127 Creek Street - Knight Frank Marketing Submission

CREEK STREET MARKETING SUBMISSION

THE KNIGHT FRANK DIFFERENCE Knight Frank provides a unique focus and attention to detail to each campaign, allowing us to achieve the greatest possible results for our clients. When marketing our client’s assets domestically and offshore, we are committed entirely on one major asset during any sales campaign. This approach enables us to provide the best agency service in our market, and has produced outstanding results.

Collective Team Approach Knight Frank has a long standing history with 127 Creek Street spanning long before 151 Property’s acquisition. With professional direction from 151 Property, both our Management and Leasing teams have worked collaboratively to produce the outstanding institutional-grade Asset that stands today. These capable teams along with the proven recent successes of our Institutional Sales team, reinforces our absolute focus to every campaign and further illustrates our ability to effectively manage and drive aggressive pricing for 127 Creek Street.

The ability for Knight Frank to work as one collective team will prove to be critical through the sale process, outlining capital expenditure works with confidence, the high retention rates of existing and expanding tenants, and the genuine effective rental growth achieved in a challenging leasing market.

We are honored to have the opportunity to complete 151 Property’s vision by managing a professional marketing campaign to achieve an exceptional divestment outcome.

YOUR CORE SALES TEAM The Knight Frank Queensland Institutional Sales Team led by Justin Bond and Ben McGrath, have been instrumental in setting benchmarks for major CBD and near city office sales in Brisbane over the past 3 years. Justin, Ben and Neil Brookes will work exclusively for you throughout the entire marketing period to ensure 127 Creek Street is given the attention it deserves. None of our competitors can give you this assurance and commitment from its most senior resources.

PROJECT TEAM LEADERS JUSTIN BOND Senior Director | Institutional Sales

BEN MCGRATH Senior Director | Institutional Sales

160 Ann Street $119.5M | 520 Wickham Street $119M 324 Queen Street $132M | 300 Queen Street $188M 215 Adelaide Street $224M | 70 Eagle Street $122.7M

520 Wickham Street $119M | 324 Queen Street $132M 300 Queen Street $188M | 215 Adelaide Street $224M 270 George Street $318M | 12 Creek Street $241.5M

NEIL BROOKES Head of Capital Markets | Asia Pacific

INTERNATIONAL MARKETING TEAM PAUL HART Executive Director Hong Kong

ALAN LIU Managing Director China

IAN LOH Head of Capital Markets Singapore

JAMES BUCKLEY Executive Director Malaysia

ANDREW SIM Partner UK & Europe

STRATEGIC PROJECT SUPPORT PATRICK KELLY Senior Property Manager

01

MARK CROSLAND Senior Analyst

LEANNE EDWARDS Project Assistant

JAMIE NASON Associate Director, Office Leasing

SALES STRATEGY TO MAXIMISE PRICING Knight Frank’s recommendations, capabilities and refined marketing strategies are designed to create the most competitive bidding environment. This process enables us to position the Asset in the best possible manner to maximise buyer participation. The process will also ensure full involvement of aggressive bidders in order to drive pricing with both domestic and international buyers.

Our approach for the formal Marketing Campaign will be structured around the following:

GENUINE ENGAGEMENT WITH OVERSEAS BUYERS Our most recent and highly successful sales campaigns including 160 Ann Street, 520 Wickham Street, 324 Queen Street and 300 Queen Street, all resulted in extensive participation from overseas investors, which noticeably drove pricing higher. By focusing on this buyer group and having them heavily participate in the process we will maximise domestic and international competition.

INTERNATIONAL PRESENTATIONS Knight Frank has extensive relationships with offshore investment groups. We are globally known for our ability to service Global Institutions and High Net Worth individuals. Direct presentations in Asia will allow the Core Sales Team, who know the Asset and local market better than anyone, to effectively sell Brisbane’s diverse economy and compelling growth prospects. Justin and Ben, will accompany Neil Brookes (who is based full time in Singapore) on all targeted presentations throughout Asia.

