valuation report - centuria · 2018-01-11 · valuation as deemed appropriate. the subject property...

Valuation Report

Address

60 Brougham Street Geelong

Under Instructions From:

Centuria Property Funds Limited

Date of Valuation:

07 December 2017

Cushman & Wakefield

Level 3, 111 Coventry Street

South Melbourne VIC 3205

Valuation Report | 60 Brougham Street

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Liability limited by a scheme approved under Professional Standards Legislation

TABLE OF CONTENTS

1 Executive Summary .................................................................................................................. 4

1.1 Valuation Assumptions ............................................................................................................. 8

1.1.1 Critical Assumptions ................................................................................................................. 8

1.1.2 Verifiable Assumptions ............................................................................................................. 8

2 SWOT Analysis ...................................................................................................................... 10

3 Risk Assessment .................................................................................................................... 11

4 Introduction ............................................................................................................................ 12

4.1 Instructions ............................................................................................................................. 12

4.2 Definitions .............................................................................................................................. 12

4.3 Date of Valuation .................................................................................................................... 12

4.4 Independence of Valuer .......................................................................................................... 13

4.5 Information Sources ............................................................................................................... 13

5 Property Details ...................................................................................................................... 14

5.1 Legal Description .................................................................................................................... 14

5.2 Town Planning........................................................................................................................ 14

5.3 Location ................................................................................................................................. 15

5.4 Site Details ............................................................................................................................. 15

5.5 Utilities ................................................................................................................................... 16

5.6 Environmental, Heritage and Cultural ...................................................................................... 17

6 Improvements......................................................................................................................... 18

6.1 Description of Improvements .................................................................................................. 18

6.2 Services ................................................................................................................................. 18

6.3 Accommodation & Internal Finishes ........................................................................................ 20

6.4 Onsite Parking ........................................................................................................................ 21

6.5 Building Areas ........................................................................................................................ 21

6.6 Building Condition and Utility .................................................................................................. 21

6.7 Occupational Health and Safety .............................................................................................. 21

7 Tenancy Details ...................................................................................................................... 22

8 Financial Analysis ................................................................................................................... 26

8.1 Income Summary ................................................................................................................... 26

8.2 Outgoing Expenses ................................................................................................................ 26


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8.3 Capital Expenditure ................................................................................................................ 27

9 Market Commentary ............................................................................................................... 29

9.1 Economic Overview ................................................................................................................ 29

9.2 Regional Office Market Overview ............................................................................................ 30

10 Market Evidence ..................................................................................................................... 34

10.1 Rental Evidence ..................................................................................................................... 34

10.1.1 Rental Summary ..................................................................................................................... 36

10.2 Sales Evidence ....................................................................................................................... 36

10.2.1 Sales Summary ...................................................................................................................... 41

11 Valuation Methodology ........................................................................................................... 42

11.1 Highest and Best Use ............................................................................................................. 43

11.2 Capitalisation Approach .......................................................................................................... 43

11.3 Discounted Cash Flow Approach ............................................................................................ 46

11.4 Direct Comparison .................................................................................................................. 49

11.5 Summary of Valuation Approaches ......................................................................................... 50

11.6 Sales History .......................................................................................................................... 50

11.7 Selling Period & Marketability ................................................................................................. 50

11.8 Suitability for Mortgage Purposes ........................................................................................... 50

11.9 Insurance Estimate ................................................................................................................. 51

11.10 Valuation Qualifications .......................................................................................................... 51

12 Valuation ................................................................................................................................ 53

Appendix 1: Letter of Instruction

Appendix 2: Certificate of Title

Appendix 3: Plan of Consolidation


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1 Executive Summary

Valuation Details

Instructing Party: Centuria Property Funds Limited

Reliant Party(s) & Purpose: - Centuria Property Funds No. 2 Limited (CPF2L) for Acquisition

Purposes

- Centuria Property Funds No. 2 Limited (CPF2L) as Responsible

Entity to advise investors in the proposed unlisted trust for Current

Market Value purposes

- Commonwealth Bank of Australia (CBA) for First Mortgage Security

Purposes

Basis of Valuation: Market Value

Type of Report: Full

Interest Valued: Freehold subject to existing tenancies

Date of Valuation: 07 December 2017

Date of Inspection: 07 December 2017

Registered Proprietor(s): 11029/247: Impact Funds Management Pty Limited

Property Overview

Planning Scheme: Greater Geelong Planning Scheme

Zoning: Activity Centre Zone 1

Site Area: 5,475 square metres

Ecologically

Sustainable

Development (ESD):

Energy 5.5 star

Water 5.0 star

Greenstar rating 5.0

Brief Description:

The subject property comprises a modern quality commercial office facility of concrete frame, glazed

curtain wall and lightweight panelling construction known as the 'TAC Building' incorporating lower and

upper ground retail floors and six upper levels of office accommodation in association with basement and

ground level car parking.

The property is located on the south eastern corner of Brougham and Clare Streets in the core of the

Geelong commercial precinct. Immediate surrounding development comprises established lower rise

commercial and retail facilities in association with two new high rise office developments, one nearing

completion and one to be developed.

Geelong is an established and historic regional city being Victoria's largest provincial centre and is located

approximately 12.5 kilometres south west of Avalon Airport and 75 kilometres southwest of the Melbourne

CBD.

Selling Period & Marketability:

In the event the property was offered for sale we consider it would meet with good demand, with an

anticipated selling period of approximately 3-5 months under current market conditions and subject to a


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professional marketing campaign. Having regard to characteristics of the asset we expect the most likely

purchaser to be an Institutional investor.

Lettable Area

Office 14,816 sqm

Retail 1,281 sqm

Total 16,098 sqm


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Tenancy Details

WALE (by Income): 10.62 years

WALE (by Area): 10.57 years

Current Vacancy: 0%

Number of Tenants: 30

Financial Details

Area (sqm) / Passing Income Market Income Variance to Market

Car Spaces $ pa$psm

$pcm$ pa

$psm

$pcm$ pa %

Office 14,816 $6,340,784 $428 $8,222,991 $555 ($1,882,207) -29.7%

Car Parking 338 cars $887,931 $219 $900,211 $222 ($12,280) -1.4%

Retail 1,281 $543,224 $424 $624,795 $488 ($81,570) -15.0%

Miscellaneous 2 $59,266 $29,633 $59,266 $29,633 $0 0.0%

Outgoing Recoveries $1,712,243 $106 $0 $0 $1,712,243 100.0%

Total Gross Income $9,543,448 $593 $9,807,263 $609 ($263,814) -2.8%

Less Total Outgoings $1,871,101 $116 $1,871,101 $116

Net Income $7,672,348 $477 $7,936,162 $493 ($263,814) -3.4%

Gross Income on Vacant Areas $0

Gross Income on New Leases $0

Total Gross Income (Fully Leased) $9,543,448 $593

Net Income (Fully Leased) $7,672,348 $477

Outgoing Recoveries

Fernwood Investements Pty Ltd 482 sqm

Rush Hour Café Pty Ltd 236 sqm

Major Tenants Transport Accident Commission 14,861 sqm

Impact Investment Group 520 sqm

Office14,816 sqm

92.03%

Retail1,281 sqm

7.96%

Miscellaneous2 sqm

0.01%

Categories By Area

Office$7,979,439

83.61%

Car Parking$887,931

9.30%

Retail$616,812

6.46%

Miscellaneous$59,266

0.62%

Categories by Gross Passing Rent

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

LEASE EXPIRY PROFILE

GROSS PASSING RENT (FULLY LET)

AREA


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Valuation Approach(s)

Capitalisation Rate: 6.75%

Adopted Capital Value Rate: $7,250 psm

Discounted Cash Flow Inputs Discounted Cash Flow Outputs

Discount Rate: 8.00% Discounted Terminal Value: $62,607,872

Avg Growth Rate Office Net 2.96% NPV of Cash Flows: $60,788,104

Avg Growth Rate Net Present Value (net of costs): $116,735,651

Avg Growth Rate Retail Net 3.27% Terminal value growth: 1.32% pa

Terminal Yield: 7.25% Capital Expenditure (escalated): $5,555,513

Valuation Conclusions

Valuation Date 7 December 2017

Capitalisation Approach $115,250,000

Discounted Cash Flow Approach $116,750,000

Direct Comparison $116,700,000

Market Value $116,000,000

10.62 years

6.61%

Reversionary Yield 6.84%

6.71%

Internal Rate of Return (inc. Capex) 8.09%

Improved Value psm $7,206

Valuation

Subject to the leases described herein

$116,000,000 - Exclusive of GST

(One Hundred and Sixteen Million Dollars)

Weighted Average Lease Expiry (by Income)

Passing Initial Yield

Equivalent Yield

Cushman & Wakefield (Valuations) Pty Ltd

John Waugh FAPI

Certified Practising Valuer

Head of Valuation and Advisory, ANZ

Mars Njoo AAPI


Director - Valuation and Advisory, Victoria

IMPORTANT NOTE: All data provided in this summary is wholly reliant on and must be read in conjunction with the

information provided in the attached report. It is a synopsis only designed to provide a brief overview and must not be

acted on in isolation.

Liability limited by a scheme approved under Professional Standards Legislation.


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1.1 Valuation Assumptions

1.1.1 Critical Assumptions

The NLA of the Transport Accident Commission varies from the definition within the PCA code of

measurement. The Lease states the NLA includes various back of house areas including loading dock and

accessways for the exclusive use of the tenant. The Lease states these areas are included in NLA. This

does increase the NLA from that under the normal method of measurement by approximately 460 sqm. We

have had regard for this point in our assessment.

The voids and stairwells on levels 2-5 are also included in NLA.

We have assumed that all information supplied in conducting our valuation consists of a full and frank

disclosure of all information that is relevant.

All other professional/consultancy advice provided and relied upon is true and correct.

While all reasonable endeavours have been made to clarify the accuracy of the information provided, it is

assumed that the information provided consists of a full and frank disclosure of all information that is relevant.

The subject property is a leased investment and is classified as a “Going Concern” in accordance with “A New

Tax System (Goods and Services Tax) Act 1999” and Goods and Services Tax Ruling 2002/5.

We have relied upon the lettable areas indicated on the tenancy schedule provided. Should any subsequent

surveys indicate a variation to the areas adopted within, the matter should be referred to us for review of the

valuation as deemed appropriate.

The subject property is currently subject to Lease Agreement(s). We have examined all of the lease(s).

In undertaking our valuation we have relied upon various financial and other information provided. Where

possible, within the scope of our retainer and limited to our expertise as Valuers, we have reviewed this

information including by analysis against industry standards. Based upon that review, Cushman & Wakefield

(Valuations) Pty Ltd has no reason to believe that the information is not fair and reasonable or that material

facts have been withheld. However, Cushman & Wakefield (Valuations) Pty Ltd is necessarily limited by the

nature of its role and Cushman & Wakefield (Valuations) Pty Ltd does not warrant that they have identified or

verified all of the matters which a full audit, extensive examination or "due diligence" investigation might

disclose. For the purpose of our valuation assessment, we have assumed that this information is correct.

