Colonial First State Property Trusts - First State Investments

Colonial First State Property Limited ACN 006 464 428 

Colonial 

First State 

Property Trusts 

Notices of Meeting and 

Explanatory Memorandum 

• • • • • • • • 

Comprising the following trusts: 

Colonial First State Industrial Property Trust 

Colonial First State Commercial Property Trust 

Colonial First State Retail Property Trust 

Colonial First State Development Trust 

This document is important. 

If you do not understand it or are in any doubt about the action to be taken, you should consult 

your stockbroker, accountant, investment adviser or other professional adviser immediately. 

Colonial First State Property Limited 

ACN 006 464 428 

in its capacity as the Manager of the Trusts 

The Notices of Meeting and Explanatory Memorandum are dated 13 November 1999

Contents 

Page 

1 Notices of Meeting 1 

2 Action Required By Unitholders 5 

3 Explanatory Memorandum 6 

4 Property Portfolio and Market Overview 13 

5 Financial Information 49 

6 Voting & Eligibility 64 

7 Experts’ Reports 66 

8 Trust Deed Amendments 151 

9 Additional Information 156 

10 Glossary 159 

Key Dates 

Last day for lodgement of Proxy Forms 15 December 1999 

Last day for receipt of Election Forms 

(unitholders elect to receive the 

Cash Alternative or Colonial First State 

Property Trust Group Securities) 15 December 1999 

Last day of trading in existing units (1) 16 December 1999 

Meetings of unitholders of 

Colonial First State Retail Property Trust, 

Colonial First State Industrial Property Trust, 


and Colonial First State Development Trust 17 December 1999 

Trading of Colonial First State Property 

Trust Group Stapled Securities commences (2) 20 December 1999 

Announcement of Bookbuild Price 7 February 2000 

(1) Assuming Merger Proposal proceeds. 

(2) Estimate only – will only occur if Merger Proposal proceeds. 

Colonial First State Property Limited (ACN 006 464 428) is the manager of each of the Trusts. Permanent Trustee Australia Limited is the 

trustee of Colonial First State Retail Property Trust, Colonial First State Industrial Property Trust and Colonial First State Commercial Property 

Trust whilst Perpetual Trustee Company Limited is the trustee of Colonial First State Development Trust. 

An investment in the Stapled Securities of the Trusts does not represent a deposit or other liability of Colonial State Bank or any other 

member of the Colonial Group. The investment is subject to investment risk which can include delays in repayment, loss of income and the 

loss of the principal invested. None of Colonial First State Property Limited, Colonial State Bank or any member of the Colonial Group, 

guarantees the performance of the Trusts, the repayment of capital or the payment of a particular return on the Stapled Securities. 

Permanent Trustee Australia Limited and Perpetual Trustee Company Limited ("Trustees") were not involved in the preparation of any part of 

this document. The Trustees have not issued this document. The role of each Trustee has been limited to reviewing the relevant Notice of 

Meeting and Explanatory Memorandum to ensure that they contain a summary of information relating to the matters to be considered at 

the meeting of unitholders and the resolutions to be put at the meeting of which they are aware that is relevant to the decision of the 

unitholders on how to vote at the meeting. In all other respects in relation to the Notices of Meeting and Explanatory Memorandum, the 

Trustees have relied upon information provided by Colonial First State Property Limited, the Manager of the Trusts.

1. Notice of Meeting 

of Colonial First State Retail Property Trust 

Notice is given that a meeting of the unitholders of the Colonial First State Retail Property Trust (the ‘Trust’) will be held at 

the offices of Mallesons Stephen Jaques, Level 60, Governor Phillip Tower, 1 Farrer Place, Sydney on 17 December 1999 

commencing at 10am. 

Business 

The business of the meeting will consist of the following: 

Appointment of the Chairperson 

To appoint a person to act as Chairperson of the meeting in accordance with section 1069C(1) of the Corporations Law. 

Approval of Merger Proposal 

Resolution 1: Approval of Merger Proposal 

To consider and, if thought fit, pass an Ordinary Resolution on the following terms: 

‘That the Trustee and Manager are authorised to proceed with the Merger Proposal as described in the Explanatory 

Memorandum (‘Explanatory Memorandum’) that accompanies the Notice of Meeting dated 13 November 1999 

(‘Notice of Meeting’) and to do all things necessary or appropriate to implement the Merger Proposal.’ 

Approval of Issue of Units 

Resolution 2: Approval of Issue of Units in the Trust 

To consider and, if thought fit, pass a Special Resolution on the following terms: 

‘That, subject to Resolution 1 and Resolution 3 set out in the Notice of Meeting being duly passed, and subject to 

unitholders in the Trust being contemporaneously issued units in each of Colonial First State Industrial Property Trust, 

Colonial First State Commercial Property Trust and Colonial First State Development Trust at a price of $0.01 per unit and 

in the ratios set out in the Explanatory Memorandum, the following issues of units in the Trust be and are hereby approved: 

(i) the issue of up to 174,400,000 units in the Trust at a price of $0.01 per unit to unitholders in Colonial First State 

Industrial Property Trust; 

(ii) the issue of up to 148,290,000 units in the Trust at a price of $0.01 per unit to unitholders in Colonial First State 

Commercial Property Trust; and 

(iii) the issue of up to 72,830,000 units in the Trust at a price of $0.01 per unit to unitholders in Colonial First State 

Development Trust.’ 

Approval of Amendments to the Trust Deed 

Resolution 3: Approval of Amendments to the Trust Deed of the Trust 


‘That, subject to Resolution 1 and Resolution 2 set out in the Notice of Meeting being duly passed, the Trust Deed of the 

Trust be amended as described in Section 8 of the Explanatory Memorandum with such changes and additions (if any) as 

may be required by the Australian Securities and Investments Commissions (‘ASIC’) or Australian Stock Exchange Limited 

or as may be considered appropriate by the Trustee or Manager and the Trustee and the Manager are authorised and 

directed to execute a Supplemental Deed and to lodge the Supplemental Deed with ASIC to give effect to the amendments.’ 

Michelene Hart 

Company Secretary 

Colonial First State Property Limited (ACN 006 464 428) 

13 November 1999 

Information on Voting and Proxies 

For information on voting and proxies, please refer to Section 6 of this booklet. 

1


of Colonial First State Industrial Property Trust 

Notice is given that a meeting of the unitholders of the Colonial First State Industrial Property Trust (the ‘Trust’) 

will be held at the offices of Mallesons Stephen Jaques, Level 60, Governor Phillip Tower, 1 Farrer Place, Sydney on 

17 December 1999 commencing at 10am. 

Business 









(‘Notice of Meeting’) and to do all things necessary or appropriate to implement the Merger Proposal.’ 





unitholders in the Trust being contemporaneously issued units in each of Colonial First State Retail Property Trust, Colonial 

First State Commercial Property Trust and Colonial First State Development Trust at a price of $0.01 per unit and in the 

ratios set out in the Explanatory Memorandum, the following issues of units in the Trust be and are hereby approved: 

(i) the issue of up to 190,410,000 units in the Trust at $0.01 per unit to unitholders in Colonial First State Retail 

Property Trust; 

(ii) the issue of up to 148,290,000 units in the Trust at $0.01 per unit to unitholders in Colonial First State 

Commercial Property Trust; and 

(iii) the issue of up to 72,830,000 units in the Trust at $0.01 per unit to unitholders in Colonial First State 






Trust be amended as described in Section 8 of the Explanatory Memorandum with such changes or additions (if any) as 

may be required by the Australian Securities and Investments Commission (‘ASIC’) or Australian Stock Exchange Limited 

or may be considered appropriate by the Trustee or Manager and the Trustee and the Manager are authorised and directed 

to execute a Supplemental Deed and to lodge the Supplemental Deed with ASIC to give effect to the amendments.’ 







2


of Colonial First State Commercial Property Trust 

Notice is given that a meeting of the unitholders of the Colonial First State Commercial Property Trust (the ‘Trust’) will be 

held at the offices of Mallesons Stephen Jaques, Level 60, Governor Phillip Tower, 1 Farrer Place, Sydney on 17 December 

1999 commencing at 10am. 

Business 









(‘Notice of Meeting’) and to do all things necessary or appropriate to implement the Merger Proposal’. 






First State Industrial Property Trust and Colonial First State Development Trust at a price of $0.01 per unit and in the 

ratios set out in the Explanatory Memorandum, the following issues of units in the Trust be and are hereby approved: 

(i) the issue of up to 190,410,000 units in the Trust at $0.01 per unit to unitholders in Colonial First State 

Retail Property Trust; 


Industrial Property Trust; and 

















3


of Colonial First State Development Trust 

Notice is given that a meeting of the unitholders of the Colonial First State Development Trust (the ‘Trust’) will be held at 

the offices of Mallesons Stephen Jaques, Level 60, Governor Phillip Tower, 1 Farrer Place, Sydney on 17 December 1999 

commencing at 10am. 

Business 









(‘Notice of Meeting’) and to do all things necessary or appropriate to implement the Merger Proposal’. 






First State Commercial Property Trust and Colonial First State Industrial Property Trust at a price of $0.01 per unit and in 

the ratios set out in the Explanatory Memorandum, the following issues of units in the Trust be and are hereby approved: 

(i) the issue of up to 190,410,000 units in the Trust at $0.01 per unit to unitholders in Colonial First State Retail 

Property Trust; 


Industrial Property Trust; and 


Commercial Property Trust.’ 















4

2. Action Required by Unitholders 

Step 1: Read the Documents Forwarded to You 

The Notices of Meeting and Explanatory Memorandum set out the proposal to merge: 

Colonial First State Retail Property Trust; 

Colonial First State Industrial Property Trust; 

Colonial First State Commercial Property Trust; and 

Colonial First State Development Trust. 

The Explanatory Memorandum contains details of the Merger Proposal and sets out the benefits that it offers to 

unitholders, as well as potential arguments against it. It also contains a report by Arthur Andersen Corporate Finance Pty 

Limited (an independent expert) that has been prepared for unitholders. 

This information is important in deciding how you should vote on the resolutions at the unitholders’ meeting. 

Step 2: Vote on the Resolutions 

The unitholders’ meetings of each of the Trusts are scheduled for 17 December 1999. You are encouraged to attend and 

vote at the unitholders’ meeting of your Trust or, if you are unable to do so, to complete the personalised proxy form that 

accompanies this booklet. You may nominate someone to vote on your behalf at the meeting and indicate how you wish 

that person to vote on the proxy form. For details on the completion and lodgement of Proxy Forms refer to Section 6 of 

this booklet headed ‘Voting and Eligibility’. 

Proxy forms should be sent in the envelope provided as follows: 

Address for mail: 

c/- Computershare Registry Services Pty Limited 

Reply Paid 2975 

Melbourne VIC 8060 

Proxy forms must be returned so as to be received at least two days before the meeting (ie the latest time and date for return 

of proxy forms is midnight on 15 December 1999). 

Arthur Andersen Corporate Finance Pty Limited, an independent expert, has considered the Merger Proposal and 

concluded that the Merger Proposal is fair and reasonable and in the best interests of unitholders in each of the four Trusts 

proposed to be merged. 

Step 3 : Elect to Receive Stapled Securities or the Cash Alternative 

If your address is in Australia or New Zealand you are strongly encouraged to return the personalised Election Form 

accompanying this booklet. Unitholders need to choose whether they want to receive Stapled Securities in the Colonial First 

State Property Trust Group or the Cash Alternative. 

Election forms may be returned in the envelope provided to the Trust’s Registry, whose address is set out above. Election 

Forms must arrive not later than midnight on 15 December 1999. 

You are encouraged to return the Election Form even if you intend to vote against the Resolutions. If you do not lodge your 

Election Form or if it is not properly completed and received by midnight on 15 December 1999, you will automatically 

receive cash under the Cash Alternative if the Merger Proposal proceeds. 

For your choice to be effective, you must lodge your Election Form by midnight on 15 December 1999. 

5

3. Explanatory Memorandum 

The Merger Proposal 

Overview 

Colonial First State Property Limited currently manages four listed property Trusts, namely: 

Colonial First State Retail Property Trust (which has a portfolio of nine retail investments and one office investment, 

having a total book value of approximately $512 million); 

Colonial First State Commercial Property Trust (which has a portfolio of seven office investments with a total book 

value of approximately $350 million); 

Colonial First State Industrial Property Trust (which has a portfolio of 23 industrial investments and one office 

investment, having a total book value of approximately $463 million); and 

Colonial First State Development Trust (which was established to develop two Sydney office buildings which are now 

complete and substantially let and have a combined book value of approximately $275 million). 

Information on the assets of each of the Trusts is contained in Section 4 – Property Portfolio. 

Each of these Trusts currently has a strategy to invest in specific sectors of the property market. Until recently, this strategy 

was considered appropriate. However, the listed property trust market is undergoing significant rationalisation through 

mergers and take-overs with the larger vehicles enjoying greater market support and delivering benefits that are not 

generally available to the smaller vehicles. 

Accordingly, the Manager proposes that the four Trusts be merged to create a large diversified property group. 

The Current Position 

Colonial First State 

Retail Property 

Trust unitholders 


Industrial Property 



Commercial Property 



Development 


100% 100% 100% 100% 


Retail 

Property Trust 


Industrial 



Commercial 



Development 

Trust 

Predominantly Retail 

Investments 

Predominantly Industrial 

Investments 

Office Investments 

Undertook 2 office 

developments, 

now complete 

Merger Proposal 


Retail Property Trust 

unitholders prior to 



Commercial Property Trust 




Industrial Property Trust 




Development Property 

Trust unitholders prior to 


32.5% 25.3% 29.8% 12.4% 

Stapled Securities 


Property Trust Group 

Large Diversified Property Portfolio 

6

Why Merge? 

The Merger Proposal has the potential to increase the value of an investment held in each of the Trusts and to provide 

benefits that are not presently available to the Trusts and their unitholders. 

Price Re-rating. 

If the Merger Proposal is implemented, it is expected to generate an annualised distribution yield of 9.0% (based on 

the notional price of $2.00 per Stapled Security) for the six months ending 30 June 2000. As the weighted average 

distribution yield of large diversified property vehicles is 7.7%, the Manager anticipates a price re-rating (increase in the 

value of securities) if the Merger Proposal is implemented. The chart below illustrates that, based on current forecasts, 

upon implementation of the Merger Proposal, Colonial First State Property Trust Group will provide the highest 2000 

distribution yield of its peer group. 

2000 Distribution Yield 

Colonial First State Property Trust Group 

Advance Property Fund 

BT Property Trust 

AMP Diversified Property Trust 

Stockland Trust Group 

Sector Weighted Average 

National Mutual Property Trust 

Mirvac Group 

General Property Trust 

6.0 6.5 7.0 7.5 8.0 8.5 9.0 9.5 

Yield % 

Market Capitalisation 

($m) 

Source: Warburg Dillon Read, Property & Tourism Forecasts & Analysis – week ending 24 October 1999. 

Notes: 

(1) As at 22 October 1999. The market capitalisation in respect of Colonial First State Property Trust Group has been 

estimated using a notional price of $2.00 per Stapled Security. 

(2) Sector weighted average excludes Colonial First State Property Trust Group. 

Market Capitalisation and Liquidity 

If the Merger Proposal is implemented, unitholders will have an investment in a much larger property investment vehicle. 

The Merged Group is expected to have a market capitalisation of approximately $1.17 billion (based on a notional price 

of $2.00 per Stapled Security) and will represent approximately 3.90% of the Property Trust Index of the ASX. 

The Manager believes the larger market capitalisation will improve liquidity and widen the potential investor base. 

The chart below illustrates the relative price performance from January 1996 of property investment vehicles with a market 

capitalisation in excess of $600 million compared to those below $600 million. Clearly, in recent years the larger vehicles 

have outperformed the smaller vehicles. 

1,172 

641 

430 

994 

1,386 

1,421 

918 

1,692 

3,885 

Price Index Performance 

1.7 

1.6 

1.5 

1.4 

1.3 

1.2 

1.1 

1.0 

0.9 

0.8 

0.7 

0.6 

Jan-96 

Mar-96 

Jun-96 

Sep-96 

Dec-96 

Feb-97 

May-97 

Aug-97 

Nov-97 

Jan-98 

Apr-98 

Jul-98 

Oct-98 

Dec-98 

Mar-99 

Jun-99 

Sep-99 

Market Capitalisation < $600m 

Market Capitalisation > $600m 

Source: 

Warburg Dillon Read. 

7


The Merger Proposal (continued) 

Funding Flexibility and Cost of Capital 

Being part of a larger investment vehicle with a broader investor base should provide greater funding flexibility through 

improved access to debt and equity markets. This should lead to a relatively lower cost of capital in funding new 

acquisitions or restructuring existing funding arrangements. 

The expansion of the capital base will enable the Merged Group to compete more effectively with other large investors 

and open up investment opportunities not currently available to the existing Trusts due to their smaller size and relative 

cost of funding. 

Size and Diversification 

If the Merger Proposal is implemented, the Merged Group will be the sixth largest (by total assets) property investment 

vehicle listed on the ASX, with 43 properties and over 1,100 tenants in all mainland States and the ACT. 

The Manager believes that substantially increasing the size and diversification of the property portfolio should reduce any 

cyclical impact of the current sector specific property exposure and will reduce the dependence on a few large tenants. 


The proposal to merge the Trusts will be achieved by ‘stapling’ units in each of the Trusts so that unitholders will have an 

interest in each of the Trusts. 

The merger of the Trusts will primarily be achieved by amending the Trust Deeds of each Trust to enable the Trustee and 

Manager of a Trust to issue units in the Trust to unitholders in each other Trust and provide for ‘stapling’ the units in each 

Trust to units in each other Trust. On completion of the Merger Proposal, investors will hold Colonial First State Property 

Trust Group Stapled Securities, each comprising one Consolidated CMF Unit, one Consolidated CIP Unit, one Consolidated 

COC Unit and one Consolidated CFD Unit. These four securities will be quoted and traded together as Stapled Securities in 

the Colonial First State Property Trust Group on the ASX and will not be able to be traded or dealt with separately. 

Stapling will be achieved by including provisions in the Trust Deed of each Trust designed to ensure that units in the four 

Trusts are always dealt with as though they comprised a single security and, in particular, to provide that: 

a transfer of units in any of the Trusts can only be completed if it is accompanied by a transfer of an equal number of 

units in each of the other Trusts; and 

any issue of new units by a Trust must be matched by an issue of an equal number of units in each of the other Trusts. 

KPMG has advised that the recommendations comprised within the Review of Business Taxation undertaken by the Ralph 

Committee should not impact the stapled security structure proposed as, based on draft legislation, none of the Trusts 

forming the Stapled Securities should be tax paying entities. Refer to Section 7. 

Mallesons Stephen Jaques have advised that the implementation of the Merger Proposal will not give rise to a 

stamp duty imposition for the Trust although some stamp duty will be paid on the transfer of Stapled Securities to 

the Cash Alternative Nominee and this will be deducted from the Cash Alternative proceeds paid to unit holders 

who do not receive Stapled Securities. 

Unitholders need to choose whether they want to receive Stapled Securities in the Colonial First State Property Trust Group 

or the Cash Alternative. 

In addition to having common investors, it is expected that each Trust will have common objectives and strategies. 

The Colonial First State Property Trust Group will be run as a single economic entity having a diversified property 

investment portfolio. 

In implementing the Merger Proposal, the following steps will occur in relation to unitholders in each of the four Trusts 

on the merger date: 

each existing unit in each Trust will be consolidated in the following ratios rounded up to the nearest whole number: 

0.585 Consolidated CMF Units for each existing CMF Unit; 

0.950 Consolidated CIP Units for each existing CIP Unit; 

0.965 Consolidated COC Units for each existing COC Unit; 

0.850 Consolidated COC Units for each existing COC Capital Entitlement Unit; and 

1.025 Consolidated CFD Units for each existing CFD Unit; 

8

each Unitholder in each Trust will receive a special distribution of $0.03 per Consolidated Unit which will be 

wholly applied to subscribe for equal numbers of fully paid Consolidated Units in each of the three other Trusts 

for $0.01 each. This special distribution is a deferred tax distribution (for a more detailed review of tax consequences, 

see Section 7 of this Explanatory Memorandum); 

the stapling provisions in each of the Trust Deeds will take effect and the Consolidated Units will become 

Stapled Securities; 

the Stapled Securities held by unitholders receiving the Cash Alternative (i.e. unitholders who have not elected to have 

Stapled Securities or who have registered addresses outside Australia and New Zealand) will be transferred to the Cash 

Alternative Nominee; 

the Stapled Securities transferred to the Cash Alternative Nominee will be sold through the Bookbuild – see below. 

In addition to the above steps, if the Merger Proposal is implemented: 

the final instalment of $1.00 per unit payable in respect of each unit in CFD will be cancelled; and 

the terms of issue of the Capital Entitlement Units in COC will be varied so as to render those units the same 

as ordinary units with effect from the merger date. 

The record date for determining entitlements to the income distribution for each Trust for the quarter ending 31 December 

1999 will be brought forward to 16 December 1999 (ie. the day before the meeting). The effect of this amendment is that 

unit holders in each of the Trusts will be entitled to the income of the relevant Trust for the quarter ending 31 December 

1999 based on their unit holding on 16 December 1999. Their entitlement to income from the Trust in which they held 

units prior to the Merger for the quarter ending 31 December 1999 will therefore not be affected by the Merger Proposal. 

Implementation 

The Merger Proposal is conditional on the passing of resolutions at a meeting of unitholders of each of the Trusts to be held 

on 17 December 1999, (the Notices of Meeting for which are set out in Section 1 of this booklet). 

The Bookbuild 

Where a unitholder does not elect to receive Stapled Securities by lodging the duly completed Election Form on or before 

midnight on 15 December 1999 or has a registered address outside Australia and New Zealand, their Stapled Securities will 

automatically be transferred to the Cash Alternative Nominee. The Stapled Securities will then be sold under the Bookbuild. 

Warburg Dillon Read and Deutsche Bank have been appointed by the Manager as Joint Managers of the sale of Stapled 

Securities under the Bookbuild. 

