ING OFFICE FUND Annual Results Presentation 30 June 2005 CREATING - PowerPoint PPT Presentation

ING OFFICE FUND Annual Results Presentation – 30 June 2005 CREATING VALUE

ING REAL ESTATE Global update � Gable s Residential Trust – US$2.8 billion US multi family portfolio � Abbey Portfolio (UK) – £1.2 billion of diversified assets � Rodamco acquisition completed – €832 million platform in Asia � ING Real Estate FUM - $A86 billion CREATING VALUE PAGE 2

ING REAL ESTATE (AUSTRALIA) Increased investment offering Size Type ING Office Fund $2.0 b Listed ING Industrial Fund $1.9 b Listed ING Real Estate Community Living Fund $300 m Listed ING Real Estate Entertainment Fund $200 m Listed ING Retail Property Fund Australia $1.2 b Unlisted (wholesale) ING Real Estate Direct Office Fund $26 m Unlisted (retail) ING Real Estate Income Fund $16 m Unlisted (retail) CREATING VALUE PAGE 3

AGENDA � 12 months of value � Results � Portfolio summary � Office markets � Outlook & strategy CREATING VALUE PAGE 4

12 MONTHS OF VALUE CREATING VALUE PAGE 5

12 MONTHS OF VALUE Performed � Net profit 16% to $106.4m � EPU 5% to 10.85 cpu (normalised 1.7% to 10.51) � Retained earnings $6.3m to $8.5m � NPI 4.4% like for like � NTA 6 cents or 5% to $1.18 CREATING VALUE PAGE 6

12 MONTHS OF VALUE Returned 6 mths 12 mths 3 years* 5 years* IOF 0.2% 17.4% 11.2% 11.3% UBS Comm 200 -1.1% 19.9% 9.6% 11.3% Source: UBS * Annualised compound return CREATING VALUE PAGE 7

12 MONTHS OF VALUE Leased & asset managed Leased 74,866sqm, representing 16% of the portfolio & $19.5m of income � Repositioned 1 Adelaide Tce to lengthen WALE and diversify tenant base � Extended ATO at Box Hill for 7 yrs until 2014 � Secured Telstra & Air New Zealand over 9,564sqm at 151 Clarence Street � Achieved high retention and 10% NPI growth from Brisbane portfolio � Maintained long WALE at 5.4 years and high portfolio occupancy of 99% � CREATING VALUE PAGE 8

12 MONTHS OF VALUE Acquired Purchase price Yield Homer Building, Washington DC (50%) USD 105.2m 6.5% 1 Mitretek Systems HQ, Washington DC metro USD 92.8m 6.5% Computer Associates Plaza, Dallas metro USD 53.5m 8.0% Freehold interest – 347 Kent Street, Sydney AUD 29.3m 7.4% 1 minimum yield for first 3 yrs CREATING VALUE PAGE 9

RESULTS CREATING VALUE PAGE 10

RESULTS SUMMARY Net profit Jun 05 Jun 04 ($m) ($m) Net property income 151.6 131.8 Net interest (35.9) (31.4) RE fee (7.9) (7.6) Other costs (1.4) (1.2) Net profit 106.4 91.6 EPU (cents) 10.85 10.33 EPU normalised (cents) 10.51* 10.33 DPU (cents) 10.20 10.20 * Excludes $3.4m ATO lease termination at Cheltenham CREATING VALUE PAGE 11

RESULTS SUMMARY Key financials Jun 05 Jun 04 Total assets (look through) $2.05b $1.65b Gearing (look through) 40.5% 36.8% Retained earnings $8.5m $2.2m NTA (per unit) $1.18 $1.12 Units on issue 999.1m 901.9m No. of unitholders 30,873 32,657 Avg lease duration 5.4 yrs 5.6 yrs CREATING VALUE PAGE 12

RESULTS SUMMARY Revaluations June 2005 Previous Current Cap rate 900 Third Ave New York - 49% (USD) $114.7m $142.1m 6.4% 347 Kent Street Sydney* $168.0m $208.0m 7.0% 1 Adelaide Tce Perth $45.0m $47.0m 7.8% 151 Clarence Street Sydney $58.2m $68.0m 7.5% Revaluation increment of $45.7m on book values � Weighted average portfolio capitalisation rate 7.6% � *Freehold acquired on 30 November 2004 for $29.3m CREATING VALUE PAGE 13

RESULTS SUMMARY Earnings per unit 10.85 11.0 10.8 10.51 10.6 5.21 10.33 10.4 10.12 10.2 5.21 Cents 9.98 10.0 9.8 5.64 9.6 5.21 5.30 9.4 9.2 9.0 Jun-02 Jun-03 Jun-04 Jun-05 Jun-05 Normalised CREATING VALUE PAGE 14

PORTFOLIO SUMMARY New York 9% Washington DC 13% Dallas 3% Brisbane 13% Perth 3% Sydney 44% Canberra 5% Melbourne 16% CREATING VALUE PAGE 15

PORTFOLIO SUMMARY Average lease term (by income) 50% 44% Jun-04 Jun-05 45% 40% Short term expiry reduced � 32% 35% 30% Long term expiry improved � 25% 20% 1 6% 1 5% 1 5% 1 4% 1 3% 15% 1 1 % 1 0% 1 0% 8% 9% 10% 5% 1 % 1 % 0% Vacant FY06 FY07 FY08 FY09 FY10 FY10+ CREATING VALUE PAGE 16

PORTFOLIO SUMMARY – LEASING FOCUS Tenant Property FY06 FY07 FY08 White & Case Homer Building 2% AGL 111 Pacific Hwy 2% Dept Main Roads & Q-Build 295 Ann St 1% Various George St, Third Ave, Bourke St 2% ATO 40 Cameron Ave 3% AFP Royal Mint Centre 2% ATO Terrica Place 2% Zweig Advisors 900 Third Ave 1% MLC Campus MLC 4% DEST 16 – 18 Mort St 3% Kroll Associates 900 Third Ave 1% Jenner & Block Homer Building 1% Major expiries 7% 8% 9% Total expiries 8% 10% 14% CREATING VALUE PAGE 17

PORTFOLIO SUMMARY AUD interest rate hedging USD interest rate hedging 100% 7.0% 100% 5.0% 90% 90% 4.5% 80% 80% 6.5% 4.0% Average Hedged Cost of Fund Average Hedged Cost of Fund 70% 70% Percentage Debt Hedged Percentage Debt Hedged 3.5% 60% 60% 50% 6.0% 50% 3.0% 40% 40% 2.5% 30% 30% 5.5% 2.0% 20% 20% 1.5% 10% 10% 0% 5.0% 0% 1.0% Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 % of Debt Hedged Hedged Rate % of Debt Hedged Hedged Rate 95% hedged for average of 2.3 yrs @ 5.9% 96% hedged for average of 3.3 yrs @ 3.8% � � CREATING VALUE PAGE 18

PORTFOLIO SUMMARY USD FX hedging Jun 05 – Income hedging USD Jun 09 Jun 10 Jun 08 Avg forward FX rate 0.66c 0.67c 0.70c % of forecast revenue 100% 100% 100% hedged CREATING VALUE PAGE 19

OFFICE MARKETS CREATING VALUE PAGE 20

OFFICE MARKETS - GLOBAL Real yields for 10-yr bonds and office property Low inflation expectations a � Real 10-yr bond 5.0% key driver of low bond rates 4.5% Real office property net yields 4.0% 3.5% Net office yields offer attractive � 3.0% spread to bonds in most major 2.5% markets 2.0% 1.5% 1.0% 0.5% 0.0% EURO UK Australia US Japan Canada Source: ING Real Estate Note: Real returns are calculated by subtracting financial market implied 10-yr inflationary expectations. JPN inflation est. normalised. CREATING VALUE PAGE 21

OFFICE MARKETS - GLOBAL After cost unleveraged v leveraged yields Large variation in leveraged yields Unleveraged yield � 10% Leveraged yield assuming 60% debt across major office markets 9% 8% Leveraged yields most attractive in � 7% Europe, Canada, Japan & USA; 6% least in UK & AUS 5% 4% 3% 2% 1% 0% UK AUS USA CAN JPN EURO Source: ING Real Estate Note: Leveraged returns use 5 year swap rate plus margins CREATING VALUE PAGE 22

OFFICE MARKETS - AUSTRALIA Unemployment rate Natural rate of unemployment Unemployment rate 14% Unemployment rate of 5.0% lowest in 30 � years 12% Output gap in labour market 10% Reductions in U/E rate primarily in blue � 8% collar sector; little change in white collar 6% 4% Increased productivity and decreased � 2% WSR mean business at full capacity 0% Jan-79 Jan-81 Jan-83 Jan-85 Jan-87 Jan-89 Jan-91 Jan-93 Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Source: ABS, Borland and Kennedy (1998), Crosby and Olekalns (1996), Westpac Economics & ING Real Estate CREATING VALUE PAGE 23

OFFICE MARKETS - AUSTRALIA Face rental growth outlook Rental growth Incentives 3 yrs* Jun 05* Sydney 3.0% 25 – 30% North Sydney 1.0% 30 – 35% Melbourne 2.5% 20 – 25% Brisbane 7.5% 10 – 20% Canberra 2.5% 10 – 15% Avg 3.5% 20 - 25% Moderate face rental growth expected for most markets � Better effective rental growth expected � Source: ING Real Estate * average annual compound growth rate and gross face incentives CREATING VALUE PAGE 24

OFFICE MARKETS - US GDP and job growth ‘Jobless recovery’ has now � 10% passed 8% Job growth to accelerate 6% � Real GDP Growth office market recovery 4% 2% 0% Productivity Growth -2% Job Growth -4% 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 Source: Economy.com CREATING VALUE PAGE 25

OFFICE MARKETS - US YoY change in vacancy National ave. Washington DC New York 8.0% Office sector vacancy showing � 6.0% continued downward momentum 4.0% Dec-03 National ave. 2.3% to 14.7% � 2.0% 0.0% Washington DC 3.5% to 9.8% � -2.0% New York 1.9% to 8.4% � -4.0% Dec-00 Mar-01 Jun-01 Sep-01 Dec-01 Mar-02 Jun-02 Sep-02 Dec-02 Mar-03 Jun-03 Sep-03 Dec-03 Mar-04 Jun-04 Sep-04 Dec-04 Mar-05 Jun-05 Source: Torto Wheaton CREATING VALUE PAGE 26

OFFICE MARKETS - US Cap rates and face rental growth outlook Rental growth Avg cap rate 3 yrs* New York 5.5% - 6.5% 5.6% Washington DC 5.5% - 6.5% 5.0% Chicago 6.0% - 7.0% 2.1% LA 5.5% - 6.5% 4.0% Boston 6.5% - 7.5% 4.5% Dallas 6.5% - 7.5% 1.0% Total return outlook most attractive in New York, Washington DC, LA and Boston � Source: ING Real Estate * Average annual compound growth rate CREATING VALUE PAGE 27