It should be noted that in the case of advice provided in this report which is of a projected nature, we must

emphasise that specific assumptions have been made which appear reasonable based on current market

sentiment and forecasts. It follows that any one of the associated assumptions may change over time and no

responsibility can be accepted in this event. The value performance indicated above is an assessment of the

potential value trend and the indicated figures should not be reviewed as absolute certainty.

1.1.2 Verifiable Assumptions

Verifiable assumptions relate to environmental issues, structural integrity of the improvements, condition of

building services, zoning and encroachments, and can be confirmed by obtaining appropriate documentation

relating to each.

While in the course of inspection due care is taken to note building defects, no structural survey has been

made and no undertaking is given about the absence of rot, termite or pest infestation, deleterious substances

such as asbestos or calcium chloride or other hidden defects. We can give no guarantee as to outstanding

requisitions in respect to the subject building.

We have made no survey of the property and assume no responsibility in connection with such matters.

Unless otherwise stated it is assumed that all improvements lie within the title boundaries.


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We have requested, but not been provided with an Environmental Audit Report. Verification that the subject

property is free from any contamination should be obtained from a suitably qualified environmental expert.

Should environmental concerns be encountered, our valuation may require amendment.

Based on our site inspection we can only assume there are no obvious signs of contamination, chemical

residues or other pollution brought about by the existing or previous use of the land. There did not appear to

be any evidence of site contamination, however, a subsoils survey has not been undertaken and we are

therefore unable to report or confirm the property is free of contamination.

We have requested, but not been provided with an Asbestos Register. The non-existence of an Asbestos

Register is a non-compliance with Occupational Health and Safety Regulations. Verification the property is

free from asbestos contamination should be obtained from a suitably qualified consultant. Should any

subsequent advice indicate the property to be contaminated, we reserve the right to reassess our valuation.

The property was developed after 2003 and is not required to have an asbestos register on site.

We have not sighted a structural report on the property nor have we inspected unexposed or inaccessible

portions of the premises. We therefore cannot comment on the structural integrity, defect, rot or infestation of

the improvements nor can we comment on any knowledge of the use in construction of material such as

asbestos or other materials now considered hazardous.

We emphasise that we are not qualified building surveyors and as such our comments are subject to any

detailed survey, which would confirm the structural integrity of the improvements and services. Our valuation

assumes that there are no inherent defects with the structure or service installations and reflects the age and

apparent condition.

Reference should be made to each section of our report for specific assumptions and commentary.

The right is reserved to review and if necessary vary the valuation figure if any environmental hazard, pest

affectation, heritage or cultural restrictions are found to exist.


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2 SWOT Analysis

Strengths:

Quality modern commercial asset

100% occupied

Well located in Geelong commercial centre

Large site with four street frontages

Good parking provisions

5 Greenstar rating

Long WALE of 10.62 years

Quality tenant profile with 92.30% of the total development and 100% of the office leased to

Transport Accident Commission (TAC) a state government body

Geelong is a prominent and well positioned regional city with a diverse economy and work base

Weaknesses:

Three retail tenancies or 1.70% of income expire in the next 12 months however this is minor in

terms of the total asset

A large asset in a regional location. However Geelong is a large regional city and two similar

sized assets are close by the subject - one recently complete and one commencing construction

Opportunities:

Obtain new leases on the retail areas to secure short term income

The property is a modern quality asset which is securely leased with a long WALE to a sound

tenancy profile. As such we see no material opportunities in the short to medium term

Threats:

The international economic environment appears slightly more stable but still variable which can

have a potential impact upon investment sentiment, however presently the domestic economy

continues to perform steadily

The property is a modern quality asset which is securely leased with a long WALE to a sound

tenancy profile. As such we see no material threats in the short to medium term

Note: Our observations within the S.W.O.T Analysis of this report provide our opinion of the property

as at the date of valuation.


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3 Risk Assessment

Investment Profile:

100% occupied

Well located in Geelong commercial centre

Quality tenant profile with 92.30% of the total development and 100% of the office leased to

Transport Accident Commission (TAC) a state government body

Geelong is a prominent and well positioned regional city with a diverse economy and work base

A large asset in a regional CBD location however two similar large modern assets are close by the

subject - one recently complete and one commencing construction

The asset contains what is cosnidered to be above average plant and services in compariosn to

other similar regional office assets

Physical Asset:

Quality modern commercial asset

Large site with four street frontages

Good parking provisions

5 Greenstar rating

Cash Flow Profile:

Long WALE of 10.62 years

Three retail tenancies or 1.70% of income expire in the next 12 months however this is minor in

terms of the total asset. No further expiries until April 2022

Management:

The asset is a large property with sophisticated plant and services but incorporating a low amount

of tenancies. As such we consider the asset would involve a medium level of management

The proposed management entity, Centuria Property Funds Limited is an experienced and

professional asset manager


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4 Introduction

4.1 Instructions

Instructing Party: Centuria Property Funds Limited

Reliant Party & Purpose: - Centuria Property Funds No. 2 Limited (CPF2L) for Acquisition

Purposes

- Centuria Property Funds No. 2 Limited (CPF2L) as Responsible

Entity to advise investors in the proposed unlisted trust for Current

Market Value purposes

- Commonwealth Bank of Australia (CBA) for First Mortgage

Security Purposes

Interest Valued: Freehold subject to existing tenancies

Basis of Valuation: Market Value

Type of Report: Full

Report Compliance Standards

- Australian Property Institute: Australia and New Zealand Valuation and Property Standards

(formerly Professional Practice)

- Client Standing Instructions: - Centuria Property Funds Limited

- Commonwealth Bank of Australia (CBA)

We refer to the appendix for a full copy of the instructions.

4.2 Definitions

Market Value

The estimated amount for which an asset or liability should exchange on the valuation date between a willing

buyer and a willing seller in an arm’s length transaction, after proper marketing and where the parties had

each acted knowledgeably, prudently and without compulsion.

4.3 Date of Valuation

Date of Valuation: 07 December 2017

Date of Inspection: 07 December 2017

This valuation is current as at the date of valuation only. The value assessed herein may change significantly

and unexpectedly over a relatively short period of time (including as a result of general market movements or

factors specific to the particular property). Liability for losses arising from such subsequent changes in value is

excluded as is liability where the valuation is relied upon after the date of valuation.

Reliance on a Report by a lender-client must be reasonable in all the circumstances. The Valuer will not

assume any responsibility for reliance by the lender-client on the Report after the expiration of 90 days from

the date of valuation, or the expiration of what is considered to be a reasonable time, whichever is the lesser.

The Valuer does not warrant, guarantee and/or represent that the content of the Report will remain unchanged


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for any period of time beyond the date of the Report and depending upon known and/or foreseeable facts that

might impact upon such value, such further time as maybe reasonable in all of the circumstances. The lender-

client should therefore review and consider the Report, regularly and frequently, before reliance.

If the property condition or circumstances vary between the date of inspection and date of valuation, we

reserve the right to reconsider our findings herein. We will not be held liable or negligent for variation in the

property for any reason whatsoever between the date of valuation and date of inspection.

4.4 Independence of Valuer

Cushman & Wakefield confirm that

The Valuer is qualified to carry out the valuation of properties in the State of Victoria.

Has experience in valuation of the type of property to be valued.

The Valuer has no pecuniary or other interests that could conflict with the proper valuation of the

property or could reasonably be regarded as being capable of affecting his ability to give an unbiased

opinion.

All investigations have been conducted independently and without influence from a third party in any

way.

The Valuer is a member of the Australian Property Institute, holds the designation of Certified

Practising Valuer and has completed the Institute’s required hours of Continuing Professional

Development and its compulsory Risk Management Module.

4.5 Information Sources

Areas provided by the vendor's Due Diligence room

Outgoings budgets provided by the vendor's Due Diligence material

Lease(s) provided by the vendor's Due Diligence material

Tenancy schedule provided by the vendor's Due Diligence material


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5 Property Details

5.1 Legal Description

Reference Owner Notifications

11029/247 Impact Funds Management Pty Limited 3 Notifications - a

Caveat, mortgage and

Section 173 Agreement

The above notations are detailed as follows:

Notation Description

Caveat AH271994B Lease for indoor type substation and easement for powerline purposes

Section 173

Agreement

Agreement for Access Management Plan

We have had regard for the above notations in our assessment.

Overall, there are considered to be no other encumbrances or interests reported on the Certificate(s) of Title

which are considered to adversely affect the value, marketability and continued utility of the property. Should

any encumbrances, encroachments, restrictions, leases, covenants or other Instruments which are not noted

in this report be discovered, the valuation should be returned to the Valuer for comment.

The above details were obtained from SAI Global, SAI Global certifies that the information contained within

the Certificate(s) of Title has been provided electronically by Landata Systems.

We refer to the appendix for a copy of the Certificate(s) of Title.

5.2 Town Planning

Local Authority: City of Greater Geelong

Planning Scheme: Greater Geelong Planning Scheme

Zoning: Activity Centre Zone 1

Heritage: No

Purposes: To implement the State Planning Policy Framework and the Local Planning

Policy Framework, including the Municipal Strategic Statement and local

planning policies.

To encourage a mix of uses and the intensive development of the activity

centre:

o as a focus for business, shopping, working, housing, leisure, transport

and community facilities

o to support sustainable urban outcomes that maximise the use of

infrastructure and public transport.

To deliver a diversity of housing at higher densities to make optimum use of

the facilities and services.

To create through good urban design an attractive, pleasant, walkable, safe

and stimulating environment.

To facilitate use and development of land in accordance with the

Development Framework for the activity centre.


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The current use of the land as commercial and retail is considered permissible under the zoning.

The planning information noted has been obtained from the Department of Transport, Planning and

Infrastructure online website. We recommend that this zoning or planning area should be verified by

application to Council for the issue of a Planning Certificate pursuant to the Planning and Environment Act.

Should this information prove to be incorrect, we reserve the right to review our assessment.

5.3 Location

The property is located on the south eastern corner of Brougham and Clare Streets in the core of the Geelong

commercial precinct. Immediate surrounding development comprises established lower rise commercial and

retail facilities in association with two new high rise office developments, one nearing completion and one to

be developed and leased to the NDIS and Worksafe. The broader commercial precinct includes Deakin

University and Westfield shopping centre in conjunction with a diverse retail strip precinct. Geelong Rail

station is located approximately 500 metres to the west.

Geelong is an established and historic regional city being Victoria's largest provincial centre and is located

approximately 12.5 kilometres south west of Avalon Airport and 75 kilometres southwest of the Melbourne

CBD.A pictorial indication as to the location of the subject property is shown by the locality maps below.