The Stapled Securities transferred to the Cash Alternative Nominee will be sold through the Bookbuild. The price achieved 

on sale of Stapled Securities through the Bookbuild is not fixed or underwritten, and accordingly, may be lower or higher 

than the notional $2.00 per Stapled Security. Further, expenses (including stamp duty), and brokerage of 0.75% will be 

deducted. Unitholders receiving the Cash Alternative will receive a sale price equal to the average price achieved on the 

sale of all of the Stapled Securities less expenses and brokerage. 

The sale of all Stapled Securities through the Bookbuild will be undertaken in the first week of February 2000 unless 

market conditions are unfavourable, in which case the sale of the Stapled Securities will take place no later than 24 March 

2000. Once the sale of all the Stapled Securities is completed, the sale price for Unitholders receiving the Cash Alternative 

will be determined and paid within 14 days of completion of the Bookbuild. 

The number of Stapled Securities to be sold in the Bookbuild will depend upon how many unitholders participate in the 

Cash Alternative or who have registered addresses outside Australia or New Zealand. 

Institutional investors will be invited to submit bids for Stapled Securities to be sold in the Bookbuild. Bids must be made 

to either of the Joint Managers for Stapled Securities to a value of at least $500,000. Participants in the Bookbuild may 

bid for Stapled Securities at various prices. The price at which the Stapled Securities are sold under the Bookbuild will be 

determined by the Manager in consultation with the Joint Managers. The price will be determined having regard to the 

primary objective of obtaining the best price for Stapled Securities reasonably obtainable, it being recognised that this will 

be assisted if bidders into the Bookbuild have an expectation that there will be an orderly secondary market for Stapled 

Securities. A secondary objective is to obtain a spread of investors in the Stapled Securities. 

Accordingly, the price at which the Stapled Securities are sold under the Bookbuild may not necessarily be the highest price 

at which all Stapled Securities can be sold and may be higher or lower than $2.00 per Stapled Security. 

If the Proposal is Not Implemented 

If the proposal is not implemented then each of the Trusts will continue to operate as it currently does. The Manager will 

continue to seek to maximise returns to unitholders. 

9



Overview 

The merger of the Trusts, through stapling the units of each of the Trusts, will create a diversified property group with total 

assets in excess of $1.6 billion. The Group will have investments in the retail, office and industrial sectors of the property 

market. The portfolio will be well diversified by property, property type and geographic location. 

Price Re-rating 

If the Merger Proposal is implemented, the Manager forecasts the Group will have an annualised distribution yield of 

9.0% (based on the notional price of $2.00 per Stapled Security) for the six months ending 30 June 2000. As the weighted 

average distribution yield of large diversified property vehicles is 7.7%, the Manager believes that there will be a price 

re-rating (increase in the value of securities) if the Merger Proposal is implemented. 

Asset Diversification and Average Age 

The Merger Proposal will increase the size and diversity of the property portfolio. 

As represented in the charts below, the diversification of property type by value and earnings distribution from the merged 

portfolio is well balanced, thereby alleviating any adverse impact of sector specific investment and earnings cycles. 

Asset Type 

Earnings Distribution 

Office 

40% 

Industrial 

28% 

Office 

42% 

Industrial 

32% 

Retail 

32% 

Retail 

26% 

The geographic spread of assets by value after the proposed merger is set out below. 

Geographic Spread of CPG After Merger Proposal 

QLD 20% 

WA 8% 

NSW 45% 

ACT 0.5% 

SA 10% 

VIC 16.5% 

After implementation of the Merger Proposal, the largest geographical weighting of properties will be in New South Wales, 

the largest Australian state by population. 

The average age of the portfolio (weighted by value) will be 10 years on completion of the Merger Proposal with a total net 

lettable area in excess of 838,000 square metres. 

Tenant Diversification 

On completion of the Merger Proposal, Colonial First State Property Trust Group will have in excess of 1,100 tenants. 

Colonial First State Property Trust Group’s exposure to its 10 largest tenants (in terms of total income) will be 28%. 

10

Lease Maturity Profile 

The graph below illustrates the lease maturity profile, by total net income, after the Merger. After implementation of the 

Merger Proposal, the average remaining lease term is 5 years. 

Lease Maturity Profile 

% 

50 

40 

43% 

30 

20 

10 

4% 

13% 14% 

8% 

11% 

7% 

0 

Holding over 

1 year 

2 years 

3 years 

4 years 

5 years 

5 years + 

The property portfolio will be well diversified in terms of lease maturity profile. 

Vacancies 

After implementation of the Merger Proposal, the vacancy rate will be 2.8%. 

Strategy and Key Policies 

Manager’s Strategy 

The strategy of the Manager will be to seek to provide stable, growing distributions to investors in the Colonial First State 

Property Trust Group. 

This will be achieved by adhering to a sound investment philosophy and implementing a disciplined and continuous 

action plan. 

The investment philosophy will be to: 

invest in a portfolio of properties, diversified by property type and geographic location; 

invest in sectors of the property market that the Manager considers will deliver the best overall performance; and 

avoid having a large exposure to any particular market sector or individual property. 

The key elements of the action plan will be: 

the ongoing active management of the existing property portfolio with a focus on enhancing the income stream; 

to maintain a broad diversified property portfolio; 

to improve the quality of the portfolio over time by: 

(a) the acquisition of additional properties that meet the investment criteria and enhance returns to investors; and 

(b) the disposal of properties which no longer satisfy the investment criteria in terms of quality, size and outlook 

for returns; 

the active management of interest rates; and 

to focus on the cost of capital and management of investors’ capital. 

As shown above, the property portfolio will be well diversified both geographically and by asset type. The Manager will 

look to maintain a well diversified portfolio, but at times the Manager may increase weightings in certain sectors and 

geographic locations that it expects to outperform. 

11


Colonial First State Property Trust Group (continued) 

Distributions 

Investors in the Colonial First State Property Trust Group will receive distributions from each of the Trusts. It is intended that 

the combined distribution will be paid to investors quarterly, no later than two months after the end of the relevant period. 

Gearing 

The pro-forma gearing (debt to total assets) for the Colonial First State Property Trust Group at the time of merging is 

approximately 27%. It is the current intention of the Manager that the long term gearing be 20%-30%. It is intended that 

the Group’s distribution reinvestment plan be activated to reduce gearing and fund capital expenditure. 

The Manager will implement an interest rate hedging policy that fixes most of the Group’s debt for a period of 3-5 years. 

Valuations 

The Manager will arrange to value the properties at approximately annual intervals. 

Management 

The Manager will draw on the resources of Colonial First State. A diagram showing the management structure for the 

Colonial First State Property Trust Group is shown below: 

Board of Directors 

Chief Executive Officer 

Chris Cuffe 

Head of Listed Property 

Sandy Calder 

Investment Manager Retail 

Conrad Sinclair 

Investment Manager 

Commercial 

Justin Lynch 

Investment Manager Industrial 

Chris Judd 

Portfolio Research Manager 

Asset Manager Retail 

Roger Stapleton 

Asset Manager Commercial 

Lachlan Gyde 

Asset Manager Industrial 

Matthew Meredith 

Property Management 

The profiles of the board of directors are set out below: 

Directors of the CPG Manager 

P L Polson BCom MBL PMD (Chairman) is Managing Director of Colonial First State Investments Group Limited and a 

director of other Colonial Group subsidiaries. He joined Colonial Group in October 1994. Previous positions included 

Managing Director of National Mutual Funds Management (International) Ltd and Managing Director of Standard Bank 

Financial Services in South Africa. 

A Carstens BCom (Hons) CA (SA) is Chief Financial Officer of Colonial First State Investments Group Limited and is 

responsible for overseeing the finance and administration functions of Colonial’s investment management operations. Before 

joining Colonial in 1994, he held senior management positions in the financial services industry and with Ernst & Young. 

F S Grimwade LLB (Hons) BCom MBA (Columbia) is General Manager Corporate Development of Colonial First State 

Investments Group Limited. He joined Colonial in January 1996 as Group Company Secretary and General Manager Legal 

Affairs from WMC Ltd where he spent six years as Company Secretary and General Manager Shareholder Relations. He 

also worked with international investment bank Goldman, Sachs and Co. and as a lawyer with Mallesons Stephen Jaques. 

G S Ray LLB BCom FCPA FTIA is General Counsel and Group Solicitor of the Colonial Group. He has acted in this 

capacity for more than 20 years and has been involved in most of the major contracts undertaken by the Colonial Group. 

C E Cuffe BCom, ACA, ASIA is Chief Executive Officer of Colonial First State Investment Managers (Australia) Limited. 

Following a five year period with a major firm of Chartered Accountants, Peat Marwick Mitchell & Co (now KPMG), 

Chris entered the funds management industry where he has held various senior positions since 1985, assuming the role 

of Chief Executive Officer of First State Fund Managers Limited in 1990. 

A Bird, BSc (Urban Land Admin) ARICS is Director – Property Investments. He has over 20 years’ experience in the 

property industry. Prior to joining Colonial in 1991 he held professional appointments in London, Jakarta and Melbourne. 

12

4. Property Portfolio 

The Portfolio 

With 43 properties, over 1,100 tenants, investments in all mainland states and the ACT and a total property investment 

portfolio in excess of $1.6 billion, the Colonial First State Property Trust Group will be the sixth largest (by total assets) 

property investment vehicle listed on the ASX. 

The property assets in the portfolio are set out below: 

State Book Value ($) 

Property at 30 September 1999 

Retail – 32% of portfolio by book value 

Brimbank Central VIC 83,006,072 

Corio Village VIC 48,300,410 

Golden Grove Village SA 50,867,697 

Castle Plaza SA 58,046,592 

Thornlie Square WA 22,165,534 

Grand Plaza QLD 71,398,331 

Runaway Bay Shopping Village QLD 59,529,913 

Clifford Gardens Shopping Centre QLD 88,154,586 

Rockingham City Shopping Centre WA 22,543,663 

Sub Total – Retail 504,012,798 

Office – 40% of portfolio by book value 

Brandon Office Park VIC 41,563,552 

Colonial State Bank Tower, 150 George Street, Parramatta NSW 77,818,923 

Abbotsford Office Park, 675-674 Victoria Street, Abbotsford VIC 19,878,741 

Hongkong Bank Building, 300 Queen Street, Brisbane QLD 67,500,000 

197 St Georges Terrace & 1-5 Mill Street, Perth WA 87,012,237 

Mercantile Mutual Centre, 45 Pirie Street, Adelaide SA 51,761,391 

SRA Building, 32 Lee Street, Sydney NSW 5,404,732 

15 Bowes Street, Woden ACT 8,010,801 

60 Castlereagh Street, Sydney NSW 160,000,000 

339-345 Military Road, Cremorne NSW 12,737,099 

56 Pitt Street, Sydney NSW 115,000,000 

Sub Total – Office 646,687,476 

Industrial – 28% of portfolio by book value 

Alexandria Industrial Estate NSW 35,056,393 

Boundary Industrial Park QLD 21,000,000 

Brodie Industrial Park, Rydalmere NSW 17,400,000 

390 Eastern Valley Way, Chatswood NSW 8,250,000 

71-95 Roberts Road, Chullora NSW 28,000,000 

85 Epping Road & 376 Lane Cove Road, North Ryde NSW 19,000,000 

14 Aquatic Drive, Frenchs Forest NSW 26,300,000 

Gateway Estate, Arndell Park NSW 28,506,139 

8 Giffnock Avenue, North Ryde NSW 2,400,000 

Kmart Distribution Centre, Hoppers Crossing VIC 40,000,000 

100-128 Bridge Road, Keysborough VIC 8,800,000 

Mascot Central, Mascot NSW 28,806,632 

197-205 Fitzgerald Road, Laverton North VIC 11,725,000 

13-15 Lyon Park Road, North Ryde NSW 16,304,623 

91 Mars Road, Lane Cove NSW 10,600,000 

17 O’Riordan Street, Alexandria NSW 8,238,421 

25 Pavesi Street, Smithfield NSW 7,450,000 

80 Turner Street, Port Melbourne VIC 11,617,000 

Slough Business Park, Silverwater NSW 80,072,130 

Smithfield Industrial Estate (Stage 1) NSW 11,414,294 

Smithfield Industrial Estate (Stage 2) NSW 10,308,145 

60 Enterprise Place, Tingalpa QLD 12,140,000 

299 Montague Road, West End QLD 8,479,212 

Sub Total – Industrial 451,867,989 

Total 1,602,568,263 

13


The Portfolio (continued) 

Brandon Office Park, Glen Waverley, Victoria 

Date Completed In stages from 1988 to 1990 

Net Lettable Area 16,862.30 sqm 

Typical Floor Area 1,100 sqm 

Car Parking 

657 spaces 

Occupancy 95.80% 

Current Valuation $41,500,000 

Valuation Date 15 May 1999 

Major Tenants 

Tenant Area Let (sqm) % Area Let Expiry 

NEC Australia Pty Ltd 6,791 40.30 November 2000 

Telstra Corporation Ltd 6,869 40.70 May 1999 (agreed to 

renew) & February 2000 

Pacific Dunlop Ltd 1,166 6.90 August 2003 

Jones Lang La Salle 586 3.50 August 2004 

Location: The property is located on the north east corner of Springvale and Ferntree Gully Roads, Glen Waverley, 

approximately 20 kilometres south-east of the Melbourne CBD. 

Title Details: The property is on three titles, with a total site area of 37,660 square metres. 

Description: 

The property is an office park development comprising five office buildings in three separate structures, set 

amongst landscaped gardens and recreation facilities. The structures provide office accommodation in 

varying levels between two and four storeys in height. 

The Manager has now received planning approval which allows the development of additional floor space of 

approximately 11,500 square metres on the site. Construction of any building would only commence if a 

leasing pre-commitment over part of the space was secured. 

56 Pitt Street, Sydney 

Date Completed Significantly refurbished over 1998 

Net Lettable Area 20,910 sqm 

Typical Floor Area 820 sqm 

Car Parking 

80 spaces 



Valuation Date 30 September 1999 

Major Tenants 


Perpetual Trustees 2,474 11.80 June 2005 

Paladin Australia 1,649 7.90 August 2005 

Location: The property is prominently located within Sydney’s financial district. 

Title Details: The property is held within one title, having a site area of approximately 1,784 square metres. 

Description: The building has undergone an extensive refurbishment, which was completed in October 1998 and provides 

Grade A office accommodation over 26 levels 

14

150 George Street, Parramatta, NSW 

Date Completed 1992 



Car Parking 

492 spaces 

Occupancy 100% 


Valuation Date 15 November 1998 

Major Tenants 


Colonial State Bank 21,964 100 November 2005 

Location: The property is located in the Parramatta CBD. Parramatta is a major regional centre in New South Wales 

located approximately 23 kilometres west of the Sydney CBD. 

Title Details: The property is on a single title, with a site area of 5,124 square metres. 

Description: 

A modern commercial office building incorporating ground floor retail/showroom space, loading dock and 

carpark entry, six upper levels of car parking, mezzanine offices and a further 16 upper levels of commercial 

office accommodation. 

The whole building is leased to the State Bank of New South Wales Limited (Colonial State Bank) for a 

period of 10 years expiring on 21 November 2005. Rent reviews are two-yearly to market. Colonial State 

Bank is a member of the Colonial Group. 

15



300 Queen Street, Brisbane, Queensland 


Net Lettable Area 

Office 18,301 sqm 96% 

Retail 751 sqm 4% 

Total 19,052 sqm 100% 

Typical Floor Area 798 – 833 sqm 

Car Parking 

134 spaces 




Major Tenants 


Macquarie Bank Limited 2,394 12.70 December 2006 

Kendalls KBM Service Pty Ltd 1,666 8.70 July 2005 

Douglas Heck & Burrell 1,220 6.50 July 2009 

Hong Kong Bank of Australia 870 4.60 September 2001 

BDO Property & Administration 

(Qld) Pty Ltd 833 4.40 October 2004 

Ports Corporation of Qld 830 4.40 January 2004 

Knight Frank (Queensland) 798 4.20 June 2003 

Nicol Robinson & Kidd 798 4.20 December 2002 

Location: The property is located in a prime position on the north-western side of Queen Street in the Brisbane CBD, 

adjacent to Post Office Square. 

Title Details: The property is on two titles, a freehold site with an area of 2,034 square metres and a leasehold site of 

151 square metres expiring in March 2063. 

Description: 

The property comprises a commercial office building, which is a 28 level building incorporating three 

basement carpark levels, lower ground floor food court (which links directly to Post Office Square), 

ground floor foyer and 24 upper levels of office accommodation. 

16

675-679 Victoria St, Abbotsford, Melbourne, Victoria 

Date Completed 1984 to 1987 


Office 9,356.50 sqm 98.80% 

Retail 117 sqm 1.20% 

Total 9,473.50 sqm 100.00% 

Typical Floor Area 600 – 1,500 sqm 

Car Parking 

365 spaces 

Occupancy 

Office 100% 

Retail 100% 

Total 100% 


Valuation Date 15 October 1998 

Major Tenants 


Pacific Access Pty Limited 2,969.00 31.50 September 2002 

British Aerospace 2,471.00 26.20 December 2001 

Honeywell Limited 2,041.50 21.60 December 2003 

Location: The property is located on the northern side of Victoria Street and is bounded by the Yarra River, some 

4.5 kilometres east of the Melbourne CBD. 

Title Details: The property is on three separate titles on a site area of 17,679 square metres. 

Description: The property is a complex of three freestanding, low rise office buildings. The buildings offer office 

accommodation across two to four levels, and are fully let. 

60 Castlereagh Street, Sydney 

Date Completed September 1999 



Car Parking 

62 spaces 




Major Tenants 


BNP 10,784 40 June 2010 

Holding Redlich 1,191 4 June 2008 

Location: The property is prominently located in Castlereagh Street within the CBD of Sydney. 

Title Details: The property is held within four titles, having a site area of approximately 2,487 square metres. 

Description: The development provides 20 levels of office accommodation, ground floor retail space and basement 

car parking. 

17



197 St Georges Terrace, Perth, WA 

5 Mill Street, Perth, WA 

1 Mill Street, Perth, WA 

Date Completed 

197 St Georges Terrace 1983 

5 Mill Street 1972 

1 Mill Street 1986 


Typical Floor Area 

197 St Georges Terrace 833 sqm 

5 Mill Street 737 sqm 

1 Mill Street 1,833 – 1,995 sqm 

Car Parking 

282 spaces 

Occupancy 

197 St Georges Terrace 99.10% 

5 Mill Street 90.40% 

1 Mill Street 93.60% 


Valuation Date 15 December 1998 

Major Tenants 


Government of WA 20,672 52.10 June 2007 

Fluor Daniel 5,870 14.80 August 1999 – February 2003 

Location: The property is located in Perth’s prime business district upon a large and prominent site, close to a number 

of established multi-storey office buildings. It has frontages to St Georges Terrace, Mill Street and Mounts 

Bay Road. 

Title Details: The property is on one title totalling an area of 8,726 square metres. 

Description: The property consists of three separate buildings: 

197 St Georges Terrace: The building comprises a 29 level office tower with net lettable area of 26,303 square metres. 

The premises are currently 99.1% leased, 78.66% of which is to the State Government until 2007. 

5 Mill Street: 5 Mill Street was completed in 1972 as the first stage of the development. The building comprises 

a basement, ground and 10 upper floors with a net lettable area of 7,100 square metres. The 

premises are currently 90.4% leased to a variety of tenants. 

1 Mill Street: 1 Mill Street was completed in 1986 and comprises a four level office building with net lettable 

area of 6,273 square metres. The building is 93.6% leased to Fluor Daniel. 

18

45 Pirie Street, Adelaide, South Australia 



Office 19,102.90 sqm 96.50% 

Retail 702.60 sqm 3.50% 

Total 19,805.50 sqm 100.00% 


Car Parking 

57 spaces 

Occupancy 

Office 100% 

Retail 100% 

Total 100% 



Major Tenants 


Attorney General’s Department 7,646.00 38.60 September 2007 

Department for Industrial Affairs 2,939.00 14.80 August 2000 

Norman Waterhouse 1,114.50 5.60 September 2003 

Colliers Jardine (SA) Pty Ltd 1,217.00 6.10 August 2002 

Location: The property is located in the centre of the Adelaide CBD on the southside of Pirie Street. 

Title Details: The property is on one title with a site area of 3,308 square metres. 

Description: The property is a modern 19 level premium grade office building with basement car parking. 

SRA Building, 32 Lee Street, Sydney, NSW 

Estimated Completion September 2000 


Office 

13,500 sqm 

Retail 

891 sqm 

Total 

14,391 sqm 


Car Parking 

90 spaces 

Occupancy 

Office 

100% to SRA 

Retail 

Under negotiation 

Current Valuation $4,550,000 site value 

$51,000,000 upon completion 

Major Tenants 


State Rail Authority 13,511 94.20 March 2010 

Location: The property is located in the southern sector of the Sydney CBD, approximately 2 kilometres south of the 

Sydney GPO in the Central Railway Station precinct. The development is on the eastern side of Lee Street 

abutting Central Railway Station. 

Title Details: The property is on a site area of approximately 3,464 square metres. 

Description: It is proposed that a development of an eight level retail and office building with a net lettable area of 

approximately 14,390 square metres will be constructed on the site. Offices will account for 94.2% of 

net lettable area. All of the office area is to be leased to the State Rail Authority for a period of 10 years. 

The lower two floors will contain some retail space. The Trust has purchased a 99 year lease of the site 

and will make a further single payment for the building upon completion. The total purchase price will 

be $50,925,000. 

19



Grand Plaza Shopping Centre 

Location 

South-West Brisbane 

Type 

Sub-Regional Shopping Centre 

Ownership 50% 

Current Valuation $71,000,000 (November 1998) 

Capitalisation Rate 8.50% 

Lettable Area 

38,209 sqm 

Car Parking 2,300 

Number of Tenants 116 

Major Tenants 

Tenant Area Let (sqm) % Lettable Area Expiry (excl. options) 

Target 7,102 18.59 2014 

Big W 6,599 17.27 2014 

Woolworths 4,844 12.68 2014 

Coles 3,880 10.15 2014 

Birch Caroll & Coyle 3,593 9.40 2014 

Best & Less 1,142 2.99 2004 

Location: Grand Plaza Shopping Centre is located approximately 26 kilometres south of the Brisbane CBD within 

the City of Logan. 

Title Details: The property is contained on one title with a site area of approximately 18 hectares. 