RENTAL UPLIFT Knight Frank’s Leasing team knows the Asset’s strong leasing history extremely well, having secured the majority of leases in the building over recent years. Although recent leasing successes within the Asset have averaged $585-625/sqm, our strategy is to utilise our Office Leasing team during presentations and inspections to argue with strong conviction that the rebounding market rental parameters are in the order of $625-650/sqm (gross) moving forward. This strategy proved to be extremely effective in driving the Market Net Income and in turn the end value for our recent major CBD sales.

ABILITY TO NAVIGATE PERCEIVED RISKS We are highly experienced operators with the proven ability to successfully manage assets with minor and major investment risks. Our extensive market knowledge and aptitude for real estate investment will ensure any perceived risks in the asset will be strategically analysed and presented as genuine opportunities, supported by the Asset’s knowledgeable Knight Frank Management and Leasing teams.

BENCHMARK THE UPWARD TREND OF RECENT SALES We will adopt a similar strategy to that which we implemented in our most recent highly successful sales. We will utilise the upward trend of recent Brisbane sales to benchmark an attractive yield attraction for 127 Creek Street.

AGGRESSIVE PRICING ADVICE We know the importance of maintaining an extremely clear marketing message throughout the duration of the campaign. The recent success we have achieved at well above market values, was based on our ability to aggressively up-sell the investment fundamentals and confidently defend our DCF modelling. Our goal is to exceed your expectations by driving aggressive, but defendable pricing for this compelling investment opportunity.

VALUATION SUPPORT The ability to achieve an above market price will only occur with support from key stakeholders in this process.

Justin’s close relationships with the key Brisbane Valuers and his proven ability to lobby, with sound justification, for full valuation support, will prove to be a fundamental element in the closing stages of this transaction.

DEBT FUNDING Despite a common perception, no major concerns have surfaced during our recent major sales with both domestic and foreign investors in terms of securing debt. We have great relationships with multiple financiers who will prepare term sheets that we will present to prospective buyers.

02

STRATEGIC PROCESS & TAILORED MARKETING We recommend the Asset should be formally offered For Sale via a highly competitive International Expressions of Interest (EOI) process. The familiar EOI process continues to draw aggressive offers from offshore groups, forcing domestic parties to become more competitive. Implementing a straightforward 2nd (and 3rd) round also maintains the vital momentum required to achieve the best price.

Knight Frank will adopt a three phase campaign process to successfully carry out this important marketing strategy, which has proven very successful in our recent campaigns.

PHASE 1

PHASE 2

PHASE 3

QUALITY PREPARATION

GLOBAL MARKETING CAMPAIGN

CLOSING THE TRANSACTION

• High Quality Marketing Material • Online & Digital Marketing Medium • Transaction Risk Mitigation • Accurate Financial Modelling • Vendor Due Diligence Report • Comprehensive Data Room Information • Valuer Engagement • Finance Engagement - Term Sheets

• Domestic and International Investment Presentations • Knight Frank’s Global Database • Local Market Education (Leasing & Research) • Undertake Inspections • Buyer & Sales Support (Valuation, Finance & Legal Introductions) • Vendor Reporting

• Strict Pricing Advice • Maintain a Clear Message • Professional Analysis of Bids & Agency Advice • Second/Third Round Bids • Manage Due Diligence Process • Liaise with appointed consultants • Valuation & Contract Negotiations

MARKETING BUDGET Our marketing strategy requires targeted and high quality marketing mediums to ensure the widest possible purchaser base is made aware of this quality and significant investment. Our marketing proposal allows for a marketing budget of $66,646.94 excluding GST. We have attached an indicative marketing budget outlining all suggested marketing mediums as Annexure 1 to this submission.

We are happy to discuss and tailor to 151 Property’s requirements during campaign preparation.

CAMPAIGN TIMING

Exchange of Contracts

Assuming Knight Frank is appointed by the 18th August, we propose a five (5) week International EOI campaign with the following key dates:

Expressions of Interest Close Launch International Presentations

start

11 Sep 2017

23 Oct 2017 14 Sep 2017

4 weeks

31 Oct 2017

29 Nov 2017

Completion

(Subject to FIRB)

Settlement

Agree Terms & Enter Due Diligence

Launch Formal Campaign

We recommend commencing the campaign as soon as possible to ensure school holidays do not impact the commencement and closing dates of the campaign. This will promote marketing momentum and minimises the threat of potential competing stock entering the market.