Source: Nearmap.com Source: Nearmap.com

5.4 Site Details

Land Area: 5,475 square metres (approximately)

Frontage: Approximately 50.27 metres frontage to Brougham Street

Approximately 97.39 metres frontage to Clare Street

Approximately 50.92 metres frontage to Corio Street

Boundaries: Eastern: Approximately 102.23 metres

Topography/Aspect: The subject site forms an irregularly shaped lot situated street level on the Brougham Street frontage and rising along the Clare Street frontage to the rear frontage with Corio Street.

The land has been excavated and levelled to accommodate the current development.

Access: Brougham Street is a local access route receiving low to moderate traffic flow.

Clare and Corio Streets are local streets receiving low traffic flow.


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Vehicle access is via Clare Street whilst the loading dock is accessed from Gore

Street.

Flooding: As the subject site is not affected by a Land Subject to Inundation Overlay (LSIO) or

a Special Building Overlay (SBO), we have assumed that it is not at risk from

flooding.

Site Identification: Check measurements undertaken onsite appear to indicate that the improvements

are contained within Title Boundaries. We are not surveyors and no warranty can be

given without an identification survey. If any encroachments are noted by the survey

report, the member should be consulted to reassess any effect on the value stated

in this report.

Plan of Consolidation(s)

Plan of Consolidation 370737S

We refer to the appendix for a copy of the Plan of Consolidation(s).

5.5 Utilities

Electricity: Available and connected

Water: Available and connected

Sewer: Available and connected

Telephone: Available and connected


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5.6 Environmental, Heritage and Cultural

Site Contamination

The land is currently used for office and retail purposes.

We are unaware of the previous use of the site.

We have requested, but not been provided with an Environmental Audit Report. Verification that the subject

property is free from any contamination should be obtained from a suitably qualified environmental expert.

Should environmental concerns be encountered, our valuation may require amendment.

We have carried out a search of the EPA’s Priority Sites Register at the time of completing this valuation and

confirm that the subject property is not listed.

Based on our site inspection we can only assume there are no obvious signs of contamination, chemical

residues or other pollution brought about by the existing or previous use of the land. There did not appear to

be any evidence of site contamination, however, a subsoils survey has not been undertaken and we are

therefore unable to report or confirm the property is free of contamination.

Asbestos

The subject asset was developed after the cut-off date requiring an Asbestos Register

An asbestos register is not required for a workplace if:

• the workplace was a building that was constructed after 31 December 2003

• no asbestos has been identified in the workplace

• no asbestos is likely to be present at the workplace from time to time.

(Work Health and Safety Regulation 2011 – Regulation 425 (6))

Verification the property is free from asbestos contamination should be obtained from a suitably qualified

consultant. Should any subsequent advice indicate the property to be contaminated, we reserve the right to

reassess our valuation.

Heritage and Cultural

The site incorporates a heritage overlay however the asset is a redeveloped modern building.

We have undertaken a search on the Victorian Heritage Register and the search revealed the property is not

listed or considered to have historical significance by the Heritage Council.

Right to Review

The right is reserved to review and if necessary vary the valuation figure if any environmental hazard, pest

affectation, heritage or cultural restrictions are found to exist.


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6 Improvements

6.1 Description of Improvements

The subject property comprises a modern quality commercial office facility of concrete frame, glazed curtain

wall and lightweight panelling construction known as the 'TAC Building' incorporating lower and upper ground

retail floors and six upper levels of office accommodation in association with basement and ground level car

parking.

Structure

Concrete frame

Floors

Concrete and raised flooring in office areas

Walls

concrete, masonry and lightweight panelling

Roof

Concrete and metal

6.2 Services

Air Conditioning

Central plant located at roof level comprising two York chillers, eight Air Handling Units (AHUs) and two

cooling towers. The air is ducted down the risers and dispersed via under floor plenums. Return air is

completed via ceiling vented recirculation.

Supplementary package units service the retail and back of house areas.

Fire Services

Sprinklers, smoke detectors, emergency lighting, exit signs hydrants and extinguishers, alarm and EWIS

Amenities

Modern contemporary style facilities with male, female and disabled facilities on each level. Showers

and end of trip facilities are located at B1.

Security Systems

Proximity card and CCTV.

Lifts

Three Otis passenger lifts servicing the office tower each with a capacity of 17 persons or 1,275 kg

Two Otis lifts servicing the carpark to level 2 each with a capacity of 17 persons or 1,300 kg

Two Otis variable speed passenger activated escalators servicing ground to upper ground

One Otis goods lift servicing B2 to level 7 (roof plant) with a capacity of 1,000kg


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Generator

Two 500KVA diesel generators located at basement level in association with two above ground diesel

tanks. We have been advised by the Facility Manager that the generator services all base building and

essential services

Building Management System (BMS)

The Schneider BMS controls and monitors air conditioning and ventilation and includes central

temperature adjustment and fault detection. The system also monitors various fire, electrical and

hydraulic systems


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6.3 Accommodation & Internal Finishes

Basement

Basement levels incorporate parking over three split levels

including part ground, bike racks and end of trip facilities

Ground Floor

Main entry from Brougham Street leading to large foyer with

double height ceiling. The ground level incorporates TAC

reception and security and offices on the western portion and

Rush Café occupying the eastern front portion. Escalators are

located in the foyer leading to the upper ground.

Carpark lifts are situated towards the rear on the western

perimeter whilst the office lifts are midway along the eastern

perimeter of the foyer.

Behind the public areas are various back of house areas

primarily storage, goods access, loading dock, amenities and

end of trip facilities.

The Upper ground level incorporates a second foyer for the

office lifts and access to the rear courtyard retail areas.

The retail area comprises a central courtyard with retail shops

to either side leading to the rear Corio Street frontage which

incorporates two shop frontages.

Three shops occupy the south western portion of the Clare

Street frontage

Fitout comprises stone tiled and timber floors, stone tiled walls

and decorative set ceilings incorporating down lighting

Upper Levels

Upper levels are occupied by office accommodation which is

generally of similar design and layout on all levels

A central atrium style stairwell is located between levels 2-6

Fitout includes carpeted floors, a combination of suspended

acoustic tile ceilings incorporating T5 fluorescent lighting, fire

services and air return.

The air is ducted directly into a raised under floor plenum


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6.4 Onsite Parking

There are 338 car parking bays situated over three split levels

including ground and basement. Access to the car park is gained

via Clare Street.

6.5 Building Areas

We have been provided with a tenancy schedule by the vendor's Due Diligence room which have been

adopted for the valuation and are outlined as follows:

Lettable Area

Office 14,816 sqm

Retail 1,281 sqm

Total 16,098 sqm

We have confirmed these areas by reviewing the survey plans provided.

6.6 Building Condition and Utility

The property comprises a modern well appointed asset incorporating large functional floorplates with

excellent natural light. The building was designed to the latest standards at the time of construction and

includes many energy efficient and sustainability features not normally incorporated into other regional style

head office facilities. As such we consider the asset still maintains high quality and efficiency levels in

comparison to newer assets.

We have not sighted a structural report on the property nor have we inspected unexposed or inaccessible

portions of the premises. We therefore cannot comment on the structural integrity, defect, rot or infestation of

the improvements nor can we comment on any knowledge of the use in construction of material such as

asbestos or other materials now considered hazardous.

We emphasise that we are not qualified building surveyors and as such our comments are subject to any

detailed survey, which would confirm the structural integrity of the improvements and services. Our valuation

assumes that there are no inherent defects with the structure or service installations and reflects the age and

apparent condition.

6.7 Occupational Health and Safety

We have not sighted an Occupational Health and Safety or Essential Services report, and have assumed the

property complies with all necessary Occupational Health and Safety and Essential Services requirements.


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7 Tenancy Details

Lease Synopsis

The subject property is currently subject to Lease Agreement(s). We have examined all of the lease(s) and

provided a précis of the main terms and conditions are summarised as follows:

Lessee: Transport Accident Commission

Status: Signed

Premises: GF Shop 2 & Lvls G-6

Lettable Area: 14,860.9 sqm

Permitted Use: Office and any other uses permitted by law

Term: 20 years

Commencement Date: 5 Jan 2009

Termination Date: 4 Jan 2029

Options to renew: 5+15

Review Structure: Fixed 3.50%

Passing Rent: $6,362,634 pa Part Net

Passing Rate $ psm/pcm: $428

Outgoings: $1,638,655 pa

Car Parking: 327 spaces

Lessee: Impact Investment Group

Status: Signed

Premises: GF Shop 1, GF Shop 3 and GF Shop 7

Lettable Area: 519.5 sqm

Permitted Use: Retail

Term: 5 years

Commencement Date: 18 Apr 2017

Termination Date: 17 Apr 2022

Options to renew: -


Passing Rent: $241,568 pa Part Net

Passing Rate $ psm/pcm: $465

Outgoings: $51,702

Car Parking: 4 spaces


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Lessee: Fernwood Investments Pty Ltd

Status: Signed

Premises: GF Shop 4 & 5

Lettable Area: 482.3 sqm

Permitted Use: Retail

Term: 7 years

Commencement Date: 1 Mar 2016

Termination Date: 28 Feb 2023

Options to renew: 5+5 years


Passing Rent: $156,000 pa Gross

Passing Rate $ psm/pcm: $323 psm

GST

All existing lease documentation contains Goods and Services Tax (GST) clauses which stipulate the Lessees

are responsible for the payment of GST in respect of the lease rental and all other goods and services

provided.

Occupancy Profile

% of gross passing

(fully let)

Current Vacancies Dec-17 $0 0.0%

Year 1 Dec-18 $21,850 0.2%

Year 2 Dec-19 $11,799 0.1%

Year 3 Dec-20 $0 0.0%

Year 4 Dec-21 $0 0.0%

Year 5 Dec-22 $301,430 3.2%

Year 6 Dec-23 $301,692 3.2%

Year 7 Dec-24 $0 0.0%

Year 8 Dec-25 $0 0.0%

Year 9 Dec-26 $0 0.0%

Year 10 Dec-27 $0 0.0%

$636,772 6.7%

Current Vacancy Summary

Office 0.0%

Car Parking 0.0%

Retail 0.0%

Miscellaneous 0.0%

LEASE EXPIRY BY GROSS PASSING RENT (FULLY LET)

Lease Maturity Profile

Based on our analysis of the tenancy schedule and lease documentation we summarise the lease maturity

profile of the subject property as follows:


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0.0%

20.0%

40.0%

60.0%

80.0%

100.0%


LEASE EXPIRY PROFILE

GROSS PASSING RENT(FULLY LET)

AREA

Arrears

Our enquiries with the property manager/owner reveal there are no material arrears.

Outstanding Incentives and Rental Abatements

The property is being purchased exclusive of outstanding incentives


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Tenancy Schedule

We have been provided with a tenancy schedule by the vendor's Due Diligence material which has been adopted for the valuation and are outlined as follows. We reserve

the right to review our report should this information prove to be incorrect.

60 Brougham Street,

Geelong

Tenancy Schedule

TENANT LEVEL CATEGORY NLA CAR LEASE LEASE TERM OPTION LEASE PASSING RENT OUTGOINGS Recovery rate MARKET RENT RENT REVIEW CAP & COLLAR

(sqm) SPACES COMM EXPIRY YRS PERIOD(S) TYPE ($PA) ($psm) % RECOVERY ($PA) ($psm) ($psm) ($PA) LEASE NEXT BASIS %

(YEARS) ($pcm) $ ($pcm) ($pcm) TYPE

Impact Investment Group GF Shop 1 Retail 40.20 - 18-Apr-17 17-Apr-22 5.00 - Semi-Gross - - - $4,001 $4,001 $100 $99.5 $575 $23,115 Gross Face 18-Apr-18 Fixed % -

Transport Accident Commission GF Shop 2 Retail 43.70 - 17-Oct-16 31-Mar-18 1.45 - Gross $21,850 $500 - - $21,850 $500 $99.5 $525 $22,943 Gross Face - Fixed % -

Impact Investment Group GF Shop 3 Retail 25.90 - 18-Apr-17 17-Apr-22 5.00 - Semi-Gross - - - $2,578 $2,578 $100 $99.5 $575 $14,893 Gross Face 18-Apr-18 Fixed % -

Commonwealth Bank of Aust. ATM Miscellaneous 1.00 - 26-Nov-09 25-Nov-19 10.00 - Semi-Gross $11,799 $11,799 - - $11,799 $11,799 - $11,799 $11,799 Gross Face 26-Nov-18 Fixed % 4.00%

Fernwood Investments Pty Ltd GF Shop 4 & 5 Retail 482.30 - 1-Mar-16 28-Feb-23 7.00 5+5 Gross $156,000 $323 - - $156,000 $323 $92.8 $323 $156,000 Gross Face 1-Mar-18 Fixed % 3.50%

Rush Hour Café Pty Ltd GF Shop 6 Retail 13.80 - 4-Feb-13 3-Feb-23 10.00 5+5 Semi-Gross $22,510 $1,631 - $1,280 $23,791 $1,724 $92.8 $1,730 $23,874 Gross Face 4-Feb-18 Fixed % -

Impact Investment Group GF Shop 7 Retail 453.40 - 18-Apr-17 17-Apr-22 5.00 - Semi-Gross $241,568 $533 - $45,123 $286,691 $632 $99.5 $575 $260,705 Gross Face 18-Apr-18 Fixed % 3.50%

Rush Hour Café Pty Ltd GF Shop 12 Retail 222.10 - 4-Feb-13 3-Feb-23 10.00 5+5 Semi-Gross $101,296 $456 - $20,606 $121,902 $549 $92.8 $555 $123,266 Gross Face 4-Feb-18 Fixed % -

Transport Accident Commission G Office 870.60 - 5-Jan-09 4-Jan-29 20 5+15 Semi-Gross $372,585 $428 - $96,287 $468,872 $539 $110.6 $555 $483,183 Gross Face 5-Jan-18 Fixed % 3.50%

Transport Accident Commission 1 Office 478.30 - 5-Jan-09 4-Jan-29 20 5+15 Semi-Gross $204,695 $428 - $52,899 $257,594 $539 $110.6 $555 $265,457 Gross Face 5-Jan-18 Fixed % 3.50%

Transport Accident Commission 2 Office 2,001.90 - 5-Jan-09 4-Jan-29 20 5+15 Semi-Gross $856,739 $428 - $221,408 $1,078,147 $539 $110.6 $555 $1,111,055 Gross Face 5-Jan-18 Fixed % 3.50%

Transport Accident Commission 3 Office 2,910.80 - 5-Jan-09 4-Jan-29 20 5+15 Semi-Gross $1,245,714 $428 - $321,931 $1,567,646 $539 $110.6 $555 $1,615,494 Gross Face 5-Jan-18 Fixed % 3.50%




. Office - - - - - - Net - - - - - - - $0 Net Face - Fixed % -

Transport Accident Commission Storeroom Miscellaneous 1.00 - 5-Jan-09 4-Jan-29 20 5+15 Gross $47,467 $47,467 - - $47,467 $47,467 $47,467 $47,467 Gross Face 5-Jan-18 Fixed % 3.50%

Fernwood Investements Pty Ltd (Perm.) Car Parking Car Parking - 3 1-Mar-16 28-Feb-23 7 5+5 Gross - - - - - - $170 $6,120 Gross Face 1-Mar-18 Fixed % 3.50%

Rush Hour Café Pty Ltd (Perm.) Car Parking Car Parking - 3 4-Feb-13 3-Feb-23 10 5+5 Gross - - - - - - $170 $6,120 Gross Face 4-Feb-18 Fixed % -

Impact Investment Group (Perm.) Covered Car Parking Car Parking - 4 18-Apr-17 17-Apr-22 5 - Gross $8,160 $170 - - $8,160 $170 $170 $8,160 Gross Face 18-Apr-18 Fixed % 3.50%

Rush Hour Café Pty Ltd (Casual) Covered Car Parking Car Parking - 1 - - - - Gross $2,000 $167 - - $2,000 $167 $170 $2,040 Gross Face - Fixed % -

Transport Accident Commission (Perm.) Covered Car Parking Car Parking - 320 5-Jan-09 4-Jan-29 20 5+15 Gross $858,981 $224 - - $858,981 $224 $224 $858,981 Gross Face 5-Jan-18 Fixed % 3.50%

Transport Accident Commission (Casual)Covered Car Parking Car Parking - 7 - - - - Gross $18,790 $224 - - $18,790 $224 $224 $18,790 Gross Face - Fixed % -

TOTAL 16,098 338 $7,831,206 $486 0.00% $1,712,243 $9,543,448 $593 $609 $9,807,263

The above information is purely for the purposes of a broad guide and whilst we understand the facts to be generally reliable, we are unable to guarantee their accuracy. Liability limited by a scheme approved under Professional Standards Legislation

PASSING GROSS RENT


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8 Financial Analysis

8.1 Income Summary

Area (sqm) / Passing Income Market Income Variance to Market

Car Spaces $ pa$psm

$pcm$ pa

$psm

$pcm$ pa %

Office 14,816 $6,340,784 $428 $8,222,991 $555 ($1,882,207) -29.7%

Car Parking 338 cars $887,931 $219 $900,211 $222 ($12,280) -1.4%

Retail 1,281 $543,224 $424 $624,795 $488 ($81,570) -15.0%

Miscellaneous 2 $59,266 $29,633 $59,266 $29,633 $0 0.0%

Outgoing Recoveries $1,712,243 $106.37 $0 $0 $1,712,243 100.0%

Total Gross Income $9,543,448 $593 $9,807,263 $609 ($263,814) -2.8%

Less Total Outgoings $1,871,101 $116 $1,871,101 $116

Net Income $7,672,348 $477 $7,936,162 $493 ($263,814) -3.4%

Gross Income on Vacant Areas $0

Gross Income on New Leases $0

Total Gross Income (Fully Leased) $9,543,448 $593

Net Income (Fully Leased) $7,672,348 $477

Income Category

8.2 Outgoing Expenses

We have been provided with budgeted outgoings by the vendor's Due Diligence material which have been

adopted for the valuation and are outlined as follows:


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60 Brougham Street,

Geelong

OUTGOINGS

Year Ending: 30-Jun-18

Net Lettable Area: 16,098 sqm

Budget Budget ADOPTED ADOPTED PCA

ITEM 30-Jun-18 30-Jun-18

Benchmarks

St Kilda Rd

AMOUNT AMOUNT AMOUNT AMOUNT

( $ / PA ) $psm ( $ / PA ) $psm $psm

STATUTORY OUTGOINGS

Municipal / Council Rates $524,844 $32.60 $524,844 $32.60 $11.31

Water & Sewerage Rates $31,200 $1.94 $31,200 $1.94 $5.28

Land Tax $108,558 $6.74 $108,558 $6.74 $21.27

Fire Levy $91,632 $5.69 $91,632 $5.69 $2.12

- $0.00

Sub-Total $756,234 $46.98 $756,234 $46.98 $39.98

BUILDING OUTGOINGS

Insurance Premiums $40,680 $2.53 $40,680 $2.53 $4.48

Air Conditioning/Ventilation $173,430 $10.77 $173,430 $10.77 $7.44

Common Area Cleaning $197,340 $12.26 $197,340 $12.26 $15.35

Building Supervision $153,377 $9.53 $153,377 $9.53 $3.79

Window Cleaning - $0.00 - $0.00 -

Electricity $151,380 $9.40 $151,380 $9.40 $15.06

Fire Protection $35,051 $2.18 $35,051 $2.18 $4.31

Gas & Fuel $38,000 $2.36 $38,000 $2.36 $2.70

Lift & Escalators $42,348 $2.63 $42,348 $2.63 $4.41

4 Lifts - $0.00 - $0.00 $0.28

Repairs & Maintenance $136,360 $8.47 $136,360 $8.47 $7.95

Security $51,613 $3.21 $51,613 $3.21 $3.14

Telephone & Communication $7,380 $0.46 $7,380 $0.46 -

NABERS - $0.00 - $0.00 $0.68

Building Management Expenses $59,694 $3.71 $59,694 $3.71 $11.17

Public Liability $900

Miscellaneous $28,214 $1.75 $28,214 $1.75 $1.38

Sub-Total $1,115,767 $69.26 $1,114,867 $69.26 $82.14

NON-RECOVERABLE OUTGOINGS

Car park and truck area outgoings recovered - $0.00 - $0.00 -

Non-Recoverable Management Fees - $0.00 - $0.00 -

Non-Recoverable Other - $0.00 - $0.00 -

Total Non-Recoverable Outgoings $0 $0.00 $0 $0.00 $0.00

TOTAL OUTGOINGS $1,872,001 $116.23 $1,871,101 $116.23 $122.12

The adopted outgoings equate to $116 which is considered to fall within market parameters for a property of this age, nature and location.

8.3 Capital Expenditure

We have not been provided with capital expenditure budgets, however have assessed and adopted the

following capital expenditure schedule for the valuation:

MAKE GOOD CAPITAL EXPENDITURE

Refurb costs for current vacancies $175 psm

1st Expiry $175 psm

2nd & Subsequent Expiries $175 psm

SCHEDULED CAPITAL EXPENDITURE $250 psm

CAPITAL EXPENDITURE INPUTS


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CAPITAL EXPENDITURE SUMMARY

Description Comm Date Months End Date Current Cost Escalated Cost*

MAKE GOOD CAPITAL EXPENDITURE

Current Vacancies Dec-17 1 Dec-17 -

Year 1 Dec-17 12 Nov-18 $3,824

Year 2 Dec-18 12 Nov-19 -



Year 5 Dec-21 12 Nov-22 $50,122

Year 6 Dec-22 12 Nov-23 $70,768

Year 7 Dec-23 12 Nov-24 $4,389



Year 10 Dec-26 12 Nov-27 -

SCHEDULED CAPITAL EXPENDITURE

. - - - - -

General Capex Nov-19 96 Nov-27 $4,024,400 $4,612,463

Year 1 and 2 Dec-17 24 Dec-19 $800,000 $813,947

Total $4,824,400 $5,555,513

Capex (% value) 4.79%

* Costs are escalated from month 13 onwards.