Description: 

Grand Plaza Shopping Centre opened in October 1994. It is a fully enclosed, air conditioned, single level 

sub-regional centre with a number of free standing fast food restaurants. Major tenants are Woolworths, Coles, 

Big W, Target, Best and Less and Birch Carroll & Coyle (cinemas). There are approximately 110 specialty stores. 

Brimbank Central 

Location 

Western Melbourne 

Type 


Ownership 100% 

Current Valuation $82,500,000 (May 1999) 





Major Tenants 


Kmart 7,440 20.86 2012 

Target 7,123 19.97 2016 

Safeway 3,688 10.28 2004 

Bi-Lo Megafresh 3,520 9.87 2011 

Franklins 1,625 4.56 2010 

Location: Brimbank Central Shopping Centre is located within the suburb of Deer Park, approximately 18 kilometres 

to the west of the Melbourne CBD. 

Title Details: The property is on a single title with a site area of approximately 10.9 hectares. 

Description: 

The centre was originally constructed in 1979 and underwent extensive refurbishment and extension in 

1997. The present configuration provides a modern sub-regional shopping centre incorporating a Target and 

Kmart Discount Department Store, Safeway, Franklins and Bi Lo Mega Fresh Supermarket, Target and 

Kmart Garden Centres and 79 specialty shops. 

20

Thornlie Square Shopping Centre 

Location 

South East Perth 

Type 

Community Shopping Centre 


Current Valuation $21,750,000 (September 1998) 


Lettable Area 

13,030 sqm 

Car Parking 874 


Major Tenants 


Coles 4,959 38.06 2013 

Farmer Jacks 2,774 21.29 2007 

Location: Thornlie Square Shopping Centre is located within the suburb of Thornlie, approximately 18 kilometres 

south-east of the Perth CBD. 

Title Details: The property is on one title, with a site area of approximately 4.8 hectares. 

Description: 

Thornlie Square Shopping Centre was completed in the early 1970s and was extended and refurbished 

in 1987. The centre is constructed over a single level, and the malls are fully enclosed and airconditioned. 

The centre is anchored by a Coles supermarket, Farmer Jacks Supermarket, 44 specialty shops and a service 

station. 

Corio Village Shopping Centre 

Location 

Geelong, Victoria 

Type 



Current Valuation $48,000,000 (February 1999) 





Major Tenants 


Kmart 6,503 21.41 2004 

Coles 3,716 12.24 2005 

Harris Scarfe 2,799 9.22 2005 

Franklins 2,726 8.98 2010 

Location: Corio Village Shopping Centre is located on an island site on the corner of Bacchus Marsh Road and 

Purnell Road in Corio. Corio is located approximately 7 kilometres north of the City of Geelong and 

enjoys a dominant position within the immediate market. 

Title Details: The property is contained on three separate titles and has a combined site area of approximately 

8.7 hectares. 

Description: Originally constructed in 1973, the property comprises a sub-regional shopping centre featuring a Kmart 

and Harris Scarfe Discount Department Stores, Coles and Franklins Supermarkets, 80 specialty shops, 

three kiosks and 14 office suites. The centre has been extended and refurbished since it first opened in 1973. 

21



Castle Plaza Shopping Centre 

Location 

Edwardstown, Southern Adelaide 

Type 




Capitalisation Rate 10% 




Major Tenants 


Target 7,970 31.40 2012 

Coles 4,325 17.04 2012 

Foodland 2,539 10.00 2008 

Location: The centre is located in the suburb of Edwardstown, approximately 8 kilometres south of Adelaide’s CBD. 

Title Details: The property is on three separate titles and has a site area of approximately 7.7 hectares. 

Description: Castle Plaza Shopping Centre is a sub-regional centre comprising a Target Discount Department Store, 

a Coles and Foodland Supermarkets along with 55 specialty stores, a tavern and a freestanding Hungry 

Jack’s outlet. 

Golden Grove Village Shopping Centre 

Location 

North-East Adelaide 

Type 

District Shopping Centre 




Lettable Area 

14,074 sqm 



Major Tenants 


Woolworths 4,431 31.48 2018 

Franklins 1,805 17.08 2012 

Location: The centre is located in the suburb of Golden Grove, approximately 19 kilometres north east of the 

Adelaide CBD. 

Title Details: The property is on one title with a site area of approximately 12.56 hectares. 

Description: 

Opened in 1992, the centre comprises two anchor supermarket tenants, Woolworths and Franklins, together 

with 31 specialty tenants within an enclosed mall. 

22

Clifford Gardens Shopping Centre 

Location 

Toowoomba, Queensland 

Type 



Current Valuation $88,000,000 (May 1999) 





Major Tenants 


Big W 8,318 32.77 2003 

Franklins Big Fresh 3,532 13.91 2016 

Woolworths 3,479 13.71 2003 

Best & Less 1,027 3.73 2003 

Location: The centre is located approximately 2 kilometres south-west of the Toowoomba CBD. 

Title Details: The property is contained on a single title, with a site area of approximately 8.4 hectares. 

Description: The property comprises a fully enclosed predominantly single level sub-regional shopping centre. The centre 

incorporates a Big W, Franklins Big Fresh, Woolworths and Best and Less, 81 specialty stores and five kiosks. 

15 Bowes Street, Woden, ACT 

Location 

Woden Town Centre 

Southern Canberra 

Type 

Suburban Office 


Current Valuation $8,000,000 (March 1999) 



Car Parking 9 



Major Tenants 


Commonwealth of Australia 4,521 49.16 2000 

Department of Health 2,066 22.47 2007 

Location: Located in the suburb of Woden, approximately 10 kilometres south of the Canberra CBD. 

Title Details: The property is on one title with a site area of approximately 3,197 square metres. 

Description: The property comprises an eight storey office tower, featuring a ground floor bowling alley, retail 

premises and seven upper floors of office. 

23



Runaway Bay Shopping Village 

Location 

Northern Gold Coast 

Type 


Ownership 50% 

Current Valuation $59,050,000 (September 1998) 


Lettable Area 

35,605 sqm 



Major Tenants 


Target 7,123 20.01 2016 

Big W 6,619 18.59 2015 

Woolworths 4,279 12.02 2014 

Coles 3,214 9.03 2015 

Best & Less 1,146 3.22 2000 

Location: Runaway Bay is located at the northern end of the Gold Coast region, approximately 75 kilometres south 

of Brisbane and approximately 11 kilometres north of the Surfers Paradise commercial area. 

Title Details: The property is contained on three separate titles and has a site area of approximately 11.3 hectares. 

Description: 

Runaway Bay Shopping Village comprises a single level enclosed and air conditioned retail shopping centre 

with several freestanding buildings. The centre includes Woolworths and Coles Supermarkets, Big W and 

Target Discount Department Stores with approximately 127 specialty stores and kiosks. 

Rockingham City Shopping Centre 

Location 

Rockingham, South of Perth 

Type 


Ownership 12.50% 

Current Valuation $21,250,000 (March 1999) 


Lettable Area 

46,444 sqm 



Major Tenants 


Target 8,275 18.59 2020 

Kmart 7,812 17.27 2004 

Advantage 5,347 12.68 2009 

Coles 3,455 10.15 2005 

Aherns 2,362 2.99 2004 

Location: Located in the suburb of Rockingham, approximately 46 kilometres south of Perth’s CBD. 

Title Details: The centre and adjoining development land is contained on 15 titles and has a site area of approximately 

22 hectares. 

Description: A regional shopping centre that was originally opened in 1972 and has since undergone considerable 

extension. The centre includes Target, Kmart, Coles, Advantage Supermarket, Aherns and 143 

specialty stores. 

24

Alexandria Industrial Estate, 46-62 Maddox Street, Alexandria, NSW 

Gross Lettable Area 

Industrial 

39,583 sqm 

Office 

4,017 sqm 

Total 

43,600 sqm 

Occupancy 98% 

Average Net 

Passing Rental 

$86.00 per sqm 

Valuation $35,000,000 

Valuation Date March 1999 

Major Tenants 

Tenant Area (sqm) Average Rent (per sqm) Expiry 

Marbig Rexel 6,391 $97.54* February 2000 

Bremick 8,195 $82.00 October 2002 

Quadric Interiors 4,113 $87.00 January 2001 

Envotel 7,150 $81.00 March 2003 

DDR 3,097 $86.00 April 2001 

* Gross Rent 

Location: The property is located on the western side of Bourke Road having frontages to Maddox Street and Huntley 

Street in Alexandria. Alexandria is an established industrial location which benefits from excellent road 

routes linking the City of Sydney, which is approximately 5 kilometres to the north, with Kingsford Smith 

Airport and the container and port facilities situated on Botany Bay to the south. 

Title Details: The property is located on a single title with an area of approximately 6.10 hectares. 

Description: The property is a relatively modern industrial estate comprising 34 office/warehouse units in eight separate 

buildings. In general, each of the units provides substantially clear span warehouse/manufacturing 

accommodation with a low office content. 

25



Slough Business Park, Silverwater Road, Silverwater, NSW 


Constructed in four stages 

during the 1980s 


Industrial 

55,110 sqm 

Office 

16,169 sqm 

Total 

71,279 sqm 

Occupancy 89% 

Average Net 


$112.00 per sqm 



Major Tenants 


UNISYS 5,833 $114.00 June 2000 

AEMS 5,540 $105.00 June 2001 

Thorn EMI 4,777 $117.00 August 2004 

ITT Flygt Ltd 3,331 $119.00 May 2004 

Asic Tiger 5,300 $119.00 February 2003 

Location: The property is located at Silverwater Road, Silverwater, and is bordered by Holker Street and Fariola Street. 

Silverwater is a prime Sydney industrial suburb 19 kilometres west of the CBD and 4 kilometres east of the 

Parramatta Business District and is occupied by a number of leading technology companies. 

The property is conveniently located for transport with access to Parramatta Road, Victoria Road and the 

F4 Freeway. 

Title Details: The property is on a single title, with a total area of 9.65 hectares. 

Description: 

The property is a modern industrial estate constructed in four stages during the 1980s, comprising 

49 office/warehouse units, a take-away shop and an on-site management office in 10 separate buildings. 

Each of the 49 units are of a generally similar design comprising a ground level warehouse with minimum 

internal clearance of six to eight metres, ground level entrance foyer and high quality office accommodation 

arranged over the ground and first floor. 

26

13-15 Lyon Park Road, North Ryde, NSW 



Industrial 

1,181 sqm 

Office 

6,388 sqm 

Total 

7,569 sqm 

Occupancy 79% 

Average Net Passing Rental 

Office 

$210.19 per sqm 

Warehouse 

$102.64 per sqm 



Major Tenants 


Autodesk – Office 1,239 $197.59 October 2002 

– Warehouse 631 $92.73 

Stafford Miller 1,176 $200.00 August 2001 

Hitachi – Office 913 $225.63 March 2002 

– Warehouse 310 $103.00 

Polaroid 792 $220.00 March 2002 

Location: The property is located in Lyon Park Road, North Ryde, and is bound by Giffnock Avenue. North Ryde is 

located 14 kilometres north-west of the Sydney CBD and 7 kilometres from the North Sydney Business 

District. It offers convenient access to major arterial roads. 

Title Details: The property is located on a single title, with a site area of approximately 8,026 square metres. 

Description: 

The property is a modern high technology industrial property comprising office accommodation arranged 

over basement, ground and five upper levels together with four high clearance warehouses at the rear. The 

single level basement provides parking for 69 vehicles. 

Boundary Industrial Park, Coopers Plains, Queensland 

Date Completed Various stages between 1986 and 1991 


Warehouse 

31,018 sqm 

Office/other 4,126 sqm 

Total 

35,144 sqm 


Average Net 




Valuation Date August 1999 

Major Tenants 


Coles Supermarkets 11,715 $81.60 January 2000 

Australian Liquor Marketers 9,164 $70.60 February 2001 

Campbells Cash & Carry 5,048 $73.00 February 2004 

Joliment Dell 4,134 $64.05 January 2002 

Location: The property is located 14 kilometres south of the Brisbane CBD in an established industrial area. 

Title Details: The property is located on a single title, with a site area of approximately 6.843 hectares. 

Description: The property comprises eight high clearance warehouses with ancillary office space and one retail unit. 

27



197-205 Fitzgerald Road, Laverton North, Victoria 


Stage 1 1996 

Stage 2 1997 


Warehouse 

15,050 sqm 

Awnings 

2,455 sqm 

Office 

200 sqm 

Total 

17,705 sqm 


Average Net 





Major Tenants 


Toll Holdings 17,705 $59.70 September 2007 

Location: The property is located on the western side of Fitzgerald Road, 15 kilometres west of the Melbourne CBD 

in a developing industrial area. 

Title Details: The property is located on two titles, Lot 4 with a site area of approximately 4.186 hectares and Lot 27A 

with a site area of approximately 0.7768 hectares. 

Description: 

The property comprises three stages. Stages 1 & 2 are distribution warehouses with high clearance and 

three-sided roller shutter access to the warehouse. Stage 1 has a high quality office component at the front. 

Stage 3 land will remain vacant for the time being. 

100-128 Bridge Road, Keysborough, Victoria 



Warehouse 

6,516 sqm 

Office/other 359 sqm 

Total 

6,875 sqm 


Average Net 


$130.00 per sqm 



Major Tenants 


TDG Distribution 6,875 $130.00 June 2004 

Location: Keysborough is a recognised industrial location 30 kilometres south-east of Melbourne GPO. 

Title Details: The property is on a single title of 1.82 hectares. 

Description: A modern high clearance coolstore complex with separate administration office. 

28

25 Pavesi Street, Smithfield, NSW 



Warehouse 

6,027 sqm 

Office 

1,500 sqm 

Total 

7,527 sqm 


Average Net 





Major Tenants 


RS Components Pty Ltd 7,527 $80.00 August 2008 

Location: Smithfield is a recognised industrial area located 30 kilometres west of Sydney. The area consists largely of 

modern light industrial accommodation, large distribution warehouse facilities and a range of industrial 

estates consisting of smaller storage and light industry. 


Description: A modern high clearance warehouse with associated offices and amenities. 

Gateway Estate, Walters Road, Arndell Park, NSW 



Building A 

2,614 sqm 

Building B 

3,136 sqm 

Building C 

11,666 sqm 

Building D 

10,512 sqm 

Total 

27,928 sqm 

Occupancy 

100% (includes rental guarantee) 

Average Net 





Major Tenants 


Fujitsu General 10,512 $95.00 March 2009 

Sanyo Australia Pty Ltd 10,002 $75.00 January 2009 

Sanyo Australia Pty Ltd 1,662 $167.00 January 2009 

Kelair 3,136 $90.00 March 2009 

Location: Arndell Park is a recognised industrial area located 35 kilometres west of Sydney. The site is a short distance 

north of the Western Motorway that links the estate to Parramatta and Sydney. 


Description: Gateway Estate comprises a recently completed four unit warehouse complex. Each unit provides high 

clearance warehouse areas with adjoining offices. Both Sanyo and Fujitsu General conduct regional 

operations from the Estate. 

29



Mascot Central, Gardeners Road, Mascot, NSW 



Warehouse 

9,148 sqm 

Office 

7,998 sqm 

Total 

17,146 sqm 

Occupancy 

Rental guarantee over 

the property 

expires March 2000 

Average Net Passing Rental n/a 



Location: Mascot is located in the favoured South Sydney industrial precinct between Alexandria and the airport. The 

site contains excellent linkages to the airport, the container and port facilities of Botany Bay and Sydney by 

nearby O’Riordan Street. The site is approximately 6 kilometres south of the Sydney CBD. 

Title Details: The property is on a single title of approximately 2.06 hectares. 

Description: 

Mascot Central comprises two recently completed office/warehouse buildings. The larger of the two 

buildings enjoys exposure to busy Gardners Road having a gross lettable area of 10,289 square metres (office 

– 5,136 square metres, warehouse – 5,153 square metres). Building B benefits from frontage to Church 

Avenue and has a gross lettable area of 6,857 square metres (office – 2,862 square metres, warehouse – 

3,995 square metres). 

299 Montague Road, West End, Queensland 



5,995 sqm 


Average Net Passing Rental $149.00 per sqm 



Major Tenants 


State of Queensland 5,995 $149.00 January 2005 

Location: Established high-tech industrial location, 2.5 kilometres south-west of Brisbane CBD. 

Title Details: Freehold title – 7,971 square metres. 

Description: The State Library Building is a large freestanding administration/warehouse complex. The property was 

extensively redeveloped in 1994 to meet the high standards of accommodation and services required by the 

State Library. 

30

Brodie Industrial Park, 40 Brodie Street, Rydalmere, NSW 


Early 1980s 


Industrial 

17,424 sqm 

Office 

2,390 sqm 

Total 

19,814 sqm 





Major Tenants 


McKechnie 7,880 $81.00 May 2000 

Compaq 4,104 $88.20 December 2006 

Keycorp 2,649 $96.04 November 2000 

AGL 2,054 $97.83 March 2003 

Location: The property is located in the favoured inner western industrial suburb of Rydalmere, approximately 

20 kilometres north-west of the Sydney CBD. Brodie Street links to Victoria Road, a major arterial road 

which connects to the Western Highway via Silverwater Road. 

Title Details: The property is located on single title with a total area of approximately 3.72 hectares. 

Description: 

The property is an industrial estate comprising nine high clearance warehouses with mezzanine office 

components ranging from 10% to 20% of GLA. The complex was built in the early 1980s modelled around 

an old sawtooth section. There is generous vehicle manoeuvring, loading and parking areas. 

390 Eastern Valley Way, Chatswood, NSW 



5,221 sqm 





Major Tenants 


E & P International 1,088 $171.23 February 2001 

Sharp Corporation 876 $163.67 January 2004 

Hal Data 768 $136.19 February 2000 

Location: Prominently located within the Chatswood industrial area which provides accommodation predominantly 

for light industrial users. 

Title Details: Freehold as part of a community title scheme with a site area of 3,723 square metres and also having the 

benefit of a registered strata plan. 

Description: 

Multi-tenanted office/warehouse development forming part of Chatswood Business Park. This property has 

good exposure to the main arterial route of Eastern Valley Way. 

31



77-91 Roberts Road, Chullora, NSW 



32,975 sqm 





Major Tenants 


Seahighway Pty Ltd 32,975 $76.00 March 2007 

Location: Prominently located on the eastern side of Roberts Road, a major north-south arterial road linking North 

Ryde and Homebush with the southern suburbs and M5 Motorway. 

Title Details: Freehold title with site area of 6.25 hectares. 

Description: 

Part of a major distribution facility operated by Finemores, the transport group. 

14 Aquatic Drive, Frenchs Forest, NSW 



17,815 sqm 

Occupancy 94% 




Major Tenants 


Dell Computer 4,557 $165.00 December 2002 

Prentice Hall 2,943 $165.00# July 2005 

Target 2,873 $129.00* February 2001 

*Gross Rent 

# As at November 1999 

Location: Prominently located in the Frenchs Forest high-tech industrial area. This property has exposure to busy 

Warringah Road. 

Title Details : Freehold with site area of 1.58 hectares. 

Description: 

High-tech office warehouse development, comprising four linked buildings with basement parking. 

32

91 Mars Road, Lane Cove, NSW 



6,794 sqm 





Major Tenants 


Doubleday Australia Limited 6,794 $142.50 February 2010 

Location: Located within the Lane Cove industrial area, easily accessible from Epping Road and the new M2 Motorway. 

Title Details: Freehold title with a site area of 7,853 square metres. 

Description: 

Traditional office/warehouse facility providing high clearance warehousing, offices over two levels and 

undercover parking. 

Lot 1, Old Geelong Road, Hoppers Crossing, Victoria 



52,612 sqm 





Major Tenants 


Coles Supermarkets Australia 

Pty Ltd 52,612 $86.50 October 2010 

Location: Approximately 20 kilometres south-west of Melbourne CBD, adjacent to the Princess Highway and with 

immediate access to the Western Distributor and planned City Link expressways. 

Title Details: Freehold title with a site area of 14.51 hectares. 

Description: 

National distribution centre for Kmart. 

33



85 Epping Road and 376 Lane Cove Road, North Ryde, NSW 


Estimated to be built in 

1980 and 1985 


13,153 sqm 





Major Tenants 


AC Nielson 4,562 $186.00 December 2000 

ICL Australia 8,591 $142.59 October 2000 

Location: Prominently located on the corner of Epping Road and Lane Cove Road, in the established high-tech 

industrial area of North Ryde. 


Description: 

The property incorporates two free standing high-tech buildings located in the heart of the North Ryde 

industrial area. The prominent corner position provides good exposure. 

Smithfield Stage 1, 364-368 Woodpark Road, Smithfield, NSW 


Late 1980s 


Industrial 14,313 sqm (86%) 

Office 2,416 sqm (14%) 

Total 16,729 sqm (100%) 





Major Tenants 


WDF Coghlan 8,349 $83.00 March 2004 

Islander Imports 1,776 $82.27* March 2000 

Colanco Printing 993 $78.00 December 2000 

* Gross Rent 

Location: 

The property is located in Smithfield, which is in the western suburbs of the Sydney metropolitan area 

approximately 35 kilometres west of the Sydney CBD and 7 kilometres to the south-west of Parramatta. 

The property benefits from good metropolitan and interstate road transport facilities with links directly to 

the Western Highway approximately 3 kilometres to the north and the Hume Highway approximately 

6 kilometres to the south. 

Title Details: The property is on a single title, with a total area of approximately 2.806 hectares. 

Description: 

The property consists of a relatively modern industrial estate comprising a total of 20 mixed warehouse and 

office units with a combined lettable area of approximately 16,729 square metres. 

Surrounding developments comprise a mix of industrial, manufacturing and distribution warehouse type 

properties, the majority of which have been constructed during the last 10 years. 

34

Smithfield Stage 2, 317-321 Woodpark Road, Smithfield, NSW 


Early 1990s 


Industrial 

13,820 sqm 

Office 

1,083 sqm 

Total 

14,903 sqm 





Major Tenants 


Omegatrend 1,850 $88.00 August 2000 

Speedy Wheels 1,770 $74.00 December 2001 

CEG Electric Glass 1,205 $70.00 July 2000 

Multicorp Distributions 1,069 $73.00 December 2000 

Location: The property is located opposite Smithfield Stage 1 in Woodpark Road. 

The property benefits from good metropolitan and interstate road transport facilities with links directly to 

the Western Highway approximately 3 kilometres to the north and the Hume Highway approximately 

6 kilometres to the south. 

Title Details: The property is on a single title with a site area of approximately 2.891 hectares. 

Description: 

The property is a modern warehouse estate comprising a total of 34 mixed industrial and office units 

arranged in four separate blocks. The majority of the units comprise smaller light industrial and warehouse 

type accommodation. 

The estate also includes a detached two storey property comprising a ground floor retail outlet together with 

an upper level caretaker’s office and adjoining residence. 

8 Giffnock Avenue, North Ryde, NSW 


n/a 


n/a 

Occupancy 

Vacant site 

Average Net Passing Rental 

n/a 



Location: 

Adjoining 85 Epping Road and 376 Lane Cove Road, North Ryde, with access from Giffnock Avenue. 

Title Details: Freehold title with a site area of 4,935 square metres. 

Description: 

Vacant industrial land zoned for high-tech use, situated adjacent to Fujitsu and AC Nielsen buildings, in the 

heart of North Ryde. 

35



60 Enterprise Place, Tingalpa, Queensland 



11,564 sqm 





Major Tenants 


Queensco Unity 6,091 $119.00 March 2006 

Pemara Labels 2,234 $97.00 May 2006 

Location: Part of the Wynngate Industrial Estate, adjoining the Gateway Arterial Road south of the Gateway Bridge 

and in close proximity to the port and airport. 


Description: 

Recently completed office warehouse complex, comprising one storage and distribution facility occupying 

half of the site and a three unit development on the remainder of the site. 

339-345 Military Road, Cremorne, NSW 

Date Completed Office completed in 1987 


Office 

3,693 sqm 

Alma House 

550 sqm 

The Stables 

233 sqm 

Total 

4,476 sqm 

Occupancy 80% 




Major Tenants 


ABKP 1,316 $242.00 September 2008 

Foss and McAuliffe 550 $336.00 (gross rent) May 2001 

Location: The property is located on the corner of Military Road and Belmont Road, Cremorne on the Sydney North 

Shore. The property is approximately 7 kilometres north of the Sydney CBD. 

Title Details: The property is located on a single title with a site area of approximately 3,988 square metres. 

Description: 

The property comprises a four level office building with a net lettable area of 3,693 square metres, a historic 

Victorian residence known as ‘Alma House’ and a third office building known as ‘The Stables’. 

36

17 O’Riordan Street, Alexandria, NSW 

(purchased 4 January 1999) Date Completed 1995 


Warehouse 

4,007 sqm 

Office 

2,054 sqm 

Storage 

36 sqm 

Total 

6,097 sqm 




Valuation Date November 1998 

Major Tenants 


Allders International 

(Oceania) Pty Ltd 6,097 $103.53 July 2007 

Location: 

The property is located in Alexandria, some 5 kilometres from the Sydney CBD. Alexandra is a well 

established industrial location and benefits from its proximity to shipping and air freight facilities with 

Kingsford Smith Airport and Port Botany some 3.5 and 9.5 kilometres to the south. 

Title Details: The property is located on a single title with a site area of 7,357 square metres. 

Description: 

The property comprises a modern high clearance warehouse together with an attached two level 

office building. 

80 Turner Street, Port Melbourne, Victoria 



Warehouse/other 

9,281 sqm 

Office 

2,539 sqm 

Total 

11,820 sqm 





Major Tenants 


Air International Pty Ltd 11,820 $88.53 December 2006 

Location: The property is located on the corner of Turner and Douglas Streets in Port Melbourne some 3 kilometres 

south-west of the Melbourne CBD adjacent to the soon to be developed Docklands precinct. The 

surrounding precinct is a traditional industrial area which is becoming increasingly popular with tenants with 

high-tech or office/warehouse requirements. 

Title Details: The property is located on a single title with site area of approximately 2.19 hectares. 

Description: 

The property is a modern purpose built office/warehouse, research and development facility. The property 

features a warehouse with seven metre clearance and administration area. 

37

Jones Lang LaSalle 

Market Overview 

Overview of Australian Property 

Markets – June 1999 

Prepared for 

The Directors 


Level 9, 330 Collins Street 

Melbourne Vic 3000 

38

Table of Contents 

Page 

Introduction 1 

Major Issues 1 

Australian Office Markets 2 

Australian Retail Markets 4 

Australian Industrial Markets 7 

Investment Market Conditions 9 

Disclaimer 

This Property Market Overview was prepared in October 1999, based on market data and 

information current as at the end of June (Q2) 1999. 

Jones lang LaSalle Advisory stresses that the estimating of future property market conditions, 

prices and rental levels should be regarded as an indicative assessment of possibilities rather 

than absolute certainties. The process of making projections involves assumptions about a 

considerable number of variables that are very sensitive to changing conditions. Variations in 

any one of these may, and often will, significantly affect the outcomes, we draw you attention to 

this as one of the many relevant factors to consider in making investment decisions. 

Jones Lang LaSalle Advisory has prepared this Property Market Overview , but has not been 

involved in the preparation of any other part of the Information Memorandum to which we 

understand it will be appended. Jones Lang LaSalle Advisory, therefore can not, and do not, 

make any warranty or representation as to the accuracy or completeness of any information or 

statement contained in any other part of the Information Memorandum. Jones Lang LaSalle 

Advisory specifically disclaims liability to any person in the event of any alleged false or 

misleading statement in, or material omission from any part of the Information Memorandum, 

other than in respect of the material prepared by Jones Lang LaSalle Advisory. 

39


Market Overview (continued) 

Overview of Australian Property 

Markets - June 1999 

Introduction 

This report has been prepared on instructions received 

from the Manager (Colonial First State Property Limited). 

The aim is to provide a broad overview of trends in the 

office, retail and industrial sectors of the Australian 

property markets as at June 1999. 

Major Issues 

The continued strength of the domestic economy (GDP 

grew 4.1% in year to June 1999) has been the major factor 

influencing commercial real estate markets in Australia 

over Q2/1999. (Q2 is Quarter 2, this refers to the market as 

at June 30 th 1999). 

Offices: There has been a marked improvement in 

sentiment since the beginning of 1999. This has been most 

noticeable in the Sydney CBD where a number of major 

deals over Q2/1999 have greatly reduced the risk of 

significant over-supply. 

Retail: Surging consumer spending resulted in retail sales 

increasing by 7% in the year to June 1999 ($139.4 bn). 

Combined with the strong financial performance by many 

major retailers, this has resulted in demand for further 

retail floor space. 

Industrial: Buoyant demand due to growth in output, 

particularly in those sectors producing retail goods and 

those related to the housing market. Continued shift from 

rental to ownership due to low interest rates. 

The following is a summary of the major issues that we 

expect will influence the property markets in Australia 

over the next year or so:- 

Interest Rates: The current low interest rate environment 

has acted as a major stimulus for demand for retail, 

residential and industrial property. Despite the increase in 

bond yields and money market rates experienced during 

Q2, the consensus is that interest rates will increase in late 

1999 / early 2000, which may have a dampening impact 

on the real estate market. 

Taxation Reforms: If the major findings of the Ralph 

Committee report are accepted (a reduction in the 

corporate rate tax to 30% and the retention of some form 

of accelerated depreciation for capital investment), the 

forthcoming business tax reforms are likely to have a 

positive impact on most sectors of the economy and 

therefore be beneficial for the property market. 

The other major tax reform relates to income tax, with 

significant tax cuts planned from July 2000. This is likely 

to lead to a further boost to the retail industry and to those 

areas of the manufacturing sector producing retail goods in 

the second half of next year. 

Employment Growth: Has recovered strongly over the 

second quarter of 1999 with this growth looking set to 

continue for the remainder of 1999. Employment grew by 

64 000 in June (annual growth of 2.2%) to a record level 

of 8.8 million. This pushed the unemployment rate down 

to a 9 year low of 7.0% in June, before increasing again to 

7.4% in September. The Australian labour market is now 

exhibiting similarities to that in the US with growth in the 

service sector outpacing labour shedding elsewhere in the 

economy. 

Retail Spending: Shows little sign of slowing down. 

While the monthly growth rate continues to fluctuate, June 

sales of $12.2 bn (seasonally adjusted) resulted in an 

annual growth rate of 7.1%. This is marginally above the 

average year on year growth of 6.9% achieved over the 

past 6 months. 

The Westpac – Melbourne Institute Survey of Consumer 

Sentiment is regarded as a good leading indicator of future 

retail sales levels. The index has continued to increase 

during 1999 with the July figure some 11.8% higher year 

on year. The index is currently at its highest level since 

1994. 

Housing Sector Still Growing: The level of both housing 

finance and dwelling approvals has improved in Q2 and 

further growth is expected prior to the GST. The strength 

of the housing market (along with strong employment 

growth and continued high consumption levels) may result 

in the Reserve Bank of Australia increasing interest rates 

to take some heat of the economy in late 1999 or early 

2000. 

GST: Although the GST will not be introduced until July 

2000, it is already having an impact. Sales of ‘luxury’ 

retail items such as televisions and stereos have been 

boosted by the first reduction in the Wholesale Sales Tax. 

Residential construction activity has also been boosted as 

owners bring forward projects. 

National Overview - June 1999 - 1 

40

Australian Office Markets 

Late 

Upturn 

CBD Office Markets 

Rental Cycle - As at Q2/1999 

Sydney 

Early 

Downturn 

The Sydney CBD is also at a quite different stage to other 

markets in terms of supply, being the only market to be 

currently witnessing significant levels of new 

development. Completion levels over Q2 were minimal 

with just 32 000m 2 completed nationally. The largest 

completion was the 8 000m 2 headquarters for Theiss 

Construction in the suburb of South Brisbane. 

Early 

Upturn 

Melbourne 

Perth 

Brisbane 

Adelaide 

Canberra 

Late 

Downturn 

Jones Lang LaSalle Advisory 

Figure 1 

Australian CBD office markets are at quite different stages 

of their rental cycle. 

The Sydney market is currently close to the peak of the 

present cycle with our expectation that average rentals will 

decline from current levels over the next year. Despite the 

high levels of new construction, the Sydney market is, 

however benefiting from strong positive demand and the 

downturn is therefore likely to be much less pronounced 

than in the previous market cycle. 

Other CBD office markets around Australia have seen 

much less construction activity than Sydney in the current 

cycle and (with the exception of Canberra) they continue 

to see a slow recovery in rentals. 

Supply Issues 

1,200 

1,000 

800 

Square Metres ('000s) 

OFFICE SUPPLY 

Capital City CBDs 

Future construction levels remain minimal in all markets 

except for the Sydney CBD (384 000m 2 ) which accounts 

for over 60% of all office space currently under 

construction across all the 15 markets monitored 

(620 000m 2 ). All of the office space currently under 

construction across Australia is scheduled for completion 

in 1999 or 2000, with no projects scheduled to enter the 

market in 2001. 

Demand Issues 


600 

400 

200 

0 

-200 

Average of mid-point of forecast ranges 

OFFICE NET ABSORPTION 


Forecast Q3/Q4 

Absorbed 

Q1/Q2 

1994 1995 1996 1997 1998 1999 


Figure 3 

There has been a significant increase in net absorption 

across the major Australian office markets during 

Q2/1999. Net absorption has increased from less than 

40 000m 2 in Q1 to more than 100 000m 2 in Q2, resulting in 

net absorption of around 145 000m 2 for the first half of 

1999. We are now forecasting total net absorption across 

all Capital City CBD markets of almost 212 000m 2 in 

1999, an increase of more than 100% from the 1998 total 

of 93 000m 2 . 

600 

400 

200 

0 

70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 

Completed Under Construction 


Figure 2 

Net absorption has been strongest in the Sydney and 

Melbourne CBDs, both of which recorded levels in excess 

of 35 000m 2 in Q2. All the other CBD markets have seen 

positive net absorption, with the only markets 

experiencing a reduction in total occupied stock over the 

past quarter being the suburban markets of St Kilda and 

South East Suburbs in Melbourne and Crows Nest / St 

Leonards in Sydney. 


41




Vacancies 

30% 

25% 

20% 

15% 

10% 

5% 

OFFICE VACANCY RATES 


0% 

1993 1994 1995 1996 1997 1998 Q2/99 

Sydney Melbourne Brisbane Adelaide Perth Canberra 


Figure 4 

With limited levels of new supply and stronger than 

expected demand, vacancy levels have fallen in most 

office markets during Q2/1999. Vacancies in the Sydney 

CBD have moved down to 6.1%, in line with levels 

experienced in Q2/1998. This is forecast to be a short term 

improvement, with vacancies forecast to increase again 

over the second half of this year. 

Vacancies have continued to trend down in Melbourne and 

Brisbane CBDs over Q2, while Adelaide, Perth and Canberra 

CBDs have seen little change in vacancy rates. The only 

markets to have witnessed an increase in vacancies over Q2 

have been the Melbourne Suburban markets of St Kilda Road 

and South East Suburbs. 

Rents 

Brisbane CBD 

Melbourne CBD 

Sydney CBD 

Perth CBD 

Adelaide CBD 

Canberra 

OFFICE RENTS 


-15% -10% -5% 0% 5% 10% 15% 20% 

Growth % p.a. 

Average prime gross effective rents 

12 months to Q2/1999 12 months to Q2/1998 


Figure 5 

There have been no significant changes in effective rental 

levels during Q2/1999, with most markets recording either 

no change or a minor increase in rents. Figure 5 shows 

that rents in Canberra have fallen significantly over the 

past two years while the other CBD markets have 

continued to experience positive rental growth. The rate of 

growth has accelerated in both Melbourne and Brisbane 

over the past year. 

The average rent for prime space in the Sydney CBD has 

remained static at $478 m 2 , since Q4 1998. This average 

has been impacted by two countervailing trends. Rentals 

for space in existing buildings have been stable or 

increasing slightly, while new buildings have been leasing 

at rentals below the market average. Rents for secondary 

grade space have also been declining in the Sydney CBD. 

Yields 

12% 

10% 

8% 

6% 

OFFICE YIELDS 


4% 

1993 1994 1995 1996 1997 1998 Q2/99 

Mid-point yields 



Figure 6 

Despite the increase in interest rates and the upward trend 

in bond rates, there has been no significant change in 

investment yields for prime quality CBD office buildings. 

The only market to have seen any increase in yields in 

Q2/1999 has been the Sydney CBD, where the higher end 

of the range has moved out by 25 basis points to 7.00%. 

Melbourne CBD continues to attract the lowest yields of 

any Australian office market (4.00% - 6.00%). There 

remains strong investor interest due to the perception that 

significant levels of rental growth will be experienced over 

the next 5 years. 


42


Australian Retail Markets 

Capital Values 

Retail Markets 

There has been very little growth in the capital value of 

CBD office space across Australia over the past year. 

During the year to Q2/1999, values have fallen in Canberra 

and Perth, with no change recorded in either Sydney or 

Adelaide. The only markets to experience an increase in 

values over this period have been Melbourne (5.5%) and 

Brisbane (4.3%). 

Late 

Upturn 

Sydney CBD 

Melbourne CBD 


Early 

Downturn 

The Sydney market has seen the strongest growth in values 

since 1993. This is largely a reflection of the fact that 

values declined most in the Sydney CBD in the previous 

market downturn. Despite having increased by 40% since 

December 1993, capital values for prime office space in 

the Sydney CBD remain some 35% below those reached at 

the peak of the previous cycle in 1989/90. 

$7,000 

$6,000 

$5,000 

$4,000 

$3,000 

$2,000 

$1,000 

Per Square Metre 

CAPITAL VALUE INDICATORS 


$0 

1993 1994 1995 1996 1997 1998 Q2/1999 



Figure 7 

Early 

Upturn 

Melbourne 

Regional 

Sydney 

Regional 

Late 

Downturn 


Figure 8 

Retail markets continue to perform positively across most 

states and sectors. Turnover growth is still trending 

upwards, with further improvements likely until mid-2000. 

Rental growth has occurred and a number of sectors have 

witnessed a further firming of property yields. 

Construction activity is currently strong, but appears to 

have peaked and is forecast to diminish over the next few 

years. 

Melbourne and Sydney CBDs have experienced 

significant rental growth, and are now clearly in the late 

upturn of the rental cycle. Regional centres across the 

country are likely to witness continued moderate rental 

growth over 1999-2000. 

Supply Issues 

RETAIL SUPPLY 

Australia 

240 


200 

160 

120 

80 

40 

0 

CBD Regional Sub Regional Neighbourhood Bulky Goods 

Historic (1996-98 - avg pa) 

Excludes Canberra and Bulky Goods prior to 1997 

Outlook (1999-01 - avg pa) 


Figure 9 

Shopping centres are continuing to expand, while new 

bulky goods outlets are planned. Although many projects 

are in the pipeline, few additional developments were 

confirmed in Q2, indicating that the cycle may have 

peaked, except in the regional sector where there remain a 

few large extensions still to complete. 


43




C BD s: Following the peak of 1998, completion levels are 

likely to be significantly lower over the next three years . 

Minimal supply has been added this year to date, and only 

16 000m 2 remain s u nd er co ns tru ction and du e f or 

completion this year (all in Sydney CBD ). 

Regional Centres: Next year is likely to witness the peak of 

the supply cycle for regional centres . The average centre is 

n ow b eco ming larg er with cinemas , bu lky g oo d r etailin g 

and more specialities often being incorporated . 

Sub –Regional/Neighbourhood Centres : Increased 

activ ity o ver the p ast 6 mo nths is likely to r es u lt in 

con stru ction peak in g in 1999. 

Bulky Goods: Almost 140 000m 2 has completed across 

multi-unit centres and category killers during the year to 

date, mostly in the form of new centres. 

Demand Issues 

140 

120 

100 

80 

60 

40 

20 

CONSUMER SENTIMENT/RETAIL TURNOVER 

Australia 

Consumer Sentiment Index 

Quarterly Growth - Trend at Constant Prices 

-0.5% 

0 

-1.0% 

6/85 6/86 6/87 6/88 6/89 6/90 6/91 6/92 6/93 6/94 6/95 6/96 6/97 6/98 6/99 

Consumer Sentiment (LHS) Turnover Growth (RHS) Long term avg - Turnover Growth (RHS) 

Source: ABS, Westpac/Melbourne Institute 


2.5% 

2.0% 

1.5% 

1.0% 

0.5% 

0.0% 

Figure 10 

Quarterly turnover growth slowed slightly over Q2/1999 to 

1.2%, in line with normal seasonal fluctuations. National 

retail turnover remains at record high levels. 

Sustained positive consumer sentiment continues to 

underpin the high retail turnover levels recorded. This is 

due to a number of factors including:- 

- Rising real income levels 

- Increased job security and tightening labour 

market conditions, 

- Anticipation of the introduction of the GST 

in mid-2000, 

- Low interest rate environment, and 

- Ready availability of credit. 

Clothing/Soft Goods 

Hospitality/Services 

Other 

Total 

Recreational Goods 

Food 

Dept Stores 

Household Goods 

RETAIL TURNOVER BY CATEGORY 

Australia 

Growth (%) 

-2% 0% 2% 4% 6% 8% 10% 12% 

Percentage change in MAT - Current Prices Year to Q2/1998 Year to Q2/1999 

Source: ABS 


Figure 11 

Total moving annual retail turnover growth continued to 

accelerate, recording 6.1% over the year to June 1999 

(current prices). Clothing/soft goods and 

hospitality/services remained the major beneficiaries. 

Despite a continued fall in household goods turnover, 

furniture and floor covering retailing (8.9%) and domestic 

hardware and houseware retailing (1.6%) have recorded 

positive growth over the last 12 months. 

Annual turnover growth was strongest in Victoria (9.3%) 

and Queensland (7.7%), with all states recording growth 

above 4%. Annual growth of over 20% was recorded for 

clothing and soft goods retailing in Victoria and for 

recreational goods retailing in the Australian Capital 

Territory. The poorest performing sectors in the year to 

June 1999 were household good retailing in Western 

Australia (-5.3%) and New South Wales (-4.4%). 

Vacancies 

12% 

10% 

8% 

6% 

4% 

2% 

RETAIL VACANCY 

Australia 

Proportion of Shops Vacant 

0% 

6/93 12/93 6/94 12/94 6/95 12/95 6/96 12/96 6/97 12/97 6/98 12/98 3/99 6/99 

Note : Arithmetic average of all major cities. 

Sub-regional vacancy excludes Canberra 

CBD Regional Sub Regional Neighbourhood 


Figure 12 

CBDs: The national vacancy rate rose slightly to 4.9%, 

with increases recorded in all eastern seaboard states. 

Vacancy rates in Sydney and Brisbane are the highest 

witnessed since June 1996, with the upgrading of city 

environments a major short term negative to CBD retailing 

in these cities. 


44


Regional Centres: Although national vacancy remains 

low, rates have increased in all capitals except Adelaide. 

Lowest vacancies were found in Melbourne (0.5%), 

Adelaide (0.9%) and Sydney (1.1%). 

Neighbourhood Centres: This sector continues to exhibit 

the highest vacancy levels (averaging 8.2%). Vacancies in 

neighbourhood centres in Melbourne have however fallen 

to the lowest vacancy on record (5.5%), with almost full 

occupancy in some larger neighbourhood centres. 

Rents 

CBD 

Sub Regional* 

Neighbourhood 

Regional 

Average net rents 

* Excludes Canberra 

Growth (%) 

RETAIL RENTS 

Australia 

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



Figure 13 

CBD: Very strong rental growth has been witnessed in 

Melbourne CBD over the past year and this continued 

during Q2/1999. This has been primarily driven by the low 

rental base, although significant improvements in tenant 

demand and trading levels have also assisted. Sydney has 

been the only other city to witness solid rental growth over 

the year. 

Sub-regional/Neighbourhood Centres: Mixed results 

recorded, although sub-regional centres in Sydney (18.2%) 

and neighbourhood centres in Melbourne (7.2%) saw solid 

rental growth over the 12 months to Q2/1999. 

Yields 

CBD & Enclosed Centre Yields 

As at Q2/1999 

Table 1 

N’hood 

Prime 

CBD 

Regional Sub- 

Regional 

Sydney 7.75-9.00 7.50 9.75 9.00-11.00 

Melbourne 7.75-9.50 7.50 9.75 9.50-11.00 

SE Qld 8.00-9.00 8.00 10.00 9.50-12.00 

Adelaide 8.50-11.00* 8.75 10.75 9.50-14.00 

Perth 8.25-9.25 7.50 10.00 9.50-13.00 

Canberra 8.75-11.00 8.00 N/A 9.00-11.00 

* Rundle Mall (Super Prime CBD) 

Note Yield ranges used for Prime CBD and Neighbourhood Centres 

Median yields quoted for Regional and Sub-Regional Centres 

Retail yields have continued to firm across several 

markets, with further decreases expected over the 

remainder of the year. Investors are reacting positively to 

the sector in general with the sheer volume of funds and 

limited availability of stock impacting strongly on property 

yields. 

CBD: Despite the wide variety of retail space in the CBD, 

prime yields are firm across most cities. This reflects 

positive investor sentiment and the scarcity of product 

available. Over the quarter, yields decreased in Sydney and 

Canberra. 

Enclosed Centre: Overall yields for enclosed centres are 

continuing to firm across most states, especially at the 

lower end of the market. Despite this, and the recent rise in 

10-year bond rates, the yield gap remains high and is 

creating investment opportunities. Over the quarter, 

regional median yields firmed in Melbourne and Canberra, 

while sub-regional medians firmed in Sydney. 

Neighbourhood yields firmed in Sydney, Melbourne and 

Canberra with other states likely to witness similar 

outcomes over the short term. 

Regional Centres: While South East Queensland and 

Adelaide have recorded low/negative increases, all other 

states have recorded 2%-3% annual average net rental 

growth. 

Bulky Goods: Little change over the quarter, except in 

Sydney where minimal increases occurred. 


45



Australian Industrial Markets 

Late 

Upturn 

Brisbane 

Sydney 

Perth 

Industrial Markets 


Melbourne 

Early 

Downturn 

Over 1.08 million m 2 of additional industrial space has 

been completed during the first half of 1999. Completions 

for the year look set to match or possibly even exceed the 

record levels experienced in 1998. 

Completions of traditional industrial premises remain at 

high levels with Melbourne, Brisbane and Adelaide set to 

experience higher levels of supply than those recorded in 

1998. 

Early 

Upturn 

Adelaide 

Canberra 

Late 

Downturn 


Figure 14 

The industrial sector of the market has seen stronger 

demand during Q2, largely as a result of the strength of the 

overall economy. This has fed through to increased 

demand for manufactured products, particularly for retail 

goods and those used in the housing sector. 

High tech development activity has increased in Sydney 

and Brisbane, with completion levels over the first half of 

1999 already exceeding 1998 levels. A substantial amount 

of space remains under construction and proposed for 

completion in Sydney over the remainder of 1999 and 

2000. 

The low interest rate environment coupled with Olympic 

related activity remain the major factors behind the 

development activity in Sydney. High levels of 

affordability and low cost ‘design & construct’ and precommitment 

activity continue to drive the market 

nationally. 

Most industrial markets remain in the upturn stage of the 

rental cycle. The only exception is Canberra, where rentals 

continue to fall due to limited leasing activity. 

Melbourne rents peaked some time ago and have been 

trending down marginally in some areas over the past year 

or more. Rents now appear likely to fall more 

significantly, driven down by the very competitive terms 

being offered to attract tenants to pre-lease new projects. 

Supply 

Demand 


5,000 

4,000 

3,000 

2,000 

1,000 

INDUSTRIAL TAKE-UP* 

Australia 


INDUSTRIAL SUPPLY 

Capital Cities 

0 

1994 1995 1996 1997 1998 H1/1999 

* Traditional & High Tech 

Average 1994-98 


2,400 

Figure 16 

2,000 

1,600 

1,200 

800 

400 

0 

1994 1995 1996 1997 1998 1999 2000 

Completed 

Under Construction 

Proposed/Mooted Average (1994-1998) 


* Traditional & High Tech 

Figure 15 

Take-up activity remains strong with over 1.7 million m 2 

of industrial space absorbed nationally over the first half of 

1999. Gross activity strengthened considerably over Q2 in 

most capitals after a very quiet Q1. Melbourne, in 

particular experienced a tripling in activity over this time. 

Take-up levels are however, likely to fall short of the 

record levels experienced in 1998, especially in Sydney 

where activity is starting to slow. 


46

Australian Industrial Markets 

Rents 

Sydney 

Melbourne 

Brisbane 

AVERAGE RENTS 

Prime Industrial 

Prime yields have either remained unchanged or firmed 

marginally in all markets over the past 6 months. This 

continues the longer term trend towards firmer industrial 

yields in all markets except for Canberra. 

Comparatively attractive returns and steady rental growth 

continue to draw investors towards prime, and in some 

instances secondary, property. 

Adelaide 

Perth 

Canberra 

-3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 



Figure 17 

Rental growth remains strong in Sydney but patchy 

elsewhere with Perth and Brisbane recording increases in 

the 12 months to Q2/1999. Adelaide recorded zero rental 

growth in the year to Q2/1999. Rents continued to decline 

in both Melbourne and Canberra which remains in the 

downturn phase of the rental cycle. 

Continued strong demand has been the catalyst for growth 

in Sydney. In Melbourne, competition among developers 

and waning demand have pushed pre-lease rents below 

existing prime rental levels. Further slides in rentals are 

expected in the Melbourne market during the remainder of 

1999. 

In Brisbane and Perth, steady demand has underpinned 

rental increases. The trend towards owner occupation and 

the strong growth of the ‘design & construct’ market have, 

however, prevented significant gains from being recorded. 

Yields 

13% 

12% 

11% 

10% 

AVERAGE YIELDS 


Strong demand for industrial property has resulted in 

competition between private investors and institutions. 

This has caused yields to firm in light of the scarce 

investment opportunities available. 

Capital Values 

$ / Square Metre 

$1,100 

$1,000 

$900 

$800 

$700 

$600 

$500 

$400 

CAPITAL VALUES 


$300 

6-94 9-94 12-94 3-95 6-95 9-95 12-95 3-96 6-96 9-96 12-96 3-97 6-97 9-97 12-97 3-98 6-98 9-98 12-98 3-99 6-99 

Sydney Melbourne Brisbane Adelaide Perth 


Figure 19 

Capital values have continued to increase in some sectors 

of the Sydney market over the past 6 months, particularly 

in Northern Sydney, while stabilising in other parts of the 

metropolitan area. Average growth in Sydney in the year 

to Q2/1999 was some 4.8%. 

Perth was the only other market to experience increasing 

capital values in the year to Q2/1999. In Adelaide values 

remained stable with marginal falls in other markets. 

Figure 19 shows that Sydney has been the only market to 

experience significant gains in industrial capital values, 

with gains in Melbourne, Brisbane and Adelaide being 

steady if unspectacular over the longer term. 

9% 

8% 

03-94 06-94 09-94 12-94 03-95 06-95 09-95 12-95 03-96 06-96 09-96 12-96 03-97 06-97 09-97 12-97 03-98 06-98 09-98 12-98 03-99 06-99 



Figure 18 


47



Investment Market Conditions 

Direct Investment Activity 

The f ir s t 6 m on th s o f 19 9 9 saw a d eclin e in th e total v alu e 

of direct property investment activity (sales over $5 million ) 

following a prolonged period of high activity in 1997 and 

1 99 8. O v er th e firs t h alf o f 19 9 9 th ere w as $3 ,2 0 3m 

trans acted n ation ally, r epr es en tin g a 4 5% d eclin e o n th e 

previous six month period. 

The office sector continues to record the greatest value of 

turnover , underpinned by the sale of Melbourne Central and 

a number of transactions associated with the listing of the 

Commonwealth Bank 's Property Office Fund which 

contributed $619m to the total of $1 ,760m . 

Retail transactions continued at a strong pace, although they 

also fell by 34 % when compared to the previous six month 

p er io d. Majo r trans actio n s in clu ded Melbo ur n e Cen tr al an d 

a 50% interest in Marketown Mt Druitt. 

Industrial investment activity fell away significantly, with 

only $283m transacted, representing a 72% decline in 

activ ity in the p rev io us s ix m on th per io d. 

Direct Property Sales (1) 

Australia 

Table 2 

Q1 & Q2 /1999 

( $m) 

1997 

( $m) 

1998 

( $m) 

Office 3 670.3 6 0157.6 1 760.4 

Retail 3 402.7 2 957.3 1 159.3 

Industrial 1 548.7 1 838.9 283.1 

Total 8 621.6 10 812.0 3 202.8 

(1) Sales over $5 million 


Sales activity is expected to continue at lower levels than 

was experienced during 1997 and 1998. Transactional 

activity associated with new Listed Property Trust and 

Government asset sales which contributed significantly to 

total activity in those years is expected to be lower in 

1999. 

12 

10 

8 

6 

4 

2 

0 

$ billion 

DIRECT PROPERTY SALES 

Australia 

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999* 

Office Retail Industrial 

Sales in excess of $5 million 

* 6 months to June Jones Lang LaSalle Advisory 

Net Purchaser Profile (1) 

Direct Property Sales (2) 

Australia - 12 months to Q2/1999 

Figure 20 

Table 3 

O ff ic e 

$ m 

Retail 

$ m 

Industrial 

$ m 

Total 

$ m 

Institutions -2,060.3 122.4 153.2 -1,784.7 

Property Trusts 2,980.2 1,120.4 530.8 4,631.4 

Developers/Prop. -184.1 -149.2 -285.7 -619.0 

Co. 

Corporates -155.4 -333.5 -154.3 -643.2 

Australian Private 10.0 -224.9 -86.0 -300.8 

Government -235.0 -32.8 -29.9 -297.6 

Non-Profit 

-12.6 -18.1 -11.2 -41.9 

Organisations 

Foreign – Asian -446.1 -404.8 -176.5 -1,027.4 

Foreign – Other 82.9 -25.5 33.9 91.3 

Other/Unknown 20.2 -54.1 25.8 -8.1 

(1) Total purchases less total sales 

(2) Sales over $5 million 

$ millions 

4,000 

3,500 

3,000 

2,500 

2,000 

1,500 

1,000 

500 

Direct & Indirect Real Estate 

Investment Activity 

0 

6/93 6/94 6/95 6/96 6/97 6/98 6/99 

Direct Real Estate Sales LPT Turnover LPT Sector - Capital Raised 

N.B. Direct real estate sales over $5 million 

Source: ASX/JB Were & Son 


Figure 21 


48

5. Financial Information 

Financial Summary 


The following table sets out the pro-forma balance sheet of CPG assuming the Merger Proposal was fully implemented 

as at 30 June 1999. The pro-forma balance sheet reflects the aggregate of: 

audited accounts as at 30 June 1999 of Colonial First State Industrial Property Trust and Colonial First State 

Commercial Property Trust, adjusted to reflect the effect of property re-valuations since that date; 

audited accounts as at 30 June 1999 of Colonial First State Development Trust, excluding the equity receivable 

(final instalment) and adjusted to reflect the effect of property re-valuations and actual capital expenditure to 

30 September 1999; and 

audited accounts as at 30 September 1999 of Colonial First State Retail Property Trust (as its financial statements are 

prepared as at 30 September each year), adjusted to reflect the effect of property re-valuations since that date. 

CPG (1) Pro-forma Balance Sheet $’000 

Current Assets 

Cash and other current assets 22,064 

Receivables 

_______________ 

7,138 

Total Current Assets 

_______________ 

29,202 

Non-Current Assets 

Properties 1,600,722 

Other investments 

_______________ 

– 

Total Non-Current Assets 

_______________ 

1,600,722 

Total Assets 

_______________ 

1,629,924 

Current Liabilities 

Accounts payable 

_______________ 

15,032 

Distributions payable 

_______________ 

22,850 

Total Current Liabilities 

_______________ 

37,882 

Non-Current Liabilities 

Borrowings 

_______________ 

434,500 

Total Non-Current Liabilities 

_______________ 

434,500 

Total Liabilities 

_______________ 

472,382 

Net Assets 

_______________ 

1,157,542 

Securities on issue 

_______________ 

585,827,819 

NTA per Security 

_______________ 

$1.98 

Debt/Total Assets 

_______________ 

26.66% 

Note: 

(1) Colonial First State Property Trust Group (merged group) – assumes Merger Proposal is implemented. 

49


Financial Summary (continued) 

The following table sets out the Manager’s forecast distributions for the six months ending 30 June 2000 and the year 

ending 30 June 2001, assuming the Merger Proposal is implemented. These forecasts must be read in conjunction with 

the material forecast assumptions and risk factors set out on pages 59–63. While the Manager believes the assumptions 

made in preparing the forecasts are appropriate and reasonable, some factors that may affect results cannot be foreseen 

or accurately predicted and many factors are beyond the control of the Manager. Actual results often differ from forecast 

results. Consequently the Manager cannot guarantee that the forecast results will be achieved. 

6 Months to Year to 

CPG (1) Distribution Statement 30 June 2000 30 June 2001 

Income 

Total net property income 66,477,085 142,720,451 

Total rental indemnities 925,278 150,278 

Interest income 

_______________ 

66,373 

_______________ 

41,365 

Total Income 

_______________ 

67,468,737 

_______________ 

142,912,094 

Expenses 

Trust expenses 5,005,648 11,673,330 

Interest expense 

_______________ 

13,652,470 

_______________ 

30,789,227 

Total Expenses 

_______________ 

18,658,118 

_______________ 

42,462,556 

Net Income 48,810,618 100,449,538 

Transfer from (to) reserves 4,091,831 8,120,738 

Distributable Income 

_______________ 

52,902,449 

_______________ 

108,570,275 

Average Securities 

_______________ 

587,804,988 

_______________ 

599,813,421 

Earnings Per Stapled Security (June 2000 annualised) (2) 16.61 c 16.75 c 

Distribution Per Stapled Security (June 2000 annualised) (2) 18.00 c 18.10 c 

Notes: 


(2) All earnings per unit and distributions per unit do not take account of the potential impact of GST. 

50


Impact on Colonial First State Retail Property Trust 

The following table sets out the: 

audited balance sheet of CMF as at 30 September 1999 (as its financial statements are prepared as at 30 September 

each year), adjusted to reflect the effect of property re-valuations since that date; and 

the pro-forma balance sheet of CPG assuming the Merger Proposal was fully implemented as of 30 June 1999 – the 

basis of the pro-forma accounts for CPG is set out at the beginning of this Section. 

CMF (1) CPG (2) 

Pro-forma Balance Sheet $'000 $'000 


Cash and other current assets 3,901 22,064 

Receivables 

_______________ 

4,704 

_______________ 

7,138 


_______________ 

8,605 

_______________ 

29,202 


Properties 512,027 1,600,722 


_______________ 

0 

_______________ 

0 


_______________ 

512,027 

_______________ 

1,600,722 

Total Assets 

_______________ 

520,632 

_______________ 

1,629,924 


Accounts payable 4,048 15,032 


_______________ 

8,462 

_______________ 

22,850 


_______________ 

12,510 

_______________ 

37,882 


Borrowings 

_______________ 

138,500 

_______________ 

434,500 


_______________ 

138,500 

_______________ 

434,500 


_______________ 

151,010 

_______________ 

472,382 

Net Assets 

_______________ 

369,622 

_______________ 

1,157,542 


_______________ 

325,443,693 

_______________ 

585,827,819 


_______________ 

$1.14 

_______________ 

$1.98 


_______________ 

26.60% 

_______________ 

26.66% 

Notes: 

(1) Colonial First State Retail Property Trust – assumes Merger Proposal is not implemented. 


Given the ratio of 0.585 CPG Stapled Securities for each unit held in CMF, the comparable NTA per Stapled Security 

is $1.16 compared to the present $1.14. 

51


Impact on Colonial First State Retail Property Trust (continued) 

The following table sets out the Manager’s forecast distributions for the six months ending 30 June 2000 and 12 months 

ending 30 June 2001, assuming the Merger Proposal is not implemented (refer to columns headed CMF) and also assuming 

that the Merger Proposal is implemented (refer to columns headed CPG). The table should be read in conjunction with 

the major assumptions and risks set out on pages 59–63 and the statement concerning financial forecasts on page 50. 

6 Months to 30 June 2000 Year to 30 June 2001 

Distribution Statement CMF (1) CPG (2) CMF (1) CPG (2) 

Total net property income 22,317,351 66,477,085 45,010,464 142,720,451 

Total rental indemnities 0 925,278 0 150,278 


_______________ 

78,887 

_______________ 

66,373 

_______________ 

157,545 

_______________ 

41,365 

Total Income 

_______________ 

22,396,238 

_______________ 

67,468,737 

_______________ 

45,168,009 

_______________ 

142,912,094 

Expenses 

Trust expenses 1,868,334 5,005,648 3,877,730 11,673,330 


_______________ 

3,587,175 

_______________ 

13,652,470 

_______________ 

7,845,883 

_______________ 

30,789,227 


_______________ 

5,455,509 

_______________ 

18,658,118 

_______________ 

11,723,613 

_______________ 

42,462,556 

Net Income 16,940,730 48,810,618 33,444,395 100,449,538 

Transfer from (to) reserves 145,064 4,091,831 877,206 8,120,738 


_______________ 

17,085,794 

_______________ 

52,902,449 

_______________ 

34,321,601 

_______________ 

108,570,275 


_______________ 

325,443,693 

_______________ 

587,804,988 

_______________ 

325,443,693 

_______________ 

599,813,421 

Earnings Per Unit (June 2000 annualised) (3) 10.41 c 16.61 c 10.28 c 16.75 c 

Distribution Per Unit (June 2000 annualised) (3) 10.50 c 18.00 c 10.55 c 18.10 c 

Notes: 

(1) Colonial First State Retail Property Trust – assumes Merger Proposal is not implemented. 


(3) All earnings per unit and distributions per unit do not take account of the likely impact of GST. 

Given the ratio of 0.585 CPG Stapled Securities for each unit held in Colonial First State Retail Property Trust, the 

comparable distributions per ordinary unit currently held in Colonial First State Retail Property Trust (ie. assuming 

the Merger Proposal is not implemented) and per 0.585 Stapled Securities in Colonial First State Property Trust Group 

(ie. assuming the Merger Proposal is implemented) are: 


30 June 2000 (annualised) 30 June 2001 

Excluding the Impact of GST 

Colonial First State Retail Property Trust 10.50c 10.55c 

Colonial First State Property Trust Group 10.53c 10.59c 

Including the Potential Impact of GST 

Colonial First State Retail Property Trust 10.50c 10.46c 


52


Impact on Colonial First State Industrial Property Trust 

The following table sets out: 

the audited balance sheet of Colonial First State Industrial Property Trust (‘CIP’) as at 30 June 1999, adjusted to reflect 

the effect of property re-valuations since that date; and 



30 June 1999 

CIP (1) CPG (2) 

Pro-forma Balance Sheet $’000 $’000 



Receivables 

_______________ 

1,355 

_______________ 

7,138 


_______________ 

9,213 

_______________ 

29,202 


Properties 463,064 1,600,722 


_______________ 

0 

_______________ 

0 


_______________ 

463,064 

_______________ 

1,600,722 

Total Assets 

_______________ 

472,277 

_______________ 

1,629,924 




_______________ 

8,168 

_______________ 

22,850 


_______________ 

10,669 

_______________ 

37,882 


Borrowings 

_______________ 

127,700 

_______________ 

434,500 


_______________ 

127,700 

_______________ 

434,500 


_______________ 

138,369 

_______________ 

472,382 

Net Assets 

_______________ 

333,908 

_______________ 

1,157,542 


_______________ 

183,551,660 

_______________ 

585,827,819 


_______________ 

$1.82 

_______________ 

$1.98 


_______________ 

27.04% 

_______________ 

26.66% 

Notes: 

(1) Colonial First State Industrial Property Trust – assumes Merger Proposal is not implemented. 


Given the ratio of 0.950 CPG Stapled Securities for each unit held in CIP, the comparable NTA per Stapled Security 


53


Impact on Colonial First State Industrial Property Trust (continued) 

The following table sets out the Manager’s forecast distributions for the six months ending 30 June 2000 and year ending 

30 June 2001, assuming the Merger Proposal is not implemented (refer to columns headed CIP) and also assuming that the 

Merger Proposal is implemented (refer to columns headed CPG). The table should be read in conjunction with the major 

assumptions and risks set out on pages 59–63 and the statement concerning financial forecasts on page 50. 


Distribution Statement CIP (1) CPG (2) CIP (1) CPG (2) 

Income 




_______________ 

186,675 

_______________ 

66,373 

_______________ 

248,302 

_______________ 

41,365 

Total Income 

_______________ 

21,451,842 

_______________ 

67,468,737 

_______________ 

42,173,043 

_______________ 

142,912,094 

Expenses 



_______________ 

4,095,856 

_______________ 

13,652,470 

_______________ 

8,393,894 

_______________ 

30,789,227 


_______________ 

5,865,038 

_______________ 

18,658,118 

_______________ 

12,328,063 

_______________ 

42,462,556 

Net Income 15,586,805 48,810,618 29,844,980 100,449,538 

Transfer from (to) reserves 15,086 4,091,831 991,699 8,120,738 


_______________ 

15,601,891 

_______________ 

52,902,449 

_______________ 

30,836,679 

_______________ 

108,570,275 


_______________ 

183,551,660 

_______________ 

587,804,988 

_______________ 

183,551,660 

_______________ 

599,813,421 



Notes: 

(1) Colonial First State Industrial Property Trust – assumes Merger Proposal is not implemented. 



Given the ratio of 0.950 CPG Stapled Securities for each unit held in Colonial First State Industrial Property Trust, the 

comparable distributions per ordinary unit currently held in Colonial First State Industrial Property Trust, (ie. assuming 






Colonial First State Industrial Property Trust 17.00c 16.80c 



Colonial First State Industrial Property Trust 17.00c 16.56c 


54


Impact on Colonial First State Commercial Property Trust 

The following table sets out: 

the audited balance sheet of Colonial First State Commercial Property Trust (‘COC’) as at 30 June 1999, adjusted to 

reflect the effect of property re-valuations since that date; and 



30 June 1999 

COC (1) CPG (2) 




Receivables 

_______________ 

1,079 

_______________ 

7,138 


_______________ 

4,145 

_______________ 

29,202 


Properties 350,631 1,600,722 


_______________ 

0 

_______________ 

0 


_______________ 

350,631 

_______________ 

1,600,722 

Total Assets 

_______________ 

354,776 

_______________ 

1,629,924 




_______________ 

6,220 

_______________ 

22,850 


_______________ 

7,258 

_______________ 

37,882 


Borrowings 

_______________ 

45,300 

_______________ 

434,500 


_______________ 

45,300 

_______________ 

434,500 


_______________ 

52,558 

_______________ 

472,382 

Net Assets 

_______________ 

302,218 

_______________ 

1,157,542 


_______________ 

155,029,854 

_______________ 

585,827,819 


_______________ 

$1.95 

_______________ 

$1.98 


_______________ 

12.77% 

_______________ 

26.66% 

Notes: 

(1) Colonial First State Commercial Property Trust – assumes Merger Proposal is not implemented. 

(2) Colonial First State Property Trust Group (merged group) – assumes Merger Proposal is not implemented. 

Given the ratio of 0.965 CPG Stapled Securities for each unit held in COC, the comparable NTA per Stapled Security is 

$1.91 compared to the present $1.95. 

55


Impact on Colonial First State Commercial Property Trust (continued) 


30 June 2001, assuming the Merger Proposal is not implemented (refer to columns headed COC) and also assuming that 

the Merger Proposal is implemented (refer to columns headed CPG). The table should be read in conjunction with the 

major assumptions and risks set out on pages 59–63 and the statement concerning financial forecasts on page 50. 


Distribution Statement COC (1) CPG (2) COC (1) CPG (2) 

Income 

Total net property income (3) 15,206,865 66,477,085 33,676,521 142,720,451 

Total rental indemnities 925,278 925,278 150,278 150,278 


_______________ 

140,246 

_______________ 

66,373 

_______________ 

350,183 

_______________ 

41,365 

Total Income 

_______________ 

16,272,389 

_______________ 

67,468,737 

_______________ 

34,176,982 

_______________ 

142,912,094 

Expenses 



_______________ 

1,408,542 

_______________ 

13,652,470 

_______________ 

5,407,751 

_______________ 

30,789,227 


_______________ 

2,743,530 

_______________ 

18,658,118 

_______________ 

8,457,388 

_______________ 

42,462,556 

Net Income 13,528,809 48,810,618 25,719,594 100,449,538 

Transfer from (to) reserves (1,088,508) 4,091,831 320,306 8,120,738 


_______________ 

12,440,301 

_______________ 

52,902,449 

_______________ 

26,039,900 

_______________ 

108,570,275 


_______________ 

143,387,514 

_______________ 

587,804,988 

_______________ 

149,208,684 

_______________ 

599,813,421 



Notes: 

(1) Colonial First State Commercial Property Trust – assumes Merger Proposal is not implemented. 


(3) All earnings per unit and distribution per unit do not take account of the likely impact of GST. 

Given the ratio of 0.965 CPG Stapled Securities for each unit held in Colonial First State Commercial Property Trust, the 

comparable distributions per ordinary unit held in Colonial First State Commercial Property Trust (ie. assuming the Merger 

Proposal is not implemented) and per 0.965 Stapled Securities in Colonial First State Property Trust Group (ie. assuming 

the Merger Proposal is implemented) are: 




Colonial First State Commercial Property Trust 17.35c 17.45c 



Colonial First State Commercial Property Trust 17.35c 17.22c 


56


Impact on Colonial First State Development Trust 

The table below sets out: 

the audited balance sheet of Colonial First State Development Trust (‘CFD’) as at 30 June 1999, excluding the equity 

receivable (final instalment) and adjusted to reflect the effect of property re-valuations and actual capital expenditure 

to 30 September 1999; and 



The Manager appointed Jones Lang La Salle Adviser Services Pty Limited (‘JLL’) to value the Trust’s two buildings as at 

30 September 1999. 

In respect of 56 Pitt Street Sydney, JLL considered the value to be in the order of $122.9 million, assuming the property 

was fully leased and that there were no outstanding capital commitments. After allowing for these items, JLL has valued 

the property at $115 million as at 30 September 1999. 

A similar approach was adopted in respect of 60 Castlereagh Street Sydney. JLL considered the value to be in the order 

of $197.1 million, assuming the property was fully leased and that there were no outstanding capital commitments. After 

allowing for these items, JLL has valued the property at $160 million as at 30 September 1999. 

Accordingly, as at 30 September 1999 the combined value is $275 million after allowing for actual and anticipated capital 

commitments that were unpaid. 

30 June 1999 

CFD 

CPG 




Receivables 

_______________ 

0 

_______________ 

7,138 


_______________ 

7,239 

_______________ 

29,202 


Properties 275,000 1,600,722 


_______________ 

0 

_______________ 

0 


_______________ 

275,000 

_______________ 

1,600,722 

Total Assets 

_______________ 

282,239 

_______________ 

1,629,924 




_______________ 

0 

_______________ 

22,850 


_______________ 

7,445 

_______________ 

37,882 


Borrowings 

_______________ 

123,000 

_______________ 

434,500 


_______________ 

123,000 

_______________ 

434,500 


_______________ 

130,445 

_______________ 

472,382 

Net Assets 

_______________ 

151,794 

_______________ 

1,157,542 


_______________ 

71,028,528 

_______________ 

585,827,819 


_______________ 

$2.14 

_______________ 

$1.98 


_______________ 

43.58% 

_______________ 

26.66% 

Notes: 

(1) Colonial First State Development Trust – assumes Merger Proposal is not implemented. 


Given the ratio of 1.025 CPG Stapled Securities for each unit held in CFD, the comparable NTA per Stapled Security 


57


Impact on Colonial First State Development Trust (continued) 


30 June 2001, assuming the Merger Proposal is not implemented (refer to columns headed CFD) and also assuming that 

the Merger Proposal is implemented (refer to columns headed CPG). The table should be read in conjunction with the 

major assumptions and risks set out on pages 59–63 and the statement concerning financial forecasts on page 50. 

6 Months to June 2000 Year to 30 June 2001 

Distribution Statement CFD (1) CPG (2) CFD (1) CPG (2) 

Income 




_______________ 

71,492 

_______________ 

66,373 

_______________ 

131,020 

_______________ 

41,365 

Total Income 

_______________ 

3,026,904 

_______________ 

67,468,737 

_______________ 

20,381,530 

_______________ 

142,912,094 

Expenses 



_______________ 

4,614,992 

_______________ 

13,652,470 

_______________ 

5,971,176 

_______________ 

30,789,227 


_______________ 

6,090,802 

_______________ 

18,658,118 

_______________ 

8,866,406 

_______________ 

42,462,556 

Net Income (3,063,898) 48,810,618 11,515,125 100,449,538 

Transfer from (to) reserves 0 4,091,831 (328,131) 8,120,738 


_______________ 

(3,063,898) 

_______________ 

52,902,449 

_______________ 

11,186,993 

_______________ 

108,570,275 


_______________ 

71,028,528 

_______________ 

587,804,988 

_______________ 

71,028,528 

_______________ 

599,813,421 

Earnings Per Unit (June 2000 annualised) (3) (8.63) c 16.61 c 16.21 c 16.75 c 


Notes: 

(1) Colonial First State Development Trust – assumes Merger Proposal is not implemented. 



Given the ratio of 1.025 CPG Stapled Securities for each unit held in Colonial First State Development Trust, the 

comparable distributions per ordinary unit currently held in Colonial First State Development Trust (ie. assuming 






Colonial First State Development Trust 0.00c 15.75c 



Colonial First State Development Trust 0.00c 15.72c 


58


Assumptions 

The forecast distributions for the six months ending 30 June 2000 and the year ending 30 June 2001 are based on various 

assumptions made by the Manager. 

During the forecast period, there is a risk that the assumptions may change or no longer be valid. While the Manager has 

given due care and attention to the preparation of the forecast distributions, it can give no guarantee or assurance that the 

forecasts will be achieved. Furthermore, during the forecast period the Manager may consider property acquisitions or sales 

which have not been reflected in the forecasts. Such acquisitions may require further capital raising and could have an 

impact on forecast distributions. 

The principal assumptions made by the Manager in preparing the forecasts are set out below: 


The forecasts for the Colonial First State Property Trust Group assume that the Merger Proposal proceeds in full and that 

it will be effective as at 1 January 2000. 

Net Property Income 

Net property income consists of the aggregate of rental income derived from the Trusts’ properties and is net of 

non-recoverable outgoings and other expenses incurred in the day-to-day management of the Trusts’ properties. 

The projected rental income is based on current leases and, where applicable, includes the Manager’s expectations 

for any movements arising from rent reviews, lease expiries and the potential take-up of vacant space. 

Where lease inducements are provided in the form of tenancy fitouts, they are treated by way of contributions to 

capital works. 

Certain tenants within properties held by CFD have been granted rent free periods as part of an incentive. In forecasting 

the earnings of CPG, these rent free periods have been amortised over the term of the lease and/or licence period. 

Other factors taken into account in projecting net rental income include the likely movements in market rentals 

and the Consumer Price Index. 

Letting Up in CFD 

The two properties held by Colonial First State Development Trust (‘CFD’) are 84.5% let by area, leaving approximately 

7,500 square metres of space available for lease. 

The forecasts assume that this area is leased at an average gross face rental of $538 per square metre per annum in 

accordance with the following table: 

60 Castlereagh Street, Sydney 

56 Pitt Street, Sydney 

Area 

(sqm) 

Rent 

Commences 

442 April 2000 

733 May 2000 

445 June 2000 

1,188 July 2000 


300 January 2000 

770 February 2000 

823 March 2000 

761 April 2000 

823 May 2000 

823 August 2000 

59


Assumptions (continued) 

Other Income 

Interest earned on surplus cash in the years to 30 June 2000 and 2001 has been assumed to be 4.75% and 

4.96% respectively. 

Transfers from Reserve 

If the Merger Proposal is implemented, the transfers from reserves are set out below: 

6 Months Ending 12 Months Ending 

30 June 2000 30 June 2001 

($ million) ($ million) 

Transfer from capital reserves 4.10 8.10 

Final Instalment 

The forecasts in respect of CFD (assuming the Merger Proposal is not implemented) assume investors will pay the 

final instalment of $1.00 per unit on 30 June 2000. If the Merger Proposal is implemented, it is assumed that the final 

instalment in respect of CFD is cancelled. 

Manager’s and Trustee’s Fees 

The forecasts for CPG assume the Manager charges a fee equal to 0.6% of the gross asset value and the Manager 

waives its fee in respect of January 2000. The forecasts in respect of each of the separately listed existing Trusts 

assume the current fee arrangements are not altered. 

It is assumed that the Trusts will be registered as managed investment schemes on 1 March 2000 and that fees will 

not be payable to the Trustees from this date. 

Interest Expense 

The forecasts for CPG assume the ANZ facility in respect of CFD is either prepaid or renegotiated and that the following 

existing interest rate swap facilities remain in place: 

CIP 

COC 

CMF 

Amount Termination Date Rate (1) 

$41,000,000 May 2001 5.250% 

$41,000,000 from May 2001 to May 2005 6.430% 

$31,200,00 December 2005 6.095% 

$25,000,000 November 2001 5.375% 

$8,000,000 November 2001 5.270% 

$33,000,000 from November 2001 to November 2005 6.485% 

$69,000,000 April 2001 5.015% 

$69,000,000 from April 2001 to April 2005 6.400% 

The forecasts for CPG assume the Manager will fix an additional $104 million of borrowings for 3 years at 

7.34% (including margins) from 1 January 2000. 

Interest rates (before bank margins) on any unhedged borrowings are assumed to average 5.30% in the year to 

30 June 2000 and 5.51% in the year to 30 June 2001. 

The forecasts in respect of each of the separately listed existing Trusts assume that all facilities remain in place. 

60

Capital Expenditure 

Allowance has been made for capital expenditure during the forecast period which is expected to be: 

6 Months Ending 12 Months Ending 

30 June 2000 30 June 2001 

($ million) ($ million) 

Colonial First State Property Group 6.80 79.38 

Distribution Reinvestment Plan 

The forecasts for CPG assume that the Distribution Reinvestment Plan (‘DRP’) is activated during the forecast period with 

the holders of 30% of the Stapled Securities participating in the DRP. It is assumed that Stapled Securities will be issued at 

a discount of 2.5% to the notional price of $2.00. The forecasts in respect of each of the separately listed existing Trusts 

do not assume activation of a DRP. 

Accounting Standards 

It is assumed that there is no change in applicable Accounting Standards, the Corporations Law or other financial reporting 

requirements that may have a material effect on the forecast distributions. 

Goods and Services Tax 

Leases representing at least 80% of the income of each Trust were reviewed to consider the impact of GST. (Refer GST 

commentary on page 62.) Based on the review, the likely impact of GST on the Trusts and the merged vehicle, for the year 

ended 30 June 2001, is set out below: 

Reduction in 

Trust/Investment 

Distribution due 

Vehicle 

to GST 

Colonial First State Commercial Property Trust 1.3% 

Colonial First State Industrial Property Trust 1.4% 

Colonial First State Development Trust 0.2% 

Colonial First State Retail Property Trust 0.9% 

Colonial First State Property Group 1.0% 

Other Assumptions 

No capital is raised during the forecast period other than as a result of the DRP. 

The Manager’s policy is to re-value property investments on an annual basis. Notwithstanding this, the Manager has 

not attempted to forecast movements in property values other than increasing the value of a property by the amount 

of capital expenditure in relation to that property. 

There are no sales of properties other than Thornlie Shopping Centre assumed to be sold for book value in January 

2000, nor are there any property acquisitions. 

All material leases are enforceable and performed in accordance with their terms. 

There are no changes in Federal, State or Local Government laws (including taxation laws other than GST), regulations 

or policies that will have a material impact on the performance of the Trust. 

61


Risks 

Like all investments, an investment in Colonial First State Property Trust Group will be subject to risks, some of which 

will be outside the control of the Manager. The Manager has identified the following particular risks which it believes 

should be considered: 

General Factors 

Movements in general economic conditions, share markets, bond markets and interest rates may affect the income 

and expenses of CPG and the price at which the Stapled Securities trade; 

The capital value of CPG’s investments may fluctuate with market conditions, resulting in a diminution in the net 

tangible asset backing of CPG’s Stapled Securities; 

Property rental rates may change; 

Changes in Government policy (such as in relation to taxation laws) or statutory changes may affect CPG and the 

attractiveness of an investment in CPG; 

Third parties may default on obligations to CPG. 


The Federal Government has passed the A New Tax System (Goods and Services Tax ) Act 1999 which will impose GST at 

the rate of 10% in respect of taxable supplies made or deemed to be made on or after 1 July 2000. The GST legislation 

does not provide for any statutory right of recovery of GST from the person to whom a supply is made. In the absence of 

transitional relief, a supply, such as a lease of real property which spans 1 July 2000, would result in GST becoming payable 

in respect of rent received on or after 1 July 2000. 

The A New Tax System (Goods and Services Tax Transition) Act 1999 provides limited relief from the payment of GST 

where the lease term spans 1 July 2000. Where a lease was entered into before 2 December 1998, the lease is GST free to 

the earlier of the first review opportunity and 1 July 2005. Where a lease was entered into on or after 2 December 1998 and 

before 8 July 1999, the lease is GST free until the earlier of the first review opportunity and 1 July 2005 provided that the 

lessee would otherwise have been entitled to a full input tax credit under the lease. The transitional GST free status has an 

ultimate expiry date of 1 July 2005. 

Some leases have contractual provisions which are sufficient to enable the trustee of the trust, as lessor, to recover GST from 

the tenant. Some leases have no provision in the leases to enable any recovery of GST from tenants. Subject to the 

transitional rules referred to above, GST may be payable in respect of leases from 1 July 2000 or from a review opportunity 

but, at the latest, from 1 July 2005. 

Where the lease does not contain a contractual right to recover GST, then once the transitional arrangements are exhausted 

GST will be payable by the trustee as lessor with no right of recovery of the GST from the tenant. 

The likely impact on the yield of the trusts is set out elsewhere in this document. 

Trust Specific Factors 

The rental and occupancy levels for CPG’s properties may change and therefore adversely affect CPG’s net income 

and its level of distributions; 

CPG may have to undertake unforeseen capital expenditure; 

Tenants may default on their obligations under lease agreements; 

Major unforeseen litigation may occur; and 

Loss as a result of claims by tenants due to disruption and failure of computer systems. 

62

Review of Business Taxation 

During 1998, a review of the Australian taxation system was initiated by the Federal Government. As part of this review 

the report "A Tax System Redesigned" ("The Ralph Report") was released on 21 September 1999 recommending a number 

of changes to the taxation system. At the same time, the Government announced that it would implement some of the 

Ralph Report recommendations with immediate effect and that it would give further consideration to the other 

recommendations of the Ralph Report, the implementation of which would be deferred until at least 1 July 2001. 

On 21 October 1999, the Federal Government introduced a package of legislation into Parliament to implement the 

recommendations which were to have immediate effect. The measures included within the legislation include the proposed 

reduction in the corporate tax rate, capital gains tax changes and the removal of accelerated depreciation. As at the date 

of this Explanatory Memorandum, this legislation has yet to be passed by the Federal Parliament. 

The main recommendations made by the Ralph Report which could affect property trusts include: 

removal of accelerated depreciation on plant and equipment which is acquired after 21 September 1999; 

phasing out of the deduction currently available for prepaid expenses made after 21 September 1999; 

the availability of a capital gains tax discount upon the disposal of assets which have been held for longer than 

12 months; 

the taxation of trusts as if they were companies (from 1 July 2001), with an exemption available for trusts that are 

characterised as Collective Investment Vehicles that will continue to adopt the flow through method of trust income; 

and 

the continuation of the ability to distribute tax preferred income for trusts which are characterised as Collective 

Investment Vehicles. 

These issues are likely to have an impact on the property trust industry as a whole and are not limited in their application 

to the Trusts which will form the Merged Group. 

A number of the proposed measures continue to be subject to a consultative process, and accordingly there is uncertainty 

as to the final form the proposals may take. 

Year 2000 

The Manager has completed remediation and certification for its Year 2000 compliance programme to meet the needs of its 

clients now and into the next century. Its goal and corporate policy is to continue to provide a full range of products and 

services without interruption. The Manager believes that it has taken all reasonably available measures to minimise the 

impact of the Year 2000 on its computer systems. However, because of the nature of the Year 2000 computer issue, the 

Manager, like other members of the financial community, cannot give an absolute assurance that the Year 2000 computer 

issue will not affect its operations or financial performance. 

As a result of the Year 2000 computer issue, certain disruptions and failure may indirectly affect the operations of the 

relevant Trustee, the Manager and CPG (for example, disruptions to, or failure of electricity supplies, stock exchange 

trading systems, the management of the properties in which CPG invests, and so on) and cause loss to CPG. Many of these 

risks are beyond the control of the relevant Trustee and the Manager. 

No assurance can be given by the relevant Trustee and the Manager that the operations of the relevant Trustee, the 

Manager or CPG will not be adversely affected by these risks. 

63

6. Voting and Eligibility 

The Manager has determined that all of the units as at 8.00 pm on 15 December 1999 are to be taken, for the purpose 

of the relevant meeting, to be held by the person who held them at that time. 

Consequently, persons registered as unitholders in a Trust at that time will be entitled to attend and vote at the relevant 

meeting (either in person or by proxy) (subject to any applicable voting exclusion). 

Voting in Person 

If you will be attending a meeting in person, we ask that you register your attendance at least 10 minutes prior to the 

scheduled start of the meeting. 

Voting by Proxy 

You may also appoint a proxy to vote on your behalf using the enclosed proxy form. A proxy need not be a unitholder. 

If you are a unitholder of more than one of the Trusts you must do a separate appointment of proxy for each Trust using 

the appropriate form. If you return your proxy form but do not write in the name of a proxy, the Chairperson will be your 

proxy and will vote on your behalf as you direct on the proxy form. 

You may direct your proxy how to vote on each resolution on your proxy form. If the Chairperson is your proxy and you 

choose not to mark the boxes instructing the Chairperson how to vote, the Chairperson will exercise those votes in favour 

of the Resolutions. 

The Trustee of your Trust has appointed Computershare Registry Services Pty Limited as its agent to receive proxies. Proxy 

forms must be returned so as to be received by Computershare Registry Services Pty Limited at least two days before the 

meeting (ie the latest time and date for return of proxy forms is midnight on 15 December 1999). The postal address for the 

return of proxy forms is: 

Address for mail: 

Computershare Registry Services Pty Limited 

Reply Paid 2975 


Instructions on how to sign the proxy form are set out on the back of the form. 

Your Vote is Important 

Quorum, Majority and Voting Eligibility 


The Chairperson of each meeting must be appointed by the unitholders present at the meeting or, in the absence of 

such appointment, nominated by the Trustee and approved by the ASIC. The Manager recommends the appointment 

of Mr Joe Rooney as Chairperson of each meeting. Mr Rooney has been nominated by the Trustee to act as Chairperson 

and his nomination has been approved by the ASIC. 

In accordance with section 1069C of the Corporations Law, unitholders at each meeting will be given the opportunity 

to appoint the Chairperson. Under the Corporations Law, only unitholders present in person (not by proxy) may vote 

on the appointment of the Chairperson. On a show of hands, each unitholder present in person has one vote. 

In order for the resolution for the appointment of Chairperson to be passed, the Trust Deed of each Trust requires that 

there be a quorum of at least five persons holding or representing by proxy at least 10% of all units issued in the Trust 

carrying the right to vote. If a quorum is not present within 30 minutes from the time appointed for the meeting, the 

meeting will be adjourned to such time and place as the Chairperson shall direct and this quorum requirement will not 

apply at the reconvened meeting. The resolution must be passed by a show of hands by a majority of unitholders present 

and voting at the meeting. 

64


This resolution must be passed by a majority of the votes cast on the resolution by unitholders of the relevant Trust present 

(in person or by proxy) at the meeting. 

Voting is by a show of hands or, if a poll is duly demanded, on a poll. It is intended that in each Trust voting on this 

resolution will be conducted on a poll. 

Each unitholder of the relevant Trust present in person or by proxy has one vote on a show of hands and on a poll one vote 

for each unit held. In the case of joint holders, only the person whose name appears first in the Trust’s unit register may vote. 

In each Trust, the quorum requirement for this resolution is not less than 5 unitholders present in person or by proxy 

together holding between them at least 10% of all issued units. 

Resolution 2: Approval of Issue of Units in the Trusts 

In each Trust this resolution must be passed by 75% of votes cast by unitholders entitled to vote. 

Voting is by a show of hands or, if a poll is duly demanded, on a poll. It is intended that in each Trust voting on this 

resolution will be conducted on a poll. 

Each unitholder of the relevant Trust present in person or by proxy has one vote on a show of hands and on a poll one vote 

for each unit held. In the case of joint holders, only the person whose name appears first in the Trust’s unit register may vote. 

In each Trust, the quorum requirement for this resolution is not less than 5 unitholders present in person or by proxy 

together holding between them at least 10% of all issued units. 

Resolution 3: Approval of Amendments to Trust Deeds 

In each Trust, voting must be on a poll as this resolution is required to be decided by reference to the percentage of votes 

cast at the meeting in favour of the resolution (by value and by number). 

In the case of joint holders, only the person whose name appears first in the Trust’s unit register may vote. 

In each Trust, the quorum and majority requirements for this resolution require that: 

the unitholders who at the meeting vote on the resolution (whether in person or by proxy) hold between them units 

equal in value to at least 25% of the total value of units held by persons entitled to vote on the resolution; and 

the unitholders who, at the meeting, vote (whether in person or by proxy) in favour of the resolution hold units equal 

in value to at least 75% of the total value of all of the units held by unitholders who are eligible to vote and vote 

(whether in person or by proxy) on the resolution. 

This resolution is subject to quorum and majority requirements based on the value of units held. The value of each unit will 

be determined by reference to the market value of the units on the ASX on 15 December 1999. 

If you have any queries about voting or proxies, please call Computershare Registry Services Pty Limited on 03 9615 5982. 

If you have queries about any other aspects of the meeting, please contact Colonial First State Property Pty Limited 

on 1300 360 636. 

65

7. Experts’ Reports 

Independent Experts’ Reports 

The Directors 


Level 12 

330 Collins Street 



Dear Sirs 

Taxation Report 

This report has been prepared for inclusion in the Explanatory Memorandum prepared by Colonial First State Property 

Limited in connection with the Proposed Merger of: 

Colonial First State Commercial Property Trust (‘COC’); 

Colonial First State Industrial Property Trust (‘CIP’); 

Colonial First State Retail Property Trust (‘CMF’); and 

Colonial First State Development Trust (‘CFD’). 

Merger arrangement 

The Proposed Merger will be effected by stapling the units in each of the four trusts, so that the units are treated as a single 

Stapled Security. This is to be undertaken as follows: 

The existing units in each trust will be consolidated so as to have a notional value of $2.00 per unit. 

Each current Unitholder will receive a special capital distribution of $0.03 per Consolidated Unit which will be wholly 

applied to subscribe for a fully paid unit in each of the other three trusts at a price of $0.01 per unit. 

Each of the trust deeds will be amended such that the units cannot be sold separately but the four different units must 

be sold as a stapled or consolidated security. 

The consolidated CMF, CIP, COC and CFD units will each have the same entitlements. 

Each CMF, CIP, COC and CFD unit will be stapled to form a Stapled Security in the Colonial First State Property 

Trust Group (‘CPG’). The Stapled Security will trade as one security on the ASX and units in the individual trusts will 

cease to be traded in their own right. 

A Cash Alternative will be available for existing Unitholders who do not elect to participate in the Merger Proposal 

or who have registered addresses outside Australia and New Zealand. Unitholders who receive the Cash Alterative 

will have their existing units transferred to a nominee and sold for cash. Unitholders who fail to complete the necessary 

election form for participation in the stapling arrangement will automatically have their units transferred to a nominee 

and sold for cash. 

Scope 

This Taxation Report addresses the Australian income tax implications for current CMF, CIP, COC and CFD Unitholders 

arising from the Merger Proposal. Specifically, the taxation implications associated with the on market acquisition of a 

Stapled Security after the stapling process are beyond the scope of this report. 

The report has been prepared on the basis that Unitholders are Australian residents for tax purposes and that the units are 

held on capital account and were acquired after 19 September 1985. 

The advice contained in this report is general in nature. The taxation consequence for investors under the Merger Proposal 

may vary depending upon their particular circumstances. Accordingly, Unitholders should not rely on this overview but 

should seek their own advice. 

66

In August 1998, the Australian Government initiated a review of business taxation which was chaired by Mr John Ralph. 

The report ‘A Tax System Redesigned’ (the Ralph Report) was released on 21 September 1999. 

The Government has introduced legislation to implement a number of the Ralph Report recommendations including 

The New Business Taxation System (Integrity and Other Measures) Bill 1999 (‘Integrity Bill’) which was introduced into 

Parliament on 22 October 1999. The legislation introduced addresses changes to the capital gains tax (‘CGT’) regime, 

changes to depreciation, integrity measures and reduction of the corporate tax rate. This legislation has yet to be passed 

by the Federal Parliament. 

The Ralph Report recommendations also include other measures to alter the taxation of trusts and to provide a new 

general framework for business income tax. The Government’s Press Release dated 21 September 1999 announced that 

further consideration was warranted in respect of these recommendations. At this stage, the Government has not made 

any further announcements nor introduced any legislation into Parliament in respect of these recommendations. 

The taxation comments included within this report have been based upon the first package of draft legislation arising 

from the Ralph Report and announcements included within the Government Press Release and do not include an analysis 

of potential future amendments. 

The ultimate interpretation of laws rests with the Courts and current interpretation may be subject to amendment during 

the currency of this proposal. 

Taxation implications for the stapling of the units 

Special distribution 

The special capital distribution should not be included in the Unitholder’s assessable income in the year of receipt but 

should be treated as a return of capital. 

Although the Unitholder should not be assessed on this receipt, an adjustment to the tax cost base of the original units will 

be necessary, in the same way as ordinary tax deferred distributions require the adjustment. In the event that the special 

capital distribution is greater than the cost base of the original unit (including previous adjustments which have been made 

for tax deferred amounts), an assessable capital gain will arise to the Unitholder equal to the amount by which the special 

distribution exceeds the tax cost base of the relevant units. 

Creation of CPG Stapled Securities 

Amendment of Trust Deeds 

In order to effect the stapling arrangement, the trust deed of each trust must be amended to provide for the consolidation 

of the units and the subsequent merger and stapling. We understand that the trusts’ legal advisers have confirmed that 

the trust deed amendments will not constitute a resettlement of the trusts. Accordingly, a CGT event should not arise 

in respect of the trusts as a consequence of the trust deed amendments. 

Consolidation of units 

The consolidation of the units of each trust should not constitute a CGT event. The cost base of the existing units would 

be spread over the Consolidated Units. 

Acquisition of units 

Under the Merger Proposal, there is no disposal of the original units by the Unitholder (unless units are sold on market 

prior to the restructure or a Unitholder receives the Cash Alternative at the time of the restructure). Accordingly, a CGT 

event should not arise to the Unitholder as a consequence of electing to participate in the stapled security arrangement. 

The special distribution applied to the purchase of units in the other trusts by the original Unitholder will give rise to an 

acquisition of assets for CGT purposes. The cost base in the newly acquired units will be limited to the $0.01 per unit 

so applied. 

Disposal of units 

When a Stapled Security is sold, the Unitholder will be treated as having sold units in each of the underlying trusts. 

Depending upon the cost base of the relevant units, a capital gain or capital loss may arise to the Unitholder. The 

calculation of the gain or loss will require a reasonable apportionment of the consideration received across the units of each 

trust which form the Stapled Security. In this regard, the Manager will regularly advise Unitholders of the Net Tangible 

Assets per unit for each of the underlying trusts. 

67


Independent Experts’ Reports (continued) 

It is likely that the Unitholder will incur a capital loss on the sale of the original Consolidated Units and capital gains on the 

sale of the Consolidated Units in the other trusts acquired as part of the Proposed Merger. The capital loss on the disposal 

of the original Consolidated Units will be reduced by any tax free distributions previously received in respect of those units. 

When calculating the capital loss, the cost base of the units are not indexed for inflation. Accordingly, Unitholders may 

effectively lose the benefit of indexation and the tax free distributions in respect of their original units on the sale of the 

Stapled Securities. The capital loss can be offset against the capital gains on the other units. 

The Integrity Bill introduces a CGT discount for individuals, trusts and complying superannuation funds. Under the Bill, 

in certain circumstances individuals and trusts will include in assessable income half (without indexation) the realised 

nominal capital gain whilst complying superannuation funds will be assessed on two thirds of the nominal capital gain. 

These provisions are subject to certain transitional rules for assets held as at 21 September 1999. For Unitholders to 

qualify for the CGT discount, units must be held for at least 12 months. 

Receipt of trust distributions 

Providing the four trusts continue to only carry on eligible investment business, as defined within the draft legislation, 

Unitholders of the Stapled Securities will be entitled to their share of the income distributions from each trust after the 

restructure. Each Unitholder will continue to be assessed on their portion of the net income of each trust for the relevant 

period, and each trust will continue to determine its own distributable income to be passed on to Unitholders. 

The trust distributions will consist of net income, capital gains, tax free and tax deferred income components. The taxation 

implications for a resident individual Unitholder of the respective distribution components are as follows: 

Net income 

The taxable income component of each trust’s distribution is to be included in the Unitholder’s assessable income for the 

year of income to which the distribution relates. This will be so even where the actual distribution may be received after the 

end of the relevant year of income to which the distribution relates. Pursuant to draft legislation, this will continue to be the 

case where the actual distribution is made within 2 months of the end of the year of income. 

Capital gains 

The capital gain component of a trust distribution is to be included in the Unitholder’s assessable income. 

Under the Integrity Bill, the CGT discount will be available for certain capital gains derived by a trust in respect of trust 

assets which have been held by the trust for more than 12 months. Where the CGT discount has been utilised by the trust, 

the net income of the trust distribution will include only half of the nominal capital gain. 

Unitholders receiving a discounted capital gain from the trust must gross-up the discounted capital gain distributed to them. 

The gross up factor allows the Unitholder to apply any capital losses against both the trust capital gain and capital gains 

from other sources in order to determine their net capital gain for a given income year. The net capital gain will then be 

eligible for the CGT discount if the unitholder is an individual, trust or a complying superannuation fund. 

Tax deferred distribution 

The tax deferred portion of a distribution will not form part of a Unitholder’s assessable income for the relevant year of 

income. However for CGT purposes, cost base adjustments must be made. 

Where the tax deferred amounts exceed the cost base of the respective units (determined after taking account of the receipt 

of prior period distributions of tax deferred income), a capital gain will arise to the Stapled Security Unitholder to the 

extent that the cost base is exceeded. This gain will be assessable to the Unitholder in the income year in which the tax 

deferred amount is received. 

The extent to which tax deferred distributions will be assessable to Stapled Security Unitholders will differ according to 

whether the tax deferred distribution relates to the original unitholding or to units acquired in the other trusts as a 

consequence of the Merger Proposal. 

The cost base of original trust units will be the initial consideration paid to acquire those units. Tax deferred distributions 

received in respect of the original units will be applied to reduce this cost base. The cost base must be fully eroded before 

a capital gain on the initial holding will arise to the Unitholder. 

As noted previously, under the Merger Proposal existing Unitholders in each of the four trusts acquire units in the other 

trusts for $0.01 per unit. Accordingly, the practical consequence is that the tax deferred amounts relating to units acquired 

with the special capital distribution will constitute a capital gain derived by the Unitholder in relation to the year of income 

to which the tax deferred distribution relates. 

68

In accordance with the Integrity Bill, it is proposed that the CGT discount will be available in these circumstances to 

individuals, trusts and complying superannuation funds where the units are held for at least 12 months and the trust itself 

satisfies a widely held requirement. 

Tax free distribution 

A tax free distribution will not form part of a Stapled Security Unitholder’s assessable income, nor will it reduce a unit’s 

cost base in calculating whether a capital gain arises to a Stapled Security Unitholder. However, tax-free distributions will 

reduce the cost base of the units in the event that a capital loss is incurred by a Unitholder upon disposal of the units. It 

is highly unlikely that a Unitholder will make a capital loss on the subsequent sale of a unit (within the Stapled Security) 

acquired as part of the stapling process which have an initial cost base of $0.01 per unit. However, a loss is likely to be 

realised on the original unit (within the Stapled Security), the value of which will be substantially diluted by the issues 

of units to be made prior to the Stapling. 

Distribution Re-investment Plan (DRP) 

The Manager may introduce a DRP whereby Unitholders can elect to re-invest their entitlement to distribution from 

CPG and receive new Stapled Securities. 

Unitholders will still be taxed on their share of the net income of each underlying trust distributed by CPG (as described above). 

The cost base of the new underlying units received under the DRP will be the notional amount of the cash distribution 

entitlement re-invested by the Unitholder in the proportions to be advised by the Manager. 

Cash Alternative 

Unitholders who receive the Cash Alternative will have their existing units transferred to a nominee and sold. 

The transfer of units will be a CGT Event and, depending upon the cost base (or indexed/reduced cost base) of the relevant 

units, a capital gain or a capital loss may arise. Adjustments to the units’ cost base may need to be made for any tax 

deferred or tax free distributions received by the Unitholder through the holding period. 

Under the Integrity Bill, where the units have been held for more than 12 months individuals, trusts and complying 

superannuation funds should be subject to the concessional treatment in respect of any net capital gain realised on the 

disposal of their units. 

Tax Reform 

One of the Ralph Report recommendations is that trusts should generally be taxed as companies. However, trusts which 

qualify as Collective Investment Vehicles (‘CIVs’) were recommended to be exempt from corporate taxation so that the tax 

preferred distributions and the trust distribution components would continue to be taxed on a flow-through basis, as 

outlined above, in the hands of investors. 

Based on the Ralph Report and the indicative draft legislation issued in conjunction with the Report, all of the Colonial 

First State trusts forming part of the Stapled Security should constitute CIVs. 

The mere act of stapling the securities should not prevent the trusts from qualifying as CIVs, based upon the current 

draft legislation. 

However, the recommendations as to the taxation of trusts continue to be subject to a consultative process. At present, it 

is unclear as to the final form these proposals will take. The Government stated that any changes to the taxation of trusts 

would not apply before 1 July 2001. 

Goods and Services Tax (‘GST’) 

GST at a rate of 10% will apply to taxable supplies made after 1 July 2000, subject to certain transitional provisions. The 

impact of GST at the trust level is discussed in the Explanatory Memorandum. 

For investors, there should be no direct GST consequence of either buying or selling a Stapled Security or from the 

distribution of income by the trusts. 

Yours faithfully 

Ian Dinnison 

Tax Partner 

69


Independent Experts’ Reports (continued) 

The Directors 


Level 12 




Dear Sirs 

Proposed Merger 

This report has been prepared for inclusion in an Explanatory Memorandum to be issued by Colonial First State Property 

Limited in connection with a proposal to effectively merge Colonial First State Commercial Property Trust, Colonial First 

State Industrial Property Trust, Colonial First State Retail Property Trust and Colonial First State Development Trust. 

We have been asked to review the pro-forma balance sheets and the forecast financial information relating to both the 

individual Trusts and the Merged Entity which are set out in Section 5 of the Explanatory Memorandum and summarised 

in the Overview document which accompanies the Explanatory Memorandum. These forecasts and the pro-forma balance 

sheets have been prepared by and are the sole responsibility of the directors of the Manager. Our review included such 

procedures as we considered necessary to examine both the assumptions and accounting policies used by the Manager and 

included enquiries as to the process adopted in preparing the forecasts, an examination of the reasoning behind the 

underlying assumptions and tests to verify that the assumptions have been correctly applied in the forecasts and in 

compiling the pro-forma balance sheets. 

The forecasts involve a high degree of subjective judgement on the part of the Manager in endeavouring to predict a 

number of economic, operating and trading outcomes (many of which are noted in the section headed ‘Risks’ in Section 5 

of the Explanatory Memorandum). There will inevitably be differences between the actual results and the forecasts as 

events and circumstances frequently do not occur as expected or are not anticipated. If events do not occur as assumed, 

distributions from each of the Trusts and the Merged Entity may vary materially from those in the Manager’s forecasts. 

Accordingly, we do not express an audit opinion on the forecasts (since, by their nature, they are not capable of 

independent substantiation), nor are we able to confirm or guarantee the attainment of the forecasts. 

Subject to the above, we advise that: 

(a) nothing has come to our attention which causes us to believe that the Manager’s assumptions do not provide a 

reasonable basis for the forecasts and the pro-forma balance sheets; and 

(b) in our opinion, in all material respects, the forecasts and the pro-forma balance sheets have been properly prepared in 

accordance with the Manager’s assumptions and on a basis consistent with the Trusts’ accounting policies, Australian 

Accounting Standards and other mandatory professional reporting requirements. 


KPMG Corporate Finance (Aust) Pty Ltd 

Anthony Lubofsky 

Director 

70

Colonial First State Property 

Trust Group 

Independent Expert’s Report 

November 1999 

In relation to the proposed merger of: 

Colonial First State Industrial Property Trust; 

Colonial First State Commercial Property Trust; 

Colonial First State Retail Property Trust; and 

Colonial First State Development Trust. 

71


The Trustees 

Permanent Trustee Australia Limited 

As Trustee of the Colonial First State 


294-296 Collins Street 

MELBOURNE VIC 3000 

The Trustees 






The Trustees 






The Trustees 

Perpetual Trustee Company Limited 


Development Trust 

50 Queen Street 


Dear Trustees 

Merger of Property Trusts Managed by Colonial First State Property Limited 

1. Introduction 

Colonial First State Property Limited (“Colonial First State” or “the Manager”) is 

proposing to merge the four listed property trusts that it manages to create a single 

larger diversified property trust. 

The trusts that will be included in the merger are: 

· Colonial First State Industrial Property Trust (“the Industrial Property Trust”); 

· Colonial First State Commercial Property Trust (“the Commercial Property Trust”); 

· Colonial First State Retail Property Trust (“the Retail Property Trust”); and 

· Colonial First State Development Trust (“the Development Trust”). 

The trustees of each of the existing trusts have appointed Arthur Andersen Corporate 

Finance Pty Ltd (“Arthur Andersen Corporate Finance”) to prepare an independent 

expert’s report stating whether the proposed merger is fair and reasonable and in the 

best interests of the unitholders of each trust. 

72

The Trustees 

Page 2 


The merger will be effected by a consolidation of existing units followed by an issue of 

new units in each trust to the unitholders of each other trust. The units of the four 

trusts will be “stapled” and the stapled securities will be listed on the Australian Stock 

Exchange (“ASX”). 

The following table sets out the number of stapled securities in the 

Colonial First State Property Trust Group (“the Merged Trust”) that unitholders will 

receive together with the proportion of the Merged Trust that will be held by each 

group of unitholders. 

Unitholders of 

Units in Merged Trust 

for each unit held 

Proportion of Merged 

Trust 

Industrial Property Trust 0.950 29.8% 

Commercial Property Trust 0.965 23.6% 

Commercial Property Trust – CEU 1 0.850 1.7% 

Retail Property Trust 0.585 32.5% 

Development Trust 1.025 12.4% 

Total 100.0% 

1 Capital entitlement units. 

Unitholders may elect to receive a cash alternative rather than receiving stapled 

securities in the Merged Trust. Stapled securities relating to such unitholders will be 

transferred to Perpetual Trustees Australia Limited. Those stapled securities will be 

sold in a bookbuild process managed by Warburg Dillon Read and Deutsche Bank 

with the net proceeds being remitted to unitholders. 

2. Conclusion 

In our opinion, the merger proposal is fair and reasonable and in the best interests 

of unitholders: 

· of the Industrial Property Trust taken as a whole; 

· of the Commercial Property Trust taken as a whole; 

· of the Retail Property Trust taken as a whole; and 

· of the Development Trust taken as a whole. 

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The Trustees 

Page 3 


3. Key Reasons for Conclusion 

The key reasons for these conclusions are: 

3.1 Size and Critical Mass 

An important motivation of the proposed transaction is to merge a number of smaller 

property trusts to create a larger diversified property trust with improved investor 

interest and support. 

The following table demonstrates that the Merged Trust will be a more significant 

member of the Property Trust Index than any of the existing trusts: 

Trust 


29 October 1999 

$million 

Ranking in Property 

Trust Index (AS20) 1 

Industrial Property Trust 343.2 27 

Commercial Property Trust 263.8 30 

Commercial Property Trust – CEU 2 18.3 3 na 4 

Retail Property Trust 361.2 25 

Development Trust 127.9 na 4 

Merged Trust 1,114.4 7 

1 Excluding any potential re-rating of the Merged Trust. 


3 Not listed on the ASX. This notional market capitalisation is based on the trading price of an ordinary 

Commercial Property Trust unit discounted for the lack of a current distribution entitlement. 

4 Not included in the Property Trust Index. 

In our view the objective of increasing the size of the trusts by merger is an appropriate 

objective and one which is likely to result in benefits being derived by the 

Merged Trust and unitholders. This is for the following key reasons: 

· the likelihood that a market re-rating will occur, which should result in the value of 

the Merged Trust being greater than the sum of the value of the four individual 

trusts before the announcement of the merger. This re-rating is discussed further 

below; 

· a re-rating and increased investor interest should result in better access to capital, 

potentially at a lower cost, that should allow the Manager to better exploit 

opportunities as they arise; and 

· greater investor interest should also improve liquidity in the market for investors 

interests. 

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The Trustees 

Page 4 


3.2 Reasonable Allocation of Interests in the Merged Trust 

The proportion of the Merged Trust that is allocated to each group of existing 

unitholders should reflect the value that they contribute to the Merged Trust. This 

value has been assessed on the basis of the relative market capitalisation of each trust 

and the relative net assets of each trust before the merger. This is set out as follows: 

Relative Value of Trusts 

100% 

Development 

11.4% 9.9% 

13.0% 12.4% 

80% 

32.2% 32.9% 

Retail 

32.0% 32.5% 

60% 

1.7% 1.7% 

Commercial CEU 

2.0% 1.7% 

40% 

24.1% 

24.3% 

Commercial 

24.1% 

23.6% 

20% 

30.6% 

31.2% Industrial 28.9% 29.8% 

0% 

Market 

Capitalisation 

30 Day Weighted 

Average 

Market 

Capitalisation 

90 Day Weighted 

Average 

Net Assets 

Ownership of 

Merged Trust 

Based on the above information, in our view, in the event that the merger is 

implemented, the unitholders of each of the existing trusts will receive a share of the 

Merged Trust that is in a range which would be regarded as equitable. 

3.3 Likely Re-Rating of Merged Trust 

There is strong evidence that larger listed property trusts are rated more highly than 

smaller trusts. This is illustrated in the following table which compares projected 

distribution yields for the year ended 30 June 2000 for each of the existing trusts with 

the average yield for listed property trusts with market capitalisations greater than 

$750 million. The table also indicates that the market may currently be rating 

diversified property trusts more highly than sector specific trusts. 

75

The Trustees 

Page 5 


Trust 


$million 

Projected 2000 

Distribution Yield 

Industrial Property Trust 343.2 9.1% 

Commercial Property Trust (excluding CEUs) 263.8 9.4% 

Retail Property Trust 361.2 9.4% 

Development Trust 127.9 - 

Weighted average yield (Existing Trusts) 9.3% 1 

Weighted average yields 

- all property trusts with market 

capitalisation > $750 million 8.0% 

- diversified property trusts 7.4% 

- sector specific property trusts 8.0% 

1 Excluding the Development Trust, which is not expected to commence distributions until 2001. 

This information indicates that there is the potential for a re-rating of the Merged Trust 

to occur. 

We note, however, that while some re-rating is likely to occur in the shorter term, the 

simple “amalgamation” of the four existing listed trusts may not immediately create a 

security that is rated as highly as some of the larger listed property trusts. Reasons for 

this include: 

· relative to other diversified property trusts, the Merged Trust will hold a greater 

proportion of industrial property. Industrial property generally offers strong 

yields but lower capital growth prospects than other forms of property; and 

· the Merged Trust will initially own 43 properties. This is a far greater number of 

properties than is held by many other larger property trusts. This may not be 

optimal for a trust of the size of the Merged Trust. 

In our view, for a full re-rating to occur in the longer term, some rebalancing of the 

portfolio in terms of property quality, type, size and location will be required. This is 

likely to include the sale of some non-core assets with the reinvestment of funds in 

properties more appropriate to a larger diversified property trust. 

76

The Trustees 

Page 6 


3.4 Forecast Increase in Distributions 

The Manager has forecast a small increase in distributions to stapled security holders 

of the Merged Trust compared to what the Manager forecasts that unitholders may 

receive if the existing trusts remain in their current form. This is reflected in the 

following table: 

Industrial 

Property 

Trust 

Commercial 


Trust 

Retail 

Trust 

Development 

Trust 

Merged 

Trust 

Cents Per Unit 

2000 17.00 17.35 10.50 - 18.00 

2001 16.80 17.45 10.55 15.75 18.10 

Cents Per Existing Unit 1 

2000 17.10 17.37 10.53 18.45 na 

2001 17.20 17.47 10.59 18.55 na 

1 Adjusting the per unit distribution for the Merged Trust to be comparable to the units held in the existing trust. 

The forecast distributions referred to in this letter and the independent expert’s report 

are before taking into consideration any impact of the introduction of the Goods and 

Services Tax (“GST”) on 1 July 2000. The likely impact of GST on the net income of the 

existing trusts, and therefore on distributions (in 2001), are discussed in the 

Explanatory Statement and are forecast by the Manager to be in the range of 

0.2 percent to 1.4 percent of distributions for the four existing trusts. 

While the forecast increase in distributions will benefit unitholders, in our view these 

increases alone are not sufficient to justify the merger. However, there may be long 

term advantages in terms of higher future distributions in the event that the Manager 

can take advantage of benefits arising from the Merged Trust’s greater scale and 

investor support. 

3.5 Move to Diversified Property Trust 

If the merger is implemented, unitholders will have an interest in a diversified 

property portfolio rather than the current position where they are exposed to either a 

single sector portfolio or a development portfolio which is also sector specific. 

77

The Trustees 

Page 7 


The mix of the asset portfolio on completion of the merger is expected to be as follows: 

Merged Trust 

Property Type Distribution 

(by Property Value) 

Diversified Property Trust Group 



Industrial 

28.1% 

Office 

40.5% 

Industrial 

4.8% 

Car Park 

1.4% 

Hotel/leisure 

Hot./Leis 

3.7% 

3.7% 

Retail 

45.4% 

Office 

44.7% 

Retail 

31.4% 

Source: Valuation Reports/Arthur Andersen 

Source: Property Investment Research/Arthur Andersen 

Investors should consider whether the Merged Trust with this different asset mix 

continues to meet their individual investment objectives. 

3.6 Taxation Consequence 

KPMG has provided a letter explaining the taxation implications of the merger for 

unitholders. This is included in the Explanatory Memorandum being provided to 

unitholders. Unitholders should review the KPMG taxation advice carefully and seek 

their own advice to ensure they understand the taxation implications of the merger. 

This advice indicates that unitholders participating in the merger who continue to hold 

the stapled securities will generally not be treated as having sold their units and 

therefore should not realise a capital gain or loss as a consequence of the merger. 

Unitholders accepting the cash alternative or selling their interests will be treated as 

having sold their units and may therefore realise either a gain or loss depending upon 

their individual taxation positions. 

78

The Trustees 

Page 8 


Unitholders should note that there are elements of the merger that may, depending on 

a unitholder’s individual position, not be favourable to them. These issues are outlined 

in the KPMG taxation advice and include: 

(i) 

Prima facie, the merger may result in the erosion of the “time value” of tax 

deferred distributions received by unitholders from the three trusts in which new 

units are acquired. This may occur as a consequence of the cost base of $0.01 in 

each of the new units. It is our understanding that holders of stapled securities 

will realise capital gains to the extent that cumulative tax deferred distributions 

in relation to each new unit exceed $0.01. 

This apparent erosion of value may, however, be offset in whole or part by the 

proposed “CGT discount” outlined in the KPMG taxation advice. Under the 

proposed CGT discount rules, where an asset is held for more than 

twelve (12) months, individuals and trusts will include in assessable income half 

the realised nominal capital gain (ie without indexation) whilst complying 

superannuation funds will be assessed on two thirds of the nominal capital gain. 

(ii) 

The merger potentially results in a loss of value to unitholders who would 

otherwise have been entitled to indexation of the cost bases in their original 

unitholdings. In the event of a disposal of the stapled securities by unitholders at 

some time after the merger, many unitholders are likely to realise a capital loss in 

relation to their original unitholdings. It is our understanding that cost bases 

may not be indexed to increase a capital loss and therefore indexation would be 

of no value to unitholders in these circumstances. 

This potential loss of value may, however, be mitigated by the proposed CGT 

changes. These proposed changes include, inter alia, the freezing of indexation at 

30 September 1999. This proposed change may effectively limit the loss of value 

to indexation accumulated by unitholders to 30 September 1999. Whether the 

loss of indexation is a disadvantage to unitholders will depend upon their 

individual positions and the impact of the GST discount on them. 

3.7 Matters Specific to Individual Trusts 

The following additional factors should be considered by certain unitholders: 

3.7.1 Development Trust 

As a consequence of the merger: 

· unitholders in the Development Trust will not be required to pay the final 

instalment of $1.00 per existing unit that would otherwise be payable on 

30 June 2000; 

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The Trustees 

Page 9 


· unitholders in the Development Trust are not presently expected to receive 

distributions until the year ended 30 June 2001. As holders of stapled securities in 

the Merged Trust they are forecast to receive their first distribution in respect of the 

six month period ended 30 June 2000; and 

· unitholders in the Development Trust previously held an investment focused more 

on development profits and capital gains than on distribution yields. As a 

consequence of the merger, they will gain an interest in a diversified property 

portfolio. This change in nature of their investment is potentially greater than the 

change that occurs for the other groups of unitholders. 

3.7.2 Commercial Property Trust – Capital Entitlement Units 

Colonial Limited presently holds 11.642 million capital entitlement units in the 

Commercial Property Trust. Fifty (50) percent of these are due to convert into ordinary 

units in the Commercial Property Trust on 30 June 2000 and 50 percent on 

30 June 2001. In the interim they are not listed on the ASX and they do not receive 

distributions. The merger will result in Colonial Limited in effect exchanging these 

units for stapled securities in the Merged Trust. These will be listed on the ASX and are 

forecast to pay distributions commencing in the 6 months ended 30 June 2000. 

3.8 Cash Alternative 

Investors should be aware that should they accept the cash alternative they will not 

have certainty as to how much they will receive for their units as this will depend upon 

the result of the bookbuild process. The sale of the stapled securities under the book 

build process is to occur in the first week of February 2000 or, if market conditions are 

not suitable, no later than 24 March 2000. Proceeds will not be received by unitholders 

until 14 days after the completion of this process. 

This letter is a summary of the opinion of Arthur Andersen Corporate Finance and is 

an extract from the complete independent expert’s report which is attached and should 

be read in conjunction with this letter. 


STUART BRIGHT 

Director 

OLIVER KLOTZ 

Director 

80


Merger of Listed Property Trusts Managed by Colonial First State 

November 1999 

Contents 

Page 

LETTER 

1. TERMS OF THE PROPOSAL 1 

1.1 Background 1 

1.2 Implementation 1 

1.3 The Cash Alternative 2 

1.4 Unitholder Approval 3 

1.5 Other Matters 3 

2. SCOPE AND APPROACH 3 

2.1 Purpose of the Report 3 

2.2 Basis of the Evaluation 4 

2.3 Limitations and Reliance on Information 4 

3. EVALUATION OF THE MERGER 5 

3.1 Impact of the Merger 7 

3.2 Proportion of Merged Trust Allocated to Unitholders 8 

3.3 Market Perception of the Merged Trust 10 

3.4 Distributions 20 

3.5 Tax Profile of Proposed Merger 21 

3.6 Gearing 22 

3.7 Net Tangible Asset Backing 23 

3.8 Cost Savings 25 

4. OPINION AND CONCLUSIONS 25 

APPENDICES: 

1. Profile of the Industrial Property Trust 

2. Profile of the Commercial Property Trust 

3. Profile of the Retail Property Trust 

4. Profile of the Development Trust 

5. Allocation of Value of Individual Trusts 

Annexure 

ARTHUR ANDERSEN 

CORPORATE FINANCE 

81

Independent Expert’s Report to Colonial 


November 1999 

1. Terms of the Proposal 

1.1 Background 

Colonial First State Property Limited (“Colonial First State” or “the Manager”) 

currently manages four listed property trusts. Three of these are focused on specific 

sectors of the property market and the fourth focuses on the development of two 

New South Wales properties. The four trusts are: 

· Colonial First State Industrial Property Trust (“the Industrial Property Trust”); 

· Colonial First State Commercial Property Trust (“the Commercial Property Trust”); 

· Colonial First State Retail Property Trust (“the Retail Property Trust”); and 

· Colonial First State Development Trust (“the Development Trust”). 

The Trustee of the Industrial Property Trust, the Commercial Property Trust and the 

Retail Property Trust is Permanent Trustee Australia Limited. The Trustee of the 

Development Trust is Perpetual Trustee Company Limited. 

Colonial First State is proposing to effect the merger of the four existing trusts to 

form a single diversified property trust to be known as The Colonial First State 

Property Trust Group (“the Merged Trust”). 

1.2 Implementation 

If approved, the merger of the trusts will be effected by amending the individual trust 

deeds to enable each trust to issue units to unitholders of the other three trusts and to 

“staple” the four resulting units to form a single “stapled security”. The stapled 

securities will be traded on the Australian Stock Exchange (“ASX”) replacing the 

individual trust’s units which will only be able to be traded as part of the stapled 

security. 

More specifically, and subject to the cash alternative outlined below, the merger will 

occur as follows: 

· each existing unitholder’s units will be “consolidated” in the following proportions: 

- 0.950 consolidated Industrial Property Trust units for each existing 

Industrial Property Trust unit; 

- 0.965 consolidated Commercial Property Trust units for each existing 

Commercial Property Trust unit; 

- 0.850 consolidated Commercial Property Trust units for each existing 

Commercial Property Trust capital entitlement unit; 

82 

1 ARTHUR ANDERSEN 

CORPORATE FINANCE



November 1999 

- 0.585 consolidated Retail Property Trust units for each existing Retail Property 

Trust unit; and 

- 1.025 consolidated Development Trust units for each existing Development Trust 

unit. 

· each unitholder will receive a special distribution of $0.03 per consolidated unit 

which will be wholly applied to subscribe for an equal number of fully paid 

consolidated units in each of the other three trusts for $0.01 each. At this stage, 

unitholders will hold an equal number of units in each trust; and 

· the securities held by each unitholder will be “stapled” and listed on the ASX as a 

single stapled security. 

Therefore, for every unit held before the merger, a unitholder will hold the following 

number of stapled securities in the Merged Trust: 

Existing Trust 

Merged Trust Securities 

For Every Existing Unit 

Industrial Property Trust 0.950 

Commercial Property Trust 0.965 

Commercial Property Trust (Capital Entitlement Unit) 0.850 

Retail Property Trust 0.585 

Development Trust 1.025 

1.3 The Cash Alternative 

If the merger is approved, unitholders will have the option to either receive stapled 

securities in the Merged Trust or a cash alternative. Where a unitholder elects to 

receive the cash alternative, does not make an election to retain stapled securities in the 

Merged Trust, or has an address outside Australia or New Zealand, the stapled 

securities will be transferred to Perpetual Trustee Company Limited (“Perpetual”). 

Perpetual or its nominee will then sell the stapled securities in a bookbuild process. 

Warburg Dillon Read and Deutsche Bank will conduct the bookbuild process and 

invite institutional investors to submit bids to acquire the stapled securities sold by 

Perpetual. 

The price that will be realised on the sale of the stapled securities through the 

bookbuild process is not fixed or underwritten. As set out in the 

Explanatory Memorandum, the sale will be undertaken in the first week of 

February 2000 unless market conditions are unfavourable in which case the sale will 

take place no later than 24 March 2000. Payment of the net sale proceeds will be made 

within 14 days of the completion of the bookbuild process. 



83



November 1999 

1.4 Unitholder Approval 

In order for the merger to be implemented, three resolutions need to be approved by 

the unitholders of each existing trust. These are outlined in the Notice of Meeting and 

Explanatory Memorandum. 

The first of these (an ordinary resolution) must be approved by 50 percent of the units 

voted. The second resolution and the third resolution require 75 percent of the total 

units voted to be in favour of the two resolutions and, in the case of the third 

resolution, unitholders representing 25 percent of the value of the units in the trust 

voting either in person or by proxy. 

If any of the resolutions are not approved by the unitholders of any of the 

individual trusts, the merger will not proceed. 

1.5 Other Matters 

Other matters relevant to the merger include: 

· Perpetual Trustee Company Limited, upon registration of the trusts as managed 

investment schemes, will be appointed as the custodian of the assets of the 

Merged Trust; 

· the Board of the Manager will not change. Its composition is set out in the 

Explanatory Memorandum; and 

· the Manager will cap its management fees at 0.6 percent of the gross assets of the 

Merged Trust. This is lower than that which is on average currently charged to the 

four existing trusts. 

2. Scope and Approach 

2.1 Purpose of the Report 

The trustees of the four individual trusts have appointed Arthur Andersen Corporate 

Finance Pty Ltd (“Arthur Andersen Corporate Finance”) to prepare an independent 

expert’s report stating whether in its opinion the proposed merger is fair and 

reasonable and in the best interests of: 

(i) 

(ii) 

(iii) 

(iv) 

the unitholders of the Industrial Property Trust taken as a whole; 

the unitholders of the Commercial Property Trust taken as a whole; 

the unitholders of the Retail Property Trust as taken a whole; and 

the unitholders of the Development Trust taken as a whole. 

The merger is to be implemented by amendment to the trust deeds of each trust and 

the implementation of the other steps as outlined in Section 1. 

84 


CORPORATE FINANCE



November 1999 

Notwithstanding that the merger is not being affected by Corporations Law 

mechanisms (as the entities are trusts and not companies), based on the nature of the 

transaction, in our view it is appropriate to prepare the independent expert’s report in 

accordance with the guidelines that would apply for a scheme of arrangement 

pursuant to Section 411 of the Corporations Law. 

Section 411 of the Corporations Law relates to schemes of arrangement between a 

corporation and its shareholders and is often used to effect a capital reconstruction or a 

merger of the nature proposed in this instance. 

This independent expert’s report has been prepared by Arthur Andersen Corporate 

Finance to accompany the Explanatory Memorandum and Notice of Meetings to be 

sent to the unitholders of each of the existing trusts. This report should not be used for 

any purpose other than as an expression of opinion as to whether the proposed merger 

is fair and reasonable and in the best interests of the unitholders of the four individual 

trusts. 

2.2 Basis of the Evaluation 

There is no legal definition of the expression “in the best interests”. However, 

Australian Securities and Investments Commission (“ASIC”) Policy Statement 75 

establishes certain guidelines in respect of an independent expert’s report prepared for 

the purposes of Sections 411, 648 and 703 of the Corporations Law. This policy 

statement is primarily directed towards reports prepared under Section 648 and, in 

particular, the meaning of “fair and reasonable”. This statement gives limited 

guidance as to the regulatory interpretation or meaning of “in the best interests” other 

than to state that “fair and reasonable” should be taken as a reference to “in the best 

interests of the members”. 

In our view the proposed merger is very different from a takeover transaction to which 

Section 648 of the Corporations Law applies. An assessment as to whether this 

transaction is in the best interests of unitholders requires a number of broad 

commercial assessments to be made, significantly beyond “price” which is a key focus 

in a Section 648 report. Therefore, we have assessed the transaction as a whole and 

considered the advantages and disadvantages to unitholders if the merger proceeds 

and the advantages and disadvantages to unitholders in the event that it does not 

proceed. This is a similar approach to that taken when preparing an independent 

expert’s report pursuant to Section 623 of the Corporations Law. 

As a consequence of requirements of the trust deeds of certain of the trusts, it has also 

been requested by the trustees that we specifically comment upon whether the share of 

the Merged Trust which the unitholders of each trust will receive is in a range which 

would be regarded as equitable. 

2.3 Limitations and Reliance on Information 

Arthur Andersen Corporate Finance’s opinion has been drawn on the basis of 

economic, market and other external conditions prevailing at the date of this report. 

These conditions can change significantly. 



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November 1999 

This report is also based upon financial and other information provided by the 

Manager in relation to each of the trusts and the proposed merger. 

The information provided to us included forecasts for each of the trusts for the year to 

30 June 2000 (30 September for the Retail Property Trust) and forecasts for the year to 

June 2001. We have relied upon the forecasts and have assumed that this information 

has been prepared fairly and honestly based on the information available to the 

Manager at the time and within the practical constraints and limitations of such 

forecasts. It is assumed that the forecasts do not reflect any material bias, either 

positive or negative. Arthur Andersen Corporate Finance in no way guarantees or 

otherwise warrants the ability of the trusts to achieve the forecasts of future profits. 

Forecasts are inherently uncertain. They are predictions of future events that cannot be 

assured and are necessarily based on assumptions, many of which are beyond the 

control of the trusts or the Manager. Actual results may vary significantly from 

forecasts. 

The information provided also included independent valuations of the properties of 

each of the trusts dated within the period 17 April 1998 to 15 October 1999. The 

Real Estate and Hospitality Services Group of Arthur Andersen has reviewed these 

valuations for the purpose of assisting in our assessment of the merger proposal. The 

results of this review are contained within this report. 

3. Evaluation of the Merger 

In considering the impact of the merger on their interests, unitholders are also referred 

to: 

(i) 

(ii) 

the Explanatory Memorandum and Overview of the Merger Proposal, which 

describe the merger to unitholders. The former also provides a description of 

each property owned by the four existing trusts; and 

Appendix 1 to Appendix 4 of this report. These appendices provide a detailed 

description of each of the existing trusts and provides comment on their existing 

property portfolios. 

In evaluating the merger, we have given consideration to a number of factors that have 

the potential to impact upon the position of unitholders in the event that the merger is 

implemented. These include: 

(i) 

(ii) 

(iii) 

the proportion of the Merged Trust that is allocated to the unitholders of each of 

the existing trusts; 

the likely market perception of the merger and the market “rating” of the 

Merged Trust. Importantly, this will include a consideration of the impact of the 

increase in size of the listed entity and the change in nature from sector specific 

or development trusts to a diversified property trust; 

the impact of the merger on forecast distributions to unitholders relative to those 

that they may have received if each trust remained in its existing form; 

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November 1999 

(iv) 

(v) 

(vi) 

the likely impact of the merger on the taxation profile of distributions received by 

unitholders; 

the level of debt in the Merged Trust compared to the existing trusts; 

the impact of the merger on the cost structure of the trusts. This is also related to 

(iii) above; and 

(vii) the impact of the merger on the net tangible asset backing of a unit. 

These factors are now considered in turn. 



87



November 1999 

3.1 Impact of the Merger 

Before commencing a detailed evaluation of the merger, it is appropriate to highlight 

key changes that will occur to a unitholder’s investment if the merger proceeds. 

Industrial 


Trust 

Commercial 


Trust 

Commercial 


Trust 

(CEUs 1 ) 

Retail 


Trust 

Development 

Trust 

Merged 

Trust 

Stapled securities held 

after merger (per existing 

unit) 0.950 0.965 0.850 0.585 1.025 - 

Trust Size and Ranking 

Total trust assets ($m) 472 355 355 521 282 1,630 

Net trust assets ($m) 334 302 302 370 152 1,158 

Market capitalisation ($m) 2 343 264 18 361 128 1,114 3 

Ranking in Property Trust 

Index (AS20) 27 30 na 3 25 na 3 7 4 

Property Profile 

Property Sector % 

- Industrial 97 - - - - 28 

- Commercial 3 100 100 2 100 41 

- Retail - - - 98 - 31 

100 100 100 100 100 100 

Geographic Spread % 

- NSW 76 23 23 - 100 44 

- QLD 9 19 19 43 - 20 

- VIC 15 18 18 25 - 17 

- SA - 15 15 21 - 10 

- WA - 25 25 9 - 8 

- ACT - - - 2 - 1 

100 100 100 100 100 100 

Number of properties 24 7 7 10 2 43 

Number of tenants 144 118 118 824 41 1,127 

Weighted average lease 

expiry (yrs) 4.7 5.5 5.5 4.3 7.3 5.0 


2 As at 29 October 1999. 

3 Not included in the Property Trust Index (AS20). 

4 Assuming no re-rating. 

Source: Explanatory Memorandum 



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November 1999 

3.2 Proportion of Merged Trