodman

Purchaser Invesco

Sale Price $94,100,000

Tenants Kmart

Site Area 14.62ha

Building Area 76,938 sqm

Capital Value $1,223/sqm

Total Net Income $6,112,878 per annum

WALE 11.1 years

Yield 6.50%

KMART DISTRIBUTION CENTRE IN TRUGANINAThis asset is a state of the art logistics facility built in 2011 with a long term lease until February 2026, situated in the western Melbourne suburb of Truganina. This deal saw Invesco acquire the asset from Goodman in a Colliers International brokered $94.10 million deal. This was the greatest value transaction in Victoria over the 2014-15 financial year.

Kmart Distribution Centre, Truganina: Sold on behalf of Goodman


The Industrial and logistics sector has been the stand-out property performer over the last 12 months. IPD data for Quarter 1 2015 (the latest such data available) shows that rolling annual return across the prime and secondary industrial sector averaged 12.4 percent. This was well above the all property average of 10.7 percent. Industrial sector rolling annual returns have grown by 0.6 percentage points in the 9 months to Quarter 1 2015 alone. With interest rates at record lows, these solid capital returns will ensure investors remain attracted to industrial assets as the hunt for yield continues.

The Australian economy has experienced below trend growth over the 2014-15 FY. Interest rates are depressed and the RBA has indicated that this low rate environment will persist for some time. GDP growth is a leading indicator of industrial demand. Below trend growth is forecast in the coming year as the economy is being dragged by soft employment figures and business investment. However, with GDP growth still positive at 2.41 percent for the coming year based on Deliotte Access Economics data, the industrial and logistics sector should still expand and open new opportunities for investors.

Over the course of the 2014-15 FY the Australian dollar has experienced a significant fall in value against the US dollar. At 30 June 2014 it was valued at $0.93 USD however by 30 June 2015 this had decreased to $0.77 USD, equivalent to a 17 percent loss of value in 12 months. Although the Australian dollar has fallen well away from its peak, further depreciation is expected in the near future as the economy recalibrates. This depreciation will help to rebalance the domestic economy and improve the terms of trade as it looks to find its feet the following the end of the mining boom.

As of May this year, property having doubled its contribution to Australian GDP in the last decade overtook mining, home ownership and financial services to become the largest single contributor to the Australian GDP. The industrial and logistics property sector in particular will benefit from the higher levels of property construction activity as a result of sizeable infrastructure expenditure.

The falling value of the Australian dollar will have a mixed effect on the industrial and logistics sector. Domestically produced goods will become relatively cheaper, assisting sectors such as domestic manufacturing, agriculture and resource exports.

I N D U S T R I A L A N D L O G I S T I C S S E C T O R O U T L O O K

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AUD/USD EXCHANGE RATE

GROSS DOMESTIC PRODUCT (GDP) SEASONALLY ADJUSTED


Although commodity prices have fallen, mining companies will seek to maintain revenue by increasing output. In addition, once the large pipeline mining projects are completed, exports volumes will grow significantly supporting industrial demand. Growth will largely be driven by high volumes in exports which are expected over the short term.

On the flip side, the depreciating dollar will adversely affect the purchasing power of organisations who import their products. The increasing cost of offshore goods in the retail sector will encourage more Australians to holiday at home and spend direct more spending to domestic retailers. It will also encourage more inbound tourism. As a result retail expenditure could benefit from the lower Australia dollar with resultant positive impact on industrial tenant demand.

Due to recent market volatility surrounding the potential Greek exit from the Euro and the Chinese stock market, investors will seek capital safe havens in markets such as Australian property. Coupled with the low interest rate environment and the depreciating Australian dollar, domestic and offshore purchasers alike will continue to show high demand for investment opportunities in industrial.

Population growth, employment growth and infrastructure expenditure will sure up confidence in industrial opportunities in Australia. Over the next 25 years the population of Australia will grow by over 13 million people to reach 31.8 million by 2040. This will drive demand for all types of property but with the solid underlying returns in industrial and logistics, the sector will remain a favourable asset class for investors.

13 Boundary Road, Northmead, NSW. Part of the Abacus Portfolio, sold on behalf of Abacus.


The general theme over the last year has been an increase in the number of active bidders for industrial investment property. This has been driven by a rising tide of investable funds, both on the debt and equity sides. Growing institutional demand, coupled with a strong capital market environment is driving ongoing yield compression across the majority of industrial markets. Scarcity of quality stock is leading to intensive competition for assets amongst local institutional and offshore investors. The impact of this weight of capital chasing assets has resulted in strong yield and targeted total returns (discount rate) compression, which has been experienced over the last 12 to 18 months.

On the credit side, borrowing rates for commercial property investment remain extraordinarily low allowing investors to positively gear their property investment. Yields are forecast to continue to fall further in 2015 while interest rates remain favourable and investor demand chases a shrinking pool of prime quality assets. Economic indicators point to rising demand from service based sectors such as transport, warehousing and construction overtaking manufacturing. The scarcity of quality prime assets will be met in the short term by a rising development pipeline to service this growth, however limited land supply will drive tighter vacancy levels in prime and secondary markets in the medium term.

Capital values for secondary industrial localities demonstrated signs of growth over the first half of 2015, due to ongoing demand from owner occupiers and a tightening of available stock on the market. Buyer enquiry for space in the sub 2,000 square metre market has been strong, with low interest rates proving attractive to owner occupiers where the gap between

rents and loan repayments has narrowed. The outlook for secondary stock is mixed and determined by quality of location, size and flexibility of improvements. We envisage investors, particularly those with private equity, being forced to consider the higher yields on offer from such assets. This should provide them with relatively secure returns as overseas based business tenants in particular will tend to roll over current leases rather than explore the market for other opportunities. Many investors will also chase 'value add' opportunities and therefore we anticipate more secondary industrial sales throughout 2015 again coupled with a lack of available prime stock.

Ongoing tenant demand for high quality space and a lack of supply and availability has seen rents for prime grade assets increase slightly. The largest rental growth has been seen in the recently complete, speculatively built facilities, which have received strong demand and are now fully leased. Prime rents are expected to see growth in the short to medium term while secondary grade rents are expected to remain relatively stable.

The leasing market is forecast to benefit from the low interest rate environment with rising house prices and household wealth having a positive effect on retail spending. This should in turn drive further the need for additional warehouse accommodation. Owner occupation activity could increase mover the 2015-16 financial year as the enduring low interest environment and the cheap cost of money entices businesses to acquire premises, despite current strong pricing. From a pure investment perspective, ongoing appetite for prime assets with extended remaining lease terms and good covenants will continue to drive investment activity over the next 12 months.

V A L U A T I O N O U T L O O K


The industrial and logistics sector has been the recipient of capital inflows from the rest of the world as investors hunt for yield. As illustrated in the graph below, the Australian market continues to produce relatively higher yields compared to the other major global markets. Consequently, the quantum of offshore capital seeking a home in Australian industrial and logistics assets will persist. New parties are expected to join the increasing crowded field of domestic and offshore investors vying for purchasing opportunities.

Both local and offshore investors are looking to increase their ownership of industrial and logistics stock, in particular Australian Retail Investment Trusts (AREITs) and super funds domestically and private investors, sovereign wealth funds and REITs from offshore. Australian privates will remain net sellers of industrial property over the next 12 months.

Industrial and logistics yields are already very tight for prime and secondary buildings. In the context of pent up demand, a lack of good quality stock and the wave of capital looking for opportunities, further firming may eventuate for well-located quality assets with strong covenant and long WALE. Current conditions are akin to pre-GFC in terms of the level of

interest however contrary to that period, today's sales market is characterised by lesser supply, a greater range of buyers including offshore parties and a significant positive spread between interest rates and yields.