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9 Market Commentary

9.1 Economic Overview

INDICATOR FREQUENCY RELEASE MONTH

CURRENT LONG TERM

AV.

RECENT TREND

RELATIVE TO AV.

COMMENT

Economy

GDP, annual av. YoY Quarterly Jun 2017 2.0% 3.5% Solid growth of 0.8% over the

quarter, though annual rate soft.

CPI YoY1 Quarterly Sep 2017 1.8% 2.5% ◼ Headline rate slips further below

RBA target band of 2-3%.

Building Approvals, trend YoY

Monthly Oct 2017 4.2% 2.8% ◆ ◼ The annual growth trend turns

positive for first time since Aug 16.

Gross Operating Profits (Corporations) YoY

Quarterly Jun 2017 21.2% 7.0% ◆◆Profit growth slipped in Q2 2017, mainly on softer mining profits.

Business Confidence, net balance index

Monthly Oct 2017 8.0 5.8 ◆ ◼ Confidence up a little, ‘Conditions,’

reach 20 year high.

Labour market

Unemployment Rate, % Monthly Oct 2017 5.4% 6.9% ◆ ◼ Near 4 year lows.

Employment YoY Monthly Oct 2017 3.0% 1.8% ◆ Solid growth continues.

Wage Price Index YoY Quarterly Sep 2017 2.0% 3.3% ◆ Wage growth remains very soft.

Population YoY Quarterly Mar 2017 1.5% 1.4% ◼ ◼ Growth steady near long-term

average.

Markets

Cash Rate, % Monthly Nov 2017 1.5% 5.1% ◼ ◆◆ Market pricing in the chance of a rate hike from mid-18 to early 19.

10 Year Govt Bond, %1 Monthly Nov 2017 2.6% 5.7% ◆ ◆◆ Yields compress on average

20bps in Nov.

All Ordinaries YoY Monthly Nov 2017 10.1% 7.9% ◼ Market up 1.4% over month.

A-REIT S&P/ASX 200 Monthly Nov 2017 7.3% 4.0% ◆ ◼Solid gains as bond yields

compress.

House Prices YoY Monthly Nov 2017 7.7% 6.8% ◼ National capital prices dip in Nov

as Sydney continues to slide.

Consumer Consumer Sentiment Index

Monthly Nov 2017 99.7 101.3 ◼ Confidence back below 100.

Retail Trade, MAT YoY Monthly Sep 2017 2.9% 5.1% Zero monthly growth after 2 down

months.

NAB Online sales YoY Monthly Sep 2017 6.0% 16.2% Online sales growth down -0.6% in

September

Household Saving Ratio

Quarterly Jun 2017 4.6 10.1 ◆ ◆ A new post GFC low in Q2.

Petrol average ULP terminal gate price, $

Monthly Nov 2017 $1.25 $1.21 ◼ Prices increase around 7c per

litre.

1 Average from December 1991. Recent trend key: ◆ improving; ◼ stable; worsening.

Relative to average key: Compared to long run average: ◆◆ much better ◆ better ◼ neutral worse much worse.

Source: Westpac Melb Inst, NAB, ABS, ASX, RBA, AIP and Cushman & Wakefield


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9.2 Regional Office Market Overview

The office market sector has continued to perform well in 2017 and has now reached new benchmark levels

for investment returns. This trend has been led by the CBD markets of primarily Sydney and Melbourne and to

a lesser degree Brisbane.

Driven by tenant demand Sydney and Melbourne have led the way in terms of lowering of investment

benchmarks. This in turn has also assisted the metropolitan markets in these cities which have also

demonstrated strong demand for both leasing and investment returns.

The regional office markets generally operate on different parameters to the metropolitan and CBD demand

drivers. Regional performance is based primarily upon specific local characteristics, primarily the drivers of the

local economy. This in turn drives population growth and employment demand.

Drivers of local regional economies can vary from industry and agricultural based activities to Defence

education, tourism and health.

Unlike their larger CBD and metro counterparts, regional economies tend to be more reliant upon one or two

drivers as opposed to a more diverse economic base. This in turn tends to have a more significant impact

upon a regional centre when the main driver changes. As a result regional markets often tend to swing more

than their urban counterparts. The broader the depth of a regional economy the more likely it is to withstand

change.

Prime regional office markets in Victoria are considered to be limited and are primarily

Geelong Bendigo

Wodonga Ballarat

Warrnambool

By far the most diverse and largest is Geelong being Victoria’s second largest city. It also contains the most

diverse economy with manufacturing, health (Waurn Ponds Private Hospital) and education (Deakin

University) prominent employment drivers.

Geelong has continued to grow generally in line with other major centres at an average of approximately

1.60% per annum. As at October 2017 the unemployment rate was 5.90% compared to the Victorian average

of 5.50%.


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Source ABS, Greater City of Geelong

According to Geelong council economic statistics the main drivers of the local economy are as follow

Health 16.00%

Education 10.80%

Manufacturing 13.00%

Retail Trade 14.50%

Source ABS, Greater City of Geelong


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The above denotes that Geelong is a genuinely diverse economy unlike many other regional locations which

are focused on one major driver such as tourism or defence.

The ancillary businesses associated with Geelong’s main business drivers also tend to be more white collar or

office oriented offering potential for a broader office demand than the main occupiers themselves.

RENTS

Geelong’s economy and associated investment demand has suffered due to the closure of the main

employment driver namely the Ford factory in 2016. However, in saying this the economy is diverse with

significant sectors including healthcare, education, and government.

These have tended to support the continued structural change. Geelong is well located to the more urban

areas and also within close proximity to Avalon airport, all factors assisting its qualities as a drawcard.

The office market within Geelong is mixed. The traditional local market comprises established B grade assets

generally up to 3-5 levels. In conjunction with this property type, Geelong has an increasing number of

modern A grade office park/tower developments.

These include

Centrelink NDIA

Australian Taxation Office Worksafe

Transport Accident Commission

As a result, there is a split market for rentals in the city as follow

Modern local style office full and multiple floor $250-$350 psm

Institutional grade full floor and 1-3 levels $425-$475 psm

Institutional grade whole building $400-$450 psm

Geelong CBD average net office rental rates -Source Cushman & Wakefield Research

Incentive levels are variable and generally in the range of 15%-22.5%

INVESTMENT

The general market fundamentals for the CBD and suburban office markets have typically been positive with

limited new supply additions, improving demand and declining vacancies. The competition and lack of stock

in the CBD appears to have assisted the demand in the metropolitan markets and major regional markets.

The subject property sits as an investment grade asset. These can be very limited in many regional market

however Geelong has approximately 14 investment grade assets namely office properties above 10,000 sqm

of which 8 have transacted over the past five years, demonstrating a demand for larger quality assets in the

city.

The two assets currently under construction and the subject asset are considered above average non CBD

assets incorporating the latest building and sustainability technology and 5 Green Star rating.

However, demand for regional markets is not directly related to the urban markets. The best results for sales

of office properties in regional markets have tended to be secure long term investments.


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Whist yields in regional locations can vary materially due to specific local conditions there does appear to be a

more consistent trend between metropolitan and core regional assets subject to a longer term secure income

streams. Although local factors are still relevant there appears to be a general range of 50-100 basis points

above their urban counterparts.

Average investment parameters for investment grade assets with long term secure income profiles are

outlined below

LOCATION METROPOLITAN MAJOR REGIONAL

NSW 5.25%- 5.75% 6.25%-6.75%

VIC 5.25%-5.75% 6.25%- 7.00%

QLD 5.75%-6.25% 6.50%-7.25%

Average returns for investment grade office asset subject to long term leases- Source Cushman and Wakefield

OUTLOOK

The domestic Australian economy continues to perform well, in comparison to some major foreign economies.

Consumer and business confidence and unemployment are demonstrating some uncertainty but remain

generally steady whilst the housing market appears to have peaked.

Investor demand is extremely strong and recent sales evidence demonstrates a compressing of return

parameters between prime and secondary property. Investment returns are at benchmark levels.

As mentioned regional office markets are impacted upon by more local factors. We consider those

which offer a diverse economy and central location will be able to leverage off demand being seen in

metropolitan markets and offer an alternative to these locations.

We do not see the same pressure for investment returns as in the CBD and metro markets as a general

concept, however there has been strong evidence that quality assets subject to long term income

streams attract good interest.

In summary, although the office market is generally considered to be at a high point the depth of funds

and purchasers remains strong. We consider these factors will continue to influence the market in 2018

unless a change to economic fundamentals occurs.


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10 Market Evidence

In deriving a market value for the subject property we have analysed recent comparable properties. A

selection of the evidence used for the valuation is outlined as follows:

10.1 Rental Evidence

Office

There is limited evidence of large modern office accommodation similar to the subject in the immediate area.

There are however two new commercial assets similar to the subject upon which we have based our primary

evidence.

Address Comm Date

NLA (sq m)

Term (yrs)

Rental Rate ($/ sq m)

Type Reviews Incentive

1 Malop Street, Geelong

Worksafe Jan-18 14,400.0 15 $448 Net 3.75% Nil

Description: New office development incorporating an existing heritage building and ground level retail to be completed January 2018.

Comments: Located approximately 150 metres west of the subject. Considered a similar asset but overall slightly superior.

237 Ryrie Street, Geelong

Dept. of Treasury & Finance

Mar-17 603.4 3 $408 Net 4.00% Nil

Description: A modern style five level building incorporating ground level retail and upper level offices located in a core high street location.

Comments: Inferior improvements and materially smaller letting than subject.

Part Level 3, 1 Malop Street, Geelong

Dept. of Treasury & Finance

Jan-18 877.0 6+5 $460 Net 3.75% 15%

Description: New office development incorporating an existing heritage building and ground level retail to be completed January 2018.

Comments: Located approximately 150 metres west of the subject. Considered a similar asset but overall slightly superior.

43-45 Brougham Street, Geelong

NDIS Mar-17 1,943.0 2 $302 Net Undisc. Undisc.

Description: Situated within a three storey commercial office building with NAB occupying the ground floor. Refurbished established building. The rental includes 14 car bays.

Comments: Smaller inferior office building in comparison to the subject. Located directly opposite the subject property.


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Retail

There are several recent leases within the subject property which demonstrate a trend for the retail rents.

We also provide some further local examples in the following.

Address Comm Date

GLAR (sq m)

Term (yrs)

Rental Rate ($/ sq m)

Type Reviews Incentive

Lot 2, 6-8 Eastern Beach Road, Geelong

Dec-15 120.0 5+5 $608 Net 3% 1.60%

Description: Modern ground floor retail shop forming part of a multi level complex and occupied as a restaurant. Some kitchen fit out included in lease.

Comments: Prominent but non core location. Considered inferior to subject.