03

PRICING ADVICE Given our proven ability in setting compelling benchmarks for the most recent inner-city sales, we are confident that 127 Creek Street will achieve a sale price in the ranges below, however we will never place a price ceiling on the property. The Asset’s financials have been reviewed by the Knight Frank Management Team. Our pricing assumes rental support is provided for twelve months over all current vacanies.

Sales Rate NLA ($/m²) $11,664 $7,422

$7,825

$8,120

$9,341

$8,186

$9,709 $7,310

$8,594

$9,958 $7,695

$6,645

$5,667

ADOPTED PRICING These are gross prices where the Vendor may make adjustments or pay out outstanding rebates and incentives upon settlement.

Market Price

Stretch Price

$132M 6.65%EY $7,203/sqm

$136M 6.47%EY $7,422/sqm

Pricing as at 1 October 2017

127 Creek 160 Ann 520 120 Street Street Wickham Edward Street Street

50 Ann Street

Energex Building

307 Queen Street

505 St Paul's Terrace

324 Queen Street

300 Queen Street

313 Adelaide Street

1 Eagle Street

215 Adelaide Street

6.73%

7.04%

6.85%

7.03%

300 Queen Street

313 Adelaide Street

1 Eagle Street

215 Adelaide Street

Equivalent Yield (%) 7.96% 6.47%

5.97%

6.18%

6.33%

6.15%

127 Creek 160 Ann 520 120 Street Street Wickham Edward Street Street

50 Ann Street

Energex Building

7.24%

6.81% 5.43%

307 Queen Street

505 St Paul's Terrace

324 Queen Street

The key to maximising pricing is to target the most aggressive capital by illustrating the Asset’s impressive investment fundamentals. An exceptional price will be achieved by implementing our proven ability to benchmark the upward trend of recent and comparable sales.

We have outlined the most recent major Brisbane investment sales, reinforcing the increased attraction to quality investment assets in Brisbane’s inner-city.

COMPARABLE SALES EVIDENCE - BRISBANE Sale Date

Address

Sale Price

NLA (m²)

Sale Rate ($/m²)

Equivalent Yield

Initial Yield

IRR

WALE (yrs)

Aug-17

160 Ann Street

$119,500,000

15,271

$7,454

5.97%

5.80%

6.90%

9.4

Jul-17

520 Wickham Street

$119,149,000

14,673

$8,120

6.18%

5.70%

7.68%

5.8

May-17

120 Edward Street

$142,650,000

15,271

$9,341

6.15%

5.91%

7.51%

3.5

Apr-17

50 Ann Street

$144,620,000

25,519

$5,667

7.96%

7.07%

7.63%

3.6

Apr-17

Energex Building Nundah

$106,250,000

12,980

$8,186

6.33%

6.91%

6.24%

9.5

Feb-17

307 Queen Street

$142,150,000

19,419

$7,310

6.81%

7.18%

7.77%

3.2

Jan-16

505 St Pauls Terrace

$205,500,000

17,618

$11,664

5.43%

6.46%

4.73%

10.5

Oct-16

324 Queen Street

$132,000,000

19,864

$6,645

7.24%

7.30%

7.93%

3.0

Jun-16

300 Queen Street

$188,000,000

19,364

$9,709

6.73%

7.54%

7.70%

4.4

Oct-15

313 Adelaide Street

$125,400,000

14,592

$8,594

7.04%

7.25%

7.60%

4.0

Sep-15

1 Eagle Street

$592,000,000

59,448

$9,958

6.85%

6.48%

8.75%

4.0

Jul-15

215 Adelaide Street

$224,000,000

29,110

$7,695

7.03%

6.94%

8.26%

4.3 04

WE KNOW THE MARKET INVESTOR & CAPITAL DEMAND Knight Frank’s global research report, Active Capital 2017, examined capital flows across the globe and confirmed that Australia is high on the radar for global investors - who are searching the globe for yield in this low-return environment. While Sydney has was initially the focus of offshore investment, accounting for 45% of inflows for 2016 and 2017, the markets of Melbourne (32%) and increasingly Brisbane (10%) are providing better opportunities for offshore buyers and are increasingly attracting offshore capital.

Investor interest has continued to build in the Brisbane CBD market as the Sydney and Melbourne CBD’s are recording ever-lower yields, with Brisbane offering an increased 133bps return spread on average. Positioned as a market for growth and the additional certainty that the leasing market has bottomed in the Brisbane CBD, is providing impetus to the investment market that there may be a time limit to purchase Brisbane assets to fully benefit from the expected recovery in tenant demand. Offshore investors accounted for 40% of transactions by value in the past year, second only to unlisted funds and syndicates which were strong buyers at 50% of activity by value.

Knight Frank has an expansive knowledge of the target investors and is continually in touch with investors across the country and overseas.

Due to our recent and comparable marketing campaigns in the Brisbane investment market, we know the most active and aggressive purchasers seeking quality stablised asset such as 127 Creek Street. We have provided the following targeted lists of domestic and foreign investor groups that we believe will have a genuine interest in purchasing 127 Creek Street.

TOP TARGET PURCHASERS

PURCHASER PROFILES 16/17 – BRISBANE CBD

Domestic Groups

Foreign Groups

• • • • • • • • • • • • • •

• • • • • • • • • • • • • •

Abacus AMP Cape Bouvard Challenger (Manager) Charter Hall Corval (Manager) Dexus Fife Capital (Manager) Fortius (Manager) Investec LaSalle Investment Management (Manager) Lederer Group Primewest Sumner Capital

INVESTMENT OF GLOBAL CAPITAL INTO BRISBANE OFFICE AU$2.2 Billion past 3 years

CAPITAL INTO AUSTRALIAN PROPERTY FROM ASIA PACIFIC REGION

Developer 2%

Ascendas Deutsche Asset Management Fort Street GIC Hines Hui Xian REIT Keppel Capital (Alpha Investment) M&G Millinium Inmark Patrizia Riant Capital Rockworth Soilbuild WT Funds Management

Unlisted/ Syndicate 50%

AREIT 6%

Private Investor 2%

Offshore 40%

UNITED STATES

SINGAPORE

CANADA

GERMANY

SOUTH KOREA

MALAYSIA

CHINA

HONG KONG

HONG KONG

MALAYSIA

SOUTH KOREA

JAPAN

29% 21% 18% 12% 7% 6% 5% 2%

AU$30.7 Billion past 3 years CHINA

SINGAPORE

43% 34% 10% 5% 4% 4%

05

Source: Knight Frank Research/RCA

TRACK RECORD - EXCEEDING EXPECTATIONS The approach Knight Frank takes to each campaign is thorough and solely focused to achieve the best possible price for our clients. The following transactions are some of our most recent comparable campaigns that have achieved results well above our client’s expectations.

160 ANN STREET, BRISBANE

11% $119.5M EY: 5.97%

324 QUEEN STREET, BRISBANE

7% $132M EY: 7.24%

215 ADELAIDE STREET, BRISBANE

20% $224M EY: 7.03%

35 BOUNDARY STREET, SOUTH BRISBANE

11%

520 WICKHAM STREET, BRISBANE

8% $119M

EY: 6.18%

300 QUEEN STREET, BRISBANE

11% $188M

EY: 6.73%

70 EAGLE STREET, BRISBANE

12% $122.7M EY: 6.14%

$51.2M EY: 6.99%

*Indicates percentage above clients initial book values

06

FEE PROPOSAL EXCLUSIVE AGENCY

CONFLICTS

If Knight Frank is appointed as your Exclusive Agent, we propose a base fee of 0.5% (+GST) of the gross sale price of the property.

We further propose a performance based fee of 5% above an agreed benchmark.

We confirm that we have no conflicts of interest or similar appointments that will hinder us achieving the maximum result for 151 Property. If a perceived conflict arises we will immediately bring this to your attention. We are completely dedicated to working extremely hard to successfully divest 127 Creek Street.

JOINT AGENCY

We will deliver the Knight Frank Difference.

Although Knight Frank is capable of effectively representing 151 Property as a single Exclusive Agent, we respect your right to appoint Joint Agents. As such we propose a base fee of 1.0% to be shared equally between the joint agencies and propose a performance based fee above an agreed benchmark, also to be shared equally between both agencies.

COMPETING CAMPAIGNS We are aware that the following Assets may be brought to the market in the next 6 months.

• 30 Makerston Street (Campaign date unconfirmed, 3-6 months) • 150 Charlotte Street (Currently on-market) • We are also aware 333 Ann Street was recently in due diligence (not completing). This Asset may be brought to market but there is no confirmation at this point in time.

100% COMMITMENT TO EXCEEDING YOUR EXPECTATIONS.

Appendices Marketing Budget Global NETWORK

ANNEXURE 1- MARKETING BUDGET CAMPAIGN ESTIMATE CONTACT: JUSTIN BOND / BEN MCGRATH CLIENT: 151 PROPERTY Listing Agent - Justin Bond PO Number - QLD-BR-1052 Date - 02/08/2017 IMPORTANT NOTE: This is an estimate only and may be subject to alteration

CAMPAIGN INFORMATION Project Name - 127 Creek Street Property Address - 127 Creek Street, Brisbane, QLD 4000 Type of Offering - For Sale

MEDIA BOOKINGS PUBLICATION

DESCRIPTION

QUANTITY

COST

The Australian - Prime Space

The Australian - m 6x6 Half Page

1

$5,925.75

AFR + DRX + CRE Bundle

Inclusions:

1

$19,321.19

Financial Review - 19x7 Half Page Financial Review - 19x7 Half Page Fairfax Digital DRX 1,998 clicks Commercialrealestate.com.au 13 weeks PLATINUM zone 2A

SUPPORT MARKETING ITEMS

DESCRIPTION

QUANTITY

COST

Miscellaneous

eBrochure Database & Design (complimentary)

1

$0.00

Miscellaneous

Information Memorandum (Professional Design / Print)

1

$8,000.00

Miscellaneous

Interactive 360O Asset Photography (Virtual Tour)

1

$2,200.00

Miscellaneous

International Presentations

1

$15,000.00

Miscellaneous

KnightFrank.com Listing (complimentary) Online

1

$0.00

Miscellaneous

Asset Website

1

$5,000.00

Miscellaneous

Photography

1

$1,200.00

Miscellaneous

Press Editorial Coverage (PR) (complimentary)

1

$0.00

Miscellaneous

Professional Marketing Video

1

$10,000.00

SUBTOTAL

$66,646.94

GST AMOUNT

$6,664.69

TOTAL

$73,311.63

ANNEXURE 2 - ENGAGING OUR GLOBAL NETWORK Continental Europe The Americas United Kingdom

16 Countries Austria / Belgium / Cyprus Czech Republic / France Germany / Ireland / Italy / Monaco The Netherlands / Poland / Portugal Romania / Russia / Spain Switzerland

15 Countries Argentina / Brazil Canada / Chile / Colombia Costa Rica / Dominican Republic Mexico / Peru Puerto Rico / The Caribbean (4) USA

85 2,145 OFFICES

PEOPLE

80 1.035 OFFICES

PEOPLE

169 5,475 OFFICES

3 50

PEOPLE

OFFICES

PEOPLE

23 700 OFFICES

58 5,615 OFFICES

PEOPLE

PEOPLE

The Middle East 2 Countries The Kingdom of Saudi Arabia The United Arab Emirates

Africa Asia Pacific 10 Countries Botswana / Kenya / Malawi Nigeria / Rwanda / South Africa Tanzania / Uganda / Zambia Zimbabwe

NEIL BROOKES Head of Capital Markets | Asia Pacific

“ CONNECTING THE WORLD TO AUSTRALIAN CAPITAL MARKETS”

14 Countries Australia / Cambodia China / Hong Kong India / Indonesia Japan / Malaysia New Zealand / Philippines Singapore / South Korea Taiwan / Thailand

JUSTIN BOND Senior Director Institutional Sales E Justin.Bond@au.KnightFrank.com D +61 7 3246 8872 M +61 410 485 636

BEN MCGRATH Managing Director Queensland

NEIL BROOKES Head of Capital Markets Asia Pacific

E Ben.McGrath@au.knightfrank.com D +61 7 3246 8814 M +61 438 112 192

E Neil.Brookes@asia.knightfrank.com D +65 6429 3585 M +65 83 094 985

Knight Frank Australia Pty Ltd Level 3, 12 Creek Street Brisbane QLD 4000 Australia www.knightfrank.com.au