The current spread between prime retail yields and bond rates remains wide by historic standards. The gap has started to firm gradually over the past few months due to a rise in bond yields on the back of US rate expectations and continued cap rate compression. The Australian 10-year bond rate has moved up to 2.98 percent after falling to around 2.48 percent in March 2015. Even with an increase in bond yields they will remain low through the current cycle, meaning all property types but in particular strong-returning industrial property will offer good value and attract capital from local and offshore investors alike.

The significant volumes of infrastructure investment in Australia will ensure that investors have buying confidence in the positive long-term future of the industrial and logistics sector. Coupled with strong population and employment growth, Australian industrial property will remain an attractive asset class to savvy investors over the next 12 months.

I N V E S T M E N T O U T L O O K




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Mar

-07

Sep-

07

Mar

-08

Sep-

08

Mar

-09

Sep-

09

Mar

-10

Sep-

10

Mar

-11

Sep-

11

Mar

-12

Sep-

12

Mar

-13

Sep-

13

Mar

-14

Sep-

14

Mar

-15

Sep-

15

Mar

-16

Sep-

16

Mar

-17

Sep-

17

Mar

-18

Cha

nge

from

pre

viou

s pe

riod

(%)

Seasonally Adjusted


Forecast

$0.70

$0.80

$0.90

$1.00

$1.10

$1.20

Jun-

10

Dec

-10

Jun-

11

Dec

-11

Jun-

12

Dec

-12

Jun-

13

Dec

-13

Jun-

14

Dec

-14

Jun-

15

Fore

ign

Cur

renc

y pe

rAu

stra

lian

Dol

lar







0%

1%

2%

3%

4%

5%

6%

Mar

-05

Sep-

05

Mar

-06

Sep-

06

Mar

-07

Sep-

07

Mar

-08

Sep-

08

Mar

-09

Sep-

09

Mar

-10

Sep-

10

Mar

-11

Sep-

11

Mar

-12

Sep-

12

Mar

-13

Sep-

13

Mar

-14

Sep-

14

Mar

-15

Sep-

15

Mar

-16

Sep-

16

Mar

-17

Sep-

17

Mar

-18

Cha

nge

from

pre

viou

s pe

riod

(%)

Seasonally Adjusted


Forecast

$0.70

$0.80

$0.90

$1.00

$1.10

$1.20

Jun-

10

Dec

-10

Jun-

11

Dec

-11

Jun-

12

Dec

-12

Jun-

13

Dec

-13

Jun-

14

Dec

-14

Jun-

15

US

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lar

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Aust

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0.0

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1.0

1.5

2.0

2.5

3.0

3.5

4.0

0.0

1.0

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3.0

4.0

5.0

6.0

7.0

8.0

9.0

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0%

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2%

3%

4%

5%

6%

7%

8%

9%

10%

11%

Mar

-00

Sep-

00

Mar

-01

Sep-

01

Mar

-02

Sep-

02

Mar

-03

Sep-

03

Mar

-04

Sep-

04

Mar

-05

Sep-

05

Mar

-06

Sep-

06

Mar

-07

Sep-

07

Mar

-08

Sep-

08

Mar

-09

Sep-

09

Mar

-10

Sep-

10

Mar

-11

Sep-

11

Mar

-12

Sep-

12

Mar

-13

Sep-

13

Mar

-14

Sep-

14

Mar

-15

Yiel

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0.0

0.5

1.0

1.5

2.0

2.5

3.0

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0% 1% 2% 3% 4% 5% 6% 7% 8% 9%

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Mar

-00

Sep-

00

Mar

-01

Sep-

01

Mar

-02

Sep-

02

Mar

-03

Sep-

03

Mar

-04

Sep-

04

Mar

-05

Sep-

05

Mar

-06

Sep-

06

Mar

-07

Sep-

07

Mar

-08

Sep-

08

Mar

-09

Sep-

09

Mar

-10

Sep-

10

Mar

-11

Sep-

11

Mar

-12

Sep-

12

Mar

-13

Sep-

13

Mar

-14

Sep-

14

Mar

-15

Yiel

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0%

1%

2%

3%

4%

5%

6%

Mar

-05

Sep-

05

Mar

-06

Sep-

06

Mar

-07

Sep-

07

Mar

-08

Sep-

08

Mar

-09

Sep-

09

Mar

-10

Sep-

10

Mar

-11

Sep-

11

Mar

-12

Sep-

12

Mar

-13

Sep-

13

Mar

-14

Sep-

14

Mar

-15

Sep-

15

Mar

-16

Sep-

16

Mar

-17

Sep-

17

Mar

-18

Cha

nge

from

pre

viou

s pe

riod

(%)

Seasonally Adjusted


Forecast

$0.70

$0.80

$0.90

$1.00

$1.10

$1.20

Jun-

10

Dec

-10

Jun-

11

Dec

-11

Jun-

12

Dec

-12

Jun-

13

Dec

-13

Jun-

14

Dec

-14

Jun-

15

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0%

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Mar

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Sep-

05

Mar

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Sep-

06

Mar

-07

Sep-

07

Mar

-08

Sep-

08

Mar

-09

Sep-

09

Mar

-10

Sep-

10

Mar

-11

Sep-

11

Mar

-12

Sep-

12

Mar

-13

Sep-

13

Mar

-14

Sep-

14

Mar

-15

Sep-

15

Mar

-16

Sep-

16

Mar

-17

Sep-

17

Mar

-18

Cha

nge

from

pre

viou

s pe

riod

(%)

Seasonally Adjusted


Forecast

$0.70

$0.80

$0.90

$1.00

$1.10

$1.20

Jun-

10

Dec

-10

Jun-

11

Dec

-11

Jun-

12

Dec

-12

Jun-

13

Dec

-13

Jun-

14

Dec

-14

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15

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5.0

6.0

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Mar

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Sep-

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Mar

-01

Sep-

01

Mar

-02

Sep-

02

Mar

-03

Sep-

03

Mar

-04

Sep-

04

Mar

-05

Sep-

05

Mar

-06

Sep-

06

Mar

-07

Sep-

07

Mar

-08

Sep-

08

Mar

-09

Sep-

09

Mar

-10

Sep-

10

Mar

-11

Sep-

11

Mar

-12

Sep-

12

Mar

-13

Sep-

13

Mar

-14

Sep-

14

Mar

-15

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0.0

0.5

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Mar

-00

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00

Mar

-01

Sep-

01

Mar

-02

Sep-

02

Mar

-03

Sep-

03

Mar

-04

Sep-

04

Mar

-05

Sep-

05

Mar

-06

Sep-

06

Mar

-07

Sep-

07

Mar

-08

Sep-

08

Mar

-09

Sep-

09

Mar

-10

Sep-

10

Mar

-11

Sep-

11

Mar

-12

Sep-

12

Mar

-13

Sep-

13

Mar

-14

Sep-

14

Mar

-15

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PRIME INDUSTRIAL CAP RATES AND GOVERNMENT BONDS BY SELECTED CITIES

PRIME INDUSTRIAL YIELDS VS. 10 YR BOND RATE


Property Name Street No./Name Suburb State Built Area Sale Price Transaction Date

Capital Value ($/m2)

Initial Yield (%)

Coles Chilled Distribution Centre 3 Roberts Road Eastern Creek NSW 55395 $253,000,000 Jun-2015 $4,621 5.60%

The Lakes Business Park 2 Lord St Botany NSW 43,600 $153,500,000 Dec-2014 $3,521 6.73%

St Leonards Corporate Centre 39 Herbert St St Leonards NSW 36,847 $150,000,000 Nov-2014 $4,071 6.90%

fmr Reckitt Benckiser site 44 Wharf Rd Melrose Park NSW 140,000 $95,000,000 Aug-2014 $679 6.25%

Kmart Distribution Centre 2-12 Banfield Ct Truganina VIC 76,938 $94,100,000 Dec-2014 $1,235 6.50%

133-145 Lenore Drive 133-145 Lenore Drive Erskine Park NSW 44,702 $79,531,029 Nov-2014 $1,779 5.97%

Melbourne Markets Hume Highway Epping VIC 100,000 $77,400,000 Jul-2014 $774 NA

1 Griffin Crescent 1 Griffin Crescent Brendale QLD 50,300 $73,840,472 Oct-2014 $1,468 6.35%

38-46 Bernera Rd 38-46 Bernera Rd Prestons NSW 21,000 $70,050,000 Apr-2015 $3,336 6.61%

Wyong Regional Distribution Centre 2 Woolworths Way Warnervale NSW 53,362 $69,800,000 Jul-2014 $1,308 8.30%

Gateway Business Park

495-501 Blackburn Rd Mt Waverley VIC 23,724 $63,000,000 Oct-2014 $2,656 8.60%

Junction Industrial Park 34-48 Cosgrove Rd Strathfield

South NSW 56,625 $62,300,000 Jul-2014 $1,100 8.75%

9-10 John Morphett Drive

9-10 John Morphett Drive Erskine Park NSW 42,186 $61,750,000 Oct-2014 $1,464 6.98%

7 Lenore Ln 7 Lenore Ln Erskine Park NSW 36,630 $58,520,155 Oct-2014 $1,598 7.20%

Inghams Enterprise 50 Murrarie Rd Murrarie QLD NA $56,600,000 Nov-2014 NA 7.80%

52-54 O'Dea Avenue 52-54 O'Dea Avenue Waterloo NSW NA $56,000,000 Aug-2014 NA NA

Gateway Estate 7-15 Gundah Rd Mount Kuring-Gai NSW 39,497 $55,000,000 Dec-2014 $1,375 8.43%

Quarry West Corporate Park

Quarry West Corporate Park Greystanes NSW NA $50,500,000 Jul-2014 NA NA

James Hardie-Rosehill 5 Devon Street Rosehill NSW 30,655 $50,000,000 Aug-2014 NA NA

Laverton Distribution Centre

13-19 William Angliss Dr Laverton North VIC 56,112 $49,000,000 Aug-2014 $873 NA

713 Elizabeth St 713 Elizabeth St Waterloo NSW 7,801 $46,600,000 Nov-2014 $5,974 6.33%

ACFS Port Botany 2 Simblist Rd Port Botany NSW 33,000 $44,000,000 Dec-2014 $1,333 11.00%

32-58 William Angliss Dve

32-58 William Angliss Dve Laverton North VIC 46,218 $43,500,000 Aug-2014 $941 8.00%

IC2 21 Talavera Rd North Ryde NSW 8,169 $43,290,811 May-2015 $5,299 NA


Property Name Street No./Name Suburb State Built Area Sale Price Transaction Date

Capital Value ($/m2)

Initial Yield (%) Vendor Purchaser

James Hardie Bldg 5 Devon St Rosehill NSW 57,823 $42,500,000 Dec-2014 $783 9.55%James Hardie

Building Products

Brookfield Asset Mgmt

Inghams Enterprise Facility

1122-1136 Port Wakefield Rd Burton SA 21,255 $39,500,000 Nov-2014 $1,858 8.4% Ascot Capital TPG Capital

Estate One 81-125 Princes Hwy Dandenong VIC 27,919 $39,250,000 Feb-2015 $1,406 7.70%

Warrington Property

Group (AUS)Cbus

Mcphee Logistics Chester Hill 127 Orchard Rd Chester Hill NSW 24,220 $37,000,000 Dec-2014 $1,606 7.03%

Cache Logistics

Trust

McPhee Distribution

Services

1500 Ferntree Gully Road

1500 Ferntree Gully Rd Knoxfield VIC 22,009 $36,550,000 May-2015 $1,661 7.86% Growthpoint

(AUS)Brown & Watson

99-110 Mills Road 99-110 Mills Road Braeside VIC 40,554 $36,500,000 Dec-2014 $900 7.88% Propertylink Goodman

Group

Fmr Matilda Bay Brewery

130 Stirling Highway

North Fremantle WA 29,100 $36,000,000 Aug-2014 $1,237 NA

3 Oceans Property Pty

Ltd

McGillivray Family

Patrick Autocare 78-118 Cherry Ln

Laverton North VIC 23,800 $35,500,000 May-2015 $3,871 6.00% AIMS Undisclosed

26-32 Walter St 26-32 Walter St Wetherill Park NSW 39,845 $33,000,000 May-2015 $828 10.60% Charter Hall Institution

Australian Container Freight Services Curlew Street Port of

Brisbane QLD 26,880 $31,000,000 Nov-2014 $1,153 6.77%Altis

Property Partners

Institution

470 Lytton Road 470 Lytton Rd Morningside QLD 34,053 $31,000,000 Nov-2014 $910 10.00% Undisclosed Undisclosed

iseek Data Centre 2 Cycas Lane Brisbane Airport QLD 1,151 $30,742,505 Dec-2014 $26,711 NA Keppel DC

REIT iseek

25-55 Rothschild Avenue

25-55 Rothschild

AvenueRosebery NSW NA $30,183,495 Aug-2014 NA NA Meriton DEXUS

18-20 O'Dea Avenue 18-20 O'Dea Avenue Zetland NSW 8,493 $30,000,000 Dec-2014 $3,532 NA Crown Group

Holdings

Irwin & Sheehan Pty

Ltd

72-76 Cherry Ln 72-76 Cherry Ln Laverton North VIC 20,500 $29,000,000 Feb-2015 $1,415 7.85% Stockland Toll Group

Hannanprint 2-8 Priddle St NSW 37922.51 $27,300,000 Jun-2015 $720 NAF Hannan Properties

Pty Ltd

Warwick Farm

Business Park Ltd

Yamaha Motors Warehouse 69 Rivergate Pl Murarrie QLD 11,558 $27,000,000 Nov-2014 $2,336 8.17% 360 Capital

IND Fund Trinity Group

Inghams Edinburgh Park

27-35 Sturton Rd Edinburgh SA 220,000 $26,554,930 Nov-2014 $121 7.80% Charter Hall TPG Capital

5-9 Bridges Road 5-9 Bridges Road Moorebank NSW 20,060 $25,000,000 Mar-2015 $1,246 6.00% Coronation

Property

Joyce Corporation

Ltd

Bradnam's Windows & Doors 136 Zillmere Rd Boondall QLD 15,619 $25,000,000 Dec-2014 $1,601 8.76% 360 Capital

Bradnam Family JV Pellicano

Group

1000 Abernethy Rd 1000 Abernethy Rd Forresfield WA 10,343 $25,000,000 Feb-2015 $2,417 7.20% Undisclosed

Australia Western

Railroad Pty Ltd

Dandenong Logis Industrial Estate Greens Rd Dandenong

South VIC 253 $24,000,000 Mar-2015 $94,862 NA

Elite Property

JV Bayport Group

Places Victoria

Green's Foods 33-37 Mica St Carole Park QLD 17,916 $23,875,000 Aug-2014 $1,333 8.00% 360 Capital IND Fund

Green's Biscuits Pty

Ltd

65-75 Strezlecki Ave 65-75 Strezlecki Ave

Sunshine West VIC 23,289 $23,500,000 Oct-2014 $1,157 7.20% Propertylink

Valad Property

Group

470 Lytton Rd 470 Lytton Rd Morningside QLD 34,053 $31,000,000 Nov-2014 $910 10.00% Mirvac GroupAtlis

Property Partners

iseek Data Centre 2 Cycas Lane Brisbane Airport QLD 1,151 $30,742,505 Dec-2014 $26,711 NA Undisclosed Undisclosed


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