95 Malop St Geelong

Westpac Oct-15 237.0 7 $1,050 net CPI undiscl

Description: Bank branch within Westfield Geelong

Comments: Materially superior retail leasing within a regional retail centre.

95 Malop Street Geelong

Nov-15 115.0 5 $600 net CPI undiscl

Description: Bank branch within Westfield Geelong.

Comments: Materially superior retail leasing within a regional retail centre.

In addition to the above evidence there is also prelease to NDIA in a new development under construction at

13 Malop Street directly behind the subject property.

Details of this prelease are confidential however we have obtained general parameters as follow

Address NLA Proposed

Start date

Term Average Rental Rate on whole building

13-19 Malop Street 14,881 sqm 2019 20 yrs $455 psm net

Office estimate $490psm

We are also aware of a passing rental for the ATO in Ryrie Street outlined as follows

Address NLA Start Date Term Passing office rental rate

12-14 Little Ryrie Street 3,070 sqm 20 yrs $455 psm net


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10.1.1 Rental Summary

Based upon evidence, including the above, we have adopted the following rentals for our valuation of the

subject property.

Office $555 psm Gross

Retail $323 psm to $575 psm Gross

Parking $2,040 pspa to $2,688 pspa Gross

Due to the specific recovery patterns on the part net leases we have adopted the above gross market

rates.

10.2 Sales Evidence

There are no sales within the immediate locality of similar sized and quality assets. We have obtained sales of

large modern commercial assets from other regional or metropolitan locations along the eastern seaboard.

Our evidence is outlined as follows

2 Kendall Street, Williams Landing

Sale Date: June 2017

Purchase Price: $58,230,000

Vendor: Cedar Woods

Purchaser: Centuria Metropolitan REIT

Lettable Area: 12,919 sqm

Site Area: 4,374 sqm

Parking: 384

Zoning: Priority Development zone

Occupancy: 100%

Major Tenant(s): Target WALE: 9.21 yrs

Analysis

Initial Yield: 6.49% Equivalent Yield: 6.49%

Sale Price psm (Lettable Area):

$4,507

IRR: 7.59% Terminal Yield: 6.75%

Compound Market Growth:

2.83%

Comments

Description

Presale of an eight level commercial office development which is now under construction within one of Melbourne's new residential growth suburbs. The property is conveniently located directly opposite the Williams Landing Rail Station and provides easy access to the Princes Freeway. The locality will form part of the shopping centre precinct for Point Cook, Truganina and Laverton suburbs.

Comparison

Located closer to Melbourne city than subject but located in a less mature location. Similar long term lease as subject but a smaller asset.


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800 Toorak Road, Hawthorn East

Sale Date: January 2017


Vendor: Investa

Purchaser: Charter Hall


Parking: 2449

Zoning: Comprehensive Development Zone

Occupancy: 100%

Major Tenant(s): Coles WALE: 13.20 yrs

Analysis



$6,707



3.29%

Comments

Description

A grade office complex built circa 1996. The accommodation comprises six (6) levels of office accommodation in association with 2,449 undercover and on grade car bays. Comparison

Superior location in metropolitan Melbourne and comprising a materially larger asset. With a slightly longer WALE. The sale was for the purchase of 50% stake in the interest.


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1231-1241 Sandgate Road, Nundah

Sale Date: April 2017


Vendor: Growthpoint Properties Australia

Purchaser: Centuria Property Funds Limited


Site Area: 5,597 sqm

Parking: 144

Zoning: MC Major centre

Occupancy: 100%

Major Tenant(s): Energex WALE: 9.58 yrs

Analysis



$8,186



2.94%

Comments

Description

A-grade office facility erected circa 2011. The accommodation comprises ground and part level 1 retail in association with six (6) levels of office accommodation and basement parking for 144 vehicles. The property is 67% leased to Energex Ltd, a Queensland government corporate entity, and is centrally located in an established inner metropolitan Brisbane commercial precinct.

Comparison

Similar style of asset in metropolitan Brisbane location. Similar WALE.


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41 O'Connell Terrace, Bowen Hills

Sale Date: September 2016


Vendor: City of Brisbane Investment Corporation Pty Ltd

Purchaser: MHPHA Bowen Hills Pty Ltd


Parking: 129

Zoning: EC Emerging Community

Occupancy: 100% WALE: 17.9 yrs

Major Tenant(s): State Government (Qld Health) & Brisbane City Council

Analysis



$6,875



3.10%

Comments

Description

This property comprises a seven (7) storey office building erected circa 2013, 88% occupied on long term leases to Qld government and Brisbane City Council. Accommodation comprises ground floor reception, retail and office, and further six (6) levels of office space. Basement parking is included in association with another on grade side adjoining the subject. The major lease to Brisbane City Council incorporates a break clause which if exercised reduces the WALE to 9.4 years.

Comparison

Similar modern asset located in superior fringe Brisbane metropolitan location and incorporating a longer WALE.


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505 St Pauls Terrace, Fortitude Valley

Sale Date: January 2017


Vendor: ISPT Pty Ltd

Purchaser: Eureka -Real Assets


Parking: 355 (1:50sqm Area)

Zoning: MU1 Mixed Use (Inner City)

Occupancy: 100% WALE: 10.6 yrs

Major Tenant(s): Brisbane City Council

Analysis



$11,668



3.02%

Comments

Description

505 St Pauls Terrace is a modern A grade commercial office facility comprising lower ground retail and commercial office, ground and three (3) upper levels of office accommodation in association with lower ground and two basement car parking levels. The property is fully leased to the Brisbane City Council on a 20-year lease term expiring August 2027 with two further option term of five years.

Comparison

Larger office park style asset located in superior city fringe office locality. Superior to subject.


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10.2.1 Sales Summary

The above evidence is summarised as follows:

Property Price Date

WALE

by Income

(years)

Lettable Area

$ psm

Lettable

Area

Equivalent

YieldIRR

Subject $116,000,000 Dec-17 10.62 16,098 $7,206 6.71% 8.09%

2 Kendall Street, Williams Landing $58,230,000 Jun-17 9.21 12,919 $4,507 6.49% 7.59%

800 Toorak Road, Hawthorn East $281,000,000 Jan-17 13.20 41,898 $6,707 5.63% 7.07%

1231-1241 Sandgate Road, Nundah $106,250,000 Apr-17 9.58 12,980 $8,186 6.58% 7.90%

41 O'Connell Terrace, Bowen Hills $52,000,000 Sep-16 17.90 7,564 $6,875 6.72% 7.85%

505 St Pauls Terrace, Fortitude Valley $205,500,000 Jan-17 10.60 17,613 $11,668 5.71% 7.00%

Based upon evidence including the above we have adopted the following parameters for our valuation of the

subject property.

Capitalisation Rate 6.75%

Discount Rate 8.00%

Direct Comparison Rate $7,100 psm- $7,400 psm


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11 Valuation Methodology

In determining the market value for the subject property we have examined the market evidence and applied

this analysis to the following approaches:

Capitalisation Approach

Discounted Cash Flow

Direct Comparison

Capitalisation Approach

Under this approach, the net maintainable market income generated by the property is capitalised at an

appropriate market yield to establish the property's current market value fully leased. Appropriate capital

adjustments are then made to reflect the specific cash flow profile and general characteristics of the property,

including adjustments for market rent overage/underage, letting up allowances for current and future

vacancies, incorporating down time, incentives, leasing fees and capital expenditure. It should be noted that

the methodology adopted under this method of valuation is consistent with the approach used within our sales

analysis.

Yields from sales are dependent on the location, design, quality and age of improvements, strength of

tenant(s), lease term and rent review provisions. Investors have regard to these factors in assessing their

required rate of return which fundamentally culminates in a combination of the real return, potential for rental

growth and the perceived risk inherent in the investment.

The Capitalisation Rate adopted has been derived from our sales evidence and market research.

Discounted Cash Flow

This form of analysis allows an investor or owner to make an assessment of the long term return that is likely

to be derived from a property with a combination of both rental and capital growth over an assumed

investment horizon. In undertaking this analysis a wide range of assumptions are made relating to rental

growth, sale price of the property at the end of the investment horizon, costs associated with the initial

purchase of the property and also of its disposal at the end of the investment period. These assumptions are

consistent with the approach used within our sales analysis.

Direct Comparison

The Direct Comparison Approach involves applying a value rate derived from comparable sales to a unit of

comparison (e.g. NLA, GLA, site area, FSR) to arrive at a value.

STANDARD VALUATION DEFINITIONS & TERMINOLOGY

Net Income Estimate, Fully Leased

The total current net income for the subject property plus the estimated income from vacant tenancies. The

total current net income is the sum of the current base, outgoings recoveries and sundry income, less total

outgoings expenses (including non-recoverable expenses). The estimated income from vacant tenancies

reflects our market assessment of gross rent for these tenancies.

Net Passing Income

The sum of the current base, outgoings recoveries and sundry income, less total outgoings expenses

(including non-recoverable expenses), i.e. the current net income.

Outstanding Tenant Incentives

The total costs of all outstanding tenant incentives as at the date of valuation including unexpired rent free

periods, outstanding fitout or cash contributions and rental discounts.

Initial Yield

The net passing income (as defined above) as a percentage of the assessed value less the value of any

excess land.


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Reversionary Yield

The gross market income plus sundry income less total outgoings (including non-recoverable expenses), as a

percentage of assessed value less the value of any excess land.

Adopted Capitalisation Rate (or Equivalent Yield)

The capitalisation rate applied within our valuation to the net income estimate fully leased (as defined above).

The term equivalent yield (as utilised within our analysis of comparable sales) essentially reflects a derived

capitalisation rate based on the analysed purchase price.

Terminal Yield

The capitalisation rate applied within our valuation to the net passing income forecast during Year 11 of our

Discounted Cash Flow (DCF) analysis. From this capitalised amount capital adjustments are made to arrive at

a selling price for the property at the end of Year 10 of the DCF.

Target Internal Rate of Return (IRR)

The discount rate applied to the annual net cash flows of the property and the hypothetical sale of the property

at the end of Year 10 to arrive at the adopted value (excluding any balance land) using the Discounted Cash

Flow approach.

Ten Year IRR (Indicated)

The Internal Rate of Return which the property would achieve over a 10 year period given the forecast net

cash flow and assessed value. This analysis excludes the value of any balance land.

Value psm of NLA

The adopted value (excluding the value of any balance land) per square metre of Net Lettable Area (NLA).

Vacancy/Incentive Allowance

The allowance made for vacancies, incentives and agents fees in each year of the DCF analysis timed to

coincide with lease expiry dates.

Current Vacancy Rate

The current level of vacancy expressed as a percentage proportion of the total lettable area.

11.1 Highest and Best Use

The highest and best use is considered to be the current use as a commercial office and retail development

11.2 Capitalisation Approach

A comparison of the subject property to the sales evidence is outlined in the following:


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5.00% 5.20% 5.40% 5.60% 5.80% 6.00% 6.20% 6.40% 6.60% 6.80%


Subject Property





Capitalisation Rate Comparison

Our capitalisation analysis is as follows:


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60 Brougham Street,

Geelong

CAPITALISATION APPROACH

Capitalisation of Market Rentals

Market Rental

Office 14816 sqm $8,222,991

Retail 1281 sqm $624,795

Car Parking 338 spaces $900,211

Telecommunications $0

Miscellaneous $59,266

Plus Recoveries $0

TOTAL GROSS MARKET RENTAL $9,807,263

Less Total Outgoings $116 psm $1,871,101

TOTAL NET MARKET RENTAL $7,936,162

Capitalise in Perpetuity 6.75% 14.81 $117,572,768

$117,572,768

Capital Adjustments

Costs for Current Vacancies

Leasing Fees 10.00% $0

Incentives 20.00% 5 yr avg lease term $0

Letting Up Allowance 12 months $0

PV of Costs for Vacancies in upcoming 12 months

Leasing Fees ($2,039)

Incentives ($5,353)

Letting Up Allowance ($18,302)

PV of Capital Expenditure

Makegood Capital Expenditure @ 6.75% in upcoming 12 months ($3,718)

Scheduled Capital Expenditure @ 6.75% in upcoming 12 months ($352,604)

Present Value of Rental Variance @ 6.75% ($1,938,000)

PV of Outstanding Incentives @ 6.75% $0

Gross Rental Shortfalls for New Leases $0

TOTAL CAPITAL ADJUSTMENTS ($2,320,015)

$115,252,752

SENSITIVITY ANALYSIS ADOPTED

CAPITALISATION VALUE CAPITAL CAPITAL

RATE PER SQ M VALUE VALUE

Net Passing Income $7,672,348

6.50% $7,439 $119,750,000 Net Market Income $7,936,162

6.75% $7,159 $115,250,000 $115,250,000 Initial Yield 6.66%

7.00% $6,899 $111,050,000 Initial Yield (Fully Let) 6.66%

Reversionary Yield 6.89%

AS AT Equivalent Yield 6.75%

Rate psm Lettable Area: $7,159

07-Dec-17 Rate psm Site $21,050

VALUATION ANALYSIS


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11.3 Discounted Cash Flow Approach

Discount Rate

The Discount Rate adopted has been derived from our sales evidence Section 10. A comparison of the

subject property to the sales evidence is outlined in the following.

6.40% 6.60% 6.80% 7.00% 7.20% 7.40% 7.60% 7.80% 8.00% 8.20%

Subject Property






Internal Rate of Return Comparison

Discounted Cashflow Analysis

The basic assumptions incorporated in our discounted cash flow analysis are as follows:


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CASHFLOW INPUTS

10 yr

Avg 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

GROWTH RATES

CPI 2.32% 2.02% 2.11% 2.18% 2.35% 2.43% 2.44% 2.25% 2.17% 2.39% 2.55% 2.55%

Outgoings 2.32% 2.02% 2.11% 2.18% 2.35% 2.43% 2.44% 2.25% 2.17% 2.39% 2.55% 2.55%

Office Gross Face 2.84% 2.52% 2.61% 2.68% 2.85% 2.93% 2.94% 2.75% 2.67% 2.89% 3.05% 3.05%

Car Parking 2.57% 2.27% 2.36% 2.43% 2.60% 2.68% 2.69% 2.50% 2.42% 2.64% 2.80% 2.80%

Retail Gross Face3.06% 2.77% 2.86% 2.93% 3.10% 3.18% 3.19% 3.00% 2.92% 3.14% 3.30% 3.30%

Miscellaneous 2.32% 2.02% 2.11% 2.18% 2.35% 2.43% 2.44% 2.25% 2.17% 2.39% 2.55% 2.55%

SPECULATIVE LEASE ASSUMPTIONS

Leasing Fees 10%

Incentives

Office Gross 20.00% 20.00% 20.00% 20.00% 20.00% 20.00% 20.00% 20.00% 20.00% 20.00% 20.00%

Retail Gross 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%

Industrial Gross 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00%

Downtime

(months)

Office 12 12 12 12 12 12 12 12 12 12 12

Car Parking 12 12 12 12 12 12 12 12 12 12 12

Retail 9 9 9 9 9 9 9 9 9 9 9

Miscellaneous 9 9 9 9 9 9 9 9 9 9 9

Average Lease Term Reviews Renewal Probability

Office 5 3.50% 50%

Car Parking 5 3.50% 50%

Retail 5 3.50% 50%

Miscellaneous 0 0.00% 50%

CAPITAL EXPENDITURE SUMMARY

Tenant Improvements First Expiry

Further Expiries

Amount Comm. Date Duration Escalated Amount

Tenant Improvements - -

General Capex 96

Year 1 and 2 24 $0

TOTAL

As % of Capital Value

-

4.79%

27 Nov 2019

7 Dec 2017

$4,824,400

$4,024,400

$800,000

$175 psm

$175 psm

$129,103

$4,612,463

$4,741,566


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D C F IN P UT S

DISCOUNT RATE 8.00% TERM INAL YIELD 7.25%

ACQUISITION COSTS: 5.75% DISPOSAL COSTS: 1.05%

Stamp Duty 5.50% Legal Fees 0.25%

Legal Fees 0.25% Agent Fees 0.75%

M arketing Costs 0.05%

DISCOUNTED CASH FLOW

YEAR ENDING Nov-18 Nov-19 Nov-20 Nov-21 Nov-22 Nov-23 Nov-24 Nov-25 Nov-26 Nov-27

INCOME SUMMARY

Rental Income $8,285,508 $8,587,392 $8,878,520 $9,184,720 $9,420,259 $9,765,299 $10,239,150 $10,620,359 $10,991,857 $11,376,357

Plus Recoveries $1,717,153 $1,748,757 $1,787,269 $1,828,860 $1,835,144 $1,839,514 $1,877,294 $1,919,447 $1,965,095 $2,014,444

Less Total Outgoings $1,880,660 $1,911,002 $1,953,088 $1,998,538 $2,046,815 $2,095,832 $2,143,591 $2,191,724 $2,243,848 $2,300,196

Net Operating Income $8,122,001 $8,425,146 $8,712,702 $9,015,043 $9,208,588 $9,508,981 $9,972,853 $10,348,082 $10,713,105 $11,090,604

CAPITAL ADJUSTMENTS

Outstanding Incentives - - - - - - - - - -

Leasing Fees - ($2,199) - - - ($30,199) ($11,207) ($1,211) - -

Incentives on Vacancies - ($5,790) - - - ($148,724) ($52,546) - - -

Tenant Improvements ($3,824) - - - ($50,122) ($70,768) ($4,389) - - -

Scheduled Capex ($366,667) ($412,502) ($565,246) ($543,130) ($556,377) ($569,487) ($582,101) ($595,334) ($610,010) ($625,555)

Net Cash Flow $7,751,510 $8,004,655 $8,147,456 $8,471,913 $8,602,089 $8,689,803 $9,322,609 $9,751,537 $10,103,094 $10,465,049

PURCHASE CONSIDERATIONS SELLING CONSIDERATIONS

Valuation Date Terminal Sale Date

Purchase Price Sale Price

Stamp Duty (VIC) Legal Fees

Legal Fees Agent Fees

Marketing Costs

TOTAL TOTAL $135,234,000$123,410,325

30 Nov 20277 Dec 2017

$136,600,000

($341,500)

($1,024,500)

$6,368,450

$291,875

($68,300)

$116,750,000

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%


Inc. Capex 6.68% 6.90% 7.02% 7.30% 7.42% 7.49% 8.04% 8.41% 8.71% 9.02%

Exc. Capex 7.00% 7.26% 7.51% 7.77% 7.94% 8.04% 8.54% 8.92% 9.24% 9.56%

RUNNING YIELDS

D C F OUT P UT S

Discounted Terminal Value 51% of Total Value

NPV of Cashflows 49% of Total Value

Total Capital Value

Less Acquisition Costs

N et P resent Value Terminal Value Compound Growth

$62,607,872

$123,395,976

$6,660,325

$ 116,735,651 1.32% pa

$60,788,104


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We must emphasise that such analysis is entirely subjective and based upon current perceptions, which

during the course of time may not come to fruition. The analysis is conducted reflecting a range of parameters

based upon our interpretation of current market conditions.

It follows that future projections cannot be made with certainty and whilst the above comments appear

realistic, based upon current perceptions, Cushman & Wakefield cannot accept responsibility should any

projected outcome not eventuate. A multitude of events and circumstances may occur in the future which are

unforeseen and have significant impact on the value of property.

11.4 Direct Comparison

The Direct Comparison rate of our adopted value is considered to be within a reasonable market range of the

evidence and supported by our primary methods of value.

Direct Comparison

16,098 m² @ $7,100/m² $114,292,960

16,098 m² @ $7,250/m² $116,707,600

16,098 m² @ $7,400/m² $119,122,240

Adopt $116,700,000

$7,250/m²

A comparison of the subject property to the sales evidence is outlined in the following:



Subject Property




Rate $ psm Comparison


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11.5 Summary of Valuation Approaches

Our opinion of market value and resulting parameters as at the valuation date is as follows:

Valuation Date 07-Dec-17

Capitalisation Approach $115,250,000

Discounted Cash Flow Approach $116,750,000

Direct Comparison $116,700,000

Market Value $116,000,000

Weighted Average Lease Expiry (by Income) 10.62 years

Passing Initial Yield 6.61%

Equivalent Yield 6.71%

Internal Rate of Return (inc. Capex) 8.09%

Improved Value psm $7,206

11.6 Sales History

The property is currently under Contract for purchase at a price of $115,200,000. We consider this to be within

a reasonable market range and have adopted a rounded value of $116,000,000.We have requested the

Contract for Sale from the purchasers representative, Centuria Property Funds Limited which is not available

at the time of writing the valuation report.

We reserve the right to review our report should matters within the contract have a potential impact upon

value.

11.7 Selling Period & Marketability

In the event the property was offered for sale we consider it would meet with good demand, with an

anticipated selling period of approximately 3-5 months under current market conditions and subject to a

professional marketing campaign. Having regard to characteristics of the asset we expect the most likely

purchaser to be a Institutional investor.

11.8 Suitability for Mortgage Purposes

We consider the property to be suitable for first mortgage security purposes; however, it is for the lender to

assess the quantum of funds to be released.


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11.9 Lenders Endorsement

This valuation is prepared on the assumption that the lender as referred to in the valuation report (and no

other), may rely on the valuation for mortgage finance purposes and the lender has complied with its own

lending guidelines as well as prudent finance industry lending practices, and has considered all prudent

aspects of credit risks for any potential borrower, including the borrower’s ability to service and repay any

mortgage loan. Further, the valuation is prepared on the assumption that any such lender is providing

mortgage financing at a conservative and prudent loan to value ratio. This clause (Prudent Lenders Clause)

only applies if the lender is not a lender regulated by the Banking Act of 1959.

11.10 Insurance Estimate

The current reinstatement value of the improvements is defined as the cost of reconstructing the

improvements in compliance with current Building Codes and includes allowances for professional fees and

any additional costs which would normally be incorporated in the reinstatement of an insurance policy.

The recommended insurance value escalates the current reinstatement value by incorporating allowances to

cover, firstly, the likely cost increases during demolition, lead time and rebuilding periods, secondly the

estimated costs of demolition and debris removal in the event of a serious loss, and thirdly the likely cost

escalation during the currency of the policy year.

It must be noted that we do not profess to be quantity surveyors. This value has been determined on the basis

of information as contained within Rawlinsons Australian Construction Handbook and reference to other

industry sources. We have not been instructed to commission advice from a quantity surveyor in this regard

and therefore advise that the indicated value is an estimation only.

We therefore strongly recommend that advice from a quantity surveyor is commissioned in this regard prior to

any decision making process being completed.

This assessment does not include an allowance for loss in rent or emergency accommodation.

On this basis, the indicative recommended insurance value, exclusive of GST, is in the order of:

$90,000,000

11.11 Valuation Qualifications

Neither the whole nor any part of this valuation report or any reference to it may be included in any published

document, circular or statement without the written approval of Cushman & Wakefield (Valuations) Pty Ltd as

to the form and context in which it may appear.

Information has generally been obtained from a search of records and examination of documents or by

enquiry to Government Departments or Statutory Authorities. Where it is stated in the valuation report that

information has been supplied to us by another party, this information is believed to be reliable but we can

accept no responsibility if this should prove to be not so.

This valuation report has been prepared for the specific purpose stated. Any party that relies upon it for an

alternative purpose without reference to Cushman & Wakefield (Valuations) Pty Ltd does so at their own risk.

Where applicable, the valuation is conditional upon any lifts, hot and cold water systems, drainage systems,

electrical systems, air-conditioning or ventilating systems and other installations being in proper working order

and functioning for the purpose for which they were designed.

Solicitor Mortgage Funds

Cushman & Wakefield (Valuations) Pty Ltd and our insurance provider will not indemnify in respect of any

claim relating to any valuation of real property:


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For or on behalf of a Solicitor Lender or any person lending money through a Solicitor Lender; or for which

responsibility is accepted to any Solicitor Lender or any person lending money through a Solicitor Lender.

”Solicitor Lender” means any solicitor involved in arranging, controlling, managing, broking or otherwise

inducing the lending of money on mortgage security (including but not limited to any solicitor controlled or

managed mortgage fund) BUT shall not include any mortgage fund registered as a Managed Investment

Scheme.

Managed Investment Schemes

Cushman & Wakefield (Valuations) Pty Ltd and our insurance provider will not indemnify in respect of any

claim relating to a valuation of real property in connection with any Managed Investment Scheme (within the

meaning of the Corporation Law) which:

Has as its prime or substantial purpose, the provision of tax benefits to investors; or is involved in any form of

direct or indirect investment in primary production (including property used for primary production).

Assignment

Underwriters will not indemnify the Insured in respect of valuations carried out by the Insured where the

valuation is assigned to a third party without the specific written consent of the Valuer and in accordance with

the other Australian Property Institute Valuers Limited’s conditions of this Endorsement. No indemnity will be

granted under any circumstances for any assigned valuation older than 90 days (3 months).

Australian Property Institute Valuers Limited (APIV Limited)


Market Movement Clause

This valuation is current as at the date of valuation only. The value assessed herein may change significantly

and unexpectedly over a relatively short period of time (including as a result of general market movements or

factors specific to the particular property). Liability for losses arising from such subsequent changes in value is

excluded as is liability where the valuation is relied upon after the date of valuation.

Reliance on a Report by a lender-client must be reasonable in all the circumstances. The Valuer will not

assume any responsibility for reliance by the lender-client on the Report after the expiration of 90 days from

the date of valuation, or the expiration of what is considered to be a reasonable time, whichever is the lesser.

The Valuer does not warrant, guarantee and/or represent that the content of the Report will remain unchanged

for any period of time beyond the date of the Report and depending upon known and/or foreseeable facts that

might impact upon such value, such further time as maybe reasonable in all of the circumstances. The lender-

client should therefore review and consider the Report, regularly and frequently, before reliance.


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12 Valuation

We are of the opinion that subject to the overriding stipulations contained within the body of this report and to

there being no onerous restrictions or unusual encumbrances of which we have no knowledge, the Market

Value of the subject property, as at 07 December 2017, is:

Subject to the leases described herein

$116,000,000 - Exclusive of GST

(One Hundred and Sixteen Million Dollars)

This report is to be regarded as confidential to the below party(s) whom it is addressed and intended for the

use of these party(s) only and for no other use:

Centuria Property Funds No. 2 Limited (CPF2L) for Acquisition Purposes

Centuria Property Funds No. 2 Limited (CPF2L) as Responsible Entity to advise investors in the

proposed unlisted trust for Current Market Value purposes

Commonwealth Bank of Australia (CBA) for First Mortgage Security Purposes

Consequently and in accordance with current practice, no responsibility is accepted to any third party who

may use or rely on the whole or any part of its contents. Before the Report or any part of it is reproduced or

referred to in any document, circular or statement, our written approval as to the form and context of such

publication must be obtained.

Cushman & Wakefield (Valuations) Pty Ltd

John Waugh FAPI


Head of Valuation and Advisory, ANZ

Mars Njoo AAPI


Director - Valuation and Advisory Victoria

IMPORTANT NOTE: All data provided in this summary is wholly reliant on and must be read in conjunction with the

information provided in the attached report. It is a synopsis only designed to provide a brief overview and must not be

acted on in isolation.


JO B REF : 1 7 - 1 8 7 | APPEN DIC ES


Appendix 1: Letter of Instruction

1 December 2017

John Waugh John Waugh

Head of Valuation & Advisory

Cushman & Wakefield

Level 2, 1 O’Connell Street

SYDNEY NSW 2000

National Head of Valuation Services

DTZ

Level 6, 56 Pitt Street

SYDNEY NSW 2000

We confirm our instructions, on behalf of Centuria Property Funds Limited for you to prepare a market valuation of the property at 60 Brougham Street, Geelong, VIC for acquisition, first mortgage security and financial reporting purposes to be delivered by the agreed timeframe.

The current market valuation of the property will be used by:

1. Centuria Property Funds No.2 Limited (CPF2L) for acquisition purposes.

2. Centuria Property Funds No.2 Limited (CPF2L) as Responsible Entity to advise investors in the proposed unlisted trust of the current market value of the property.

3. Commonwealth Bank of Australia (CBA) for first mortgage security purposes.

The valuation is to be undertaken in accordance with the following agreed timetable:

1. Draft calculations to be provided to CPF2L by 7 December 2017.

2. Draft valuation reports including all calculations to be provided to CPF2L by 12 December 2017.

3. Final valuation reports will be provided by no later than 20 December 2017.

The valuation report should be in accordance with the Australian Property Institute Practice Standards and Guidance Notes, in accordance with Australian Accounting Standards Board accounting standards and the requirements of the CBA, which will be advised prior to the finalisation of the report. In addition, the valuation report is to include CPFL’s valuation Executive Summary contained in Schedule 1 of this letter.

We confirm that Cushman & Wakefield has no pecuniary interest that would create any conflict with the proper valuation of the property and this position will be maintained until the valuation is completed.

Dear John

Re: Valuation for Acquisition, Finance and Financial Reporting Purposes

60 Brougham Street, Geelong, VIC

We confirm your fee quote of $17,000 + GST to undertake this work, which will include the provision of a PDS Valuation letter. On completion of the Valuation report please submit your invoice to Centuria Property Funds Limited, PO Box 6274, North Sydney NSW 2060.

CPF2L requires a signed electronic version of the report. The signed original copies of the Valuation shall be addressed to the following:

1. Centuria Property Funds Limited for acquisition purposes.

2. Centuria Property Funds Limited as Responsible Entity for financial reporting purposes.

3. Commonwealth Bank of Australia for first mortgage security purposes.

Should you have any queries please don’t hesitate to contact the undersigned.

Yours sincerely

Victor Georos Head of Portfolio & Asset Management



Appendix 2: Certificate of Title

Register Search Statement - Volume 11029 Folio 247

Copyright State of Victoria. This publication is copyright. No partmay be reproduced by any process except in accordance with theprovisions of the Copyright Act 1968 (Cth) and for the purposes ofSection 32 of the Sale of Land Act 1962 (Vic) or pursuant to a writtenagreement. The information is only valid at the time and in the formobtained from the LANDATA REGD TM System. The State of Victoriaaccepts no responsibility for any subsequent release, publication orreproduction of the information.

REGISTER SEARCH STATEMENT (Title Search) Transfer of Land Act 1958--------------------------------------------------------------------------------VOLUME 11029 FOLIO 247 Security no : 124069564708Q

Produced 14/12/2017 12:14 pmLAND DESCRIPTION----------------Land in Plan of Consolidation 370737S.PARENT TITLES :Volume 03546 Folio 117 Volume 09394 Folio 788 Volume 09824 Folio 011Volume 11004 Folio 848Created by instrument PC370737S 19/09/2007

REGISTERED PROPRIETOR---------------------Estate Fee SimpleSole Proprietor

IMPACT FUNDS MANAGEMENT PTY LTD of 11 PRINCES STREET ST KILDA VIC 3182AL563723X 16/12/2014

ENCUMBRANCES, CAVEATS AND NOTICES---------------------------------MORTGAGE AL563724V 16/12/2014

NATIONAL AUSTRALIA BANK LTD

CAVEAT as to part AH271994B 03/06/2010CaveatorPOWERCOR AUSTRALIA LTDCapacity SEE CAVEATLodged byCITIPOWER PTYNotices toPOWERCOR AUSTRALIA LTD COMPANY SECRETARY of LEVEL 8 40 MARKET STREETMELBOURNE VIC 3000

Any encumbrances created by Section 98 Transfer of Land Act 1958 or Section24 Subdivision Act 1988 and any other encumbrances shown or entered on theplan set out under DIAGRAM LOCATION below.

AGREEMENT Section 173 Planning and Environment Act 1987AF315301Q 04/09/2007

DIAGRAM LOCATION----------------SEE PC370737S FOR FURTHER DETAILS AND BOUNDARIES

ACTIVITY IN THE LAST 125 DAYS-----------------------------

NIL

------------------------END OF REGISTER SEARCH STATEMENT------------------------

Additional information: (not part of the Register Search Statement)

ADMINISTRATIVE NOTICES----------------------NIL

eCT Control 16089P NATIONAL AUSTRALIA BANK LIMITED (59)Effective from23/10/2016

DOCUMENT END

Delivered from the LANDATA® System by SAI Global Property Division Pty LtdDelivered at 14/12/2017, for Order Number 48385087. Your reference: Valuations - Tony Seo.



Appendix 3: Plan of Consolidation

valuation report - centuria · 2018-01-11 · valuation as deemed appropriate. the subject property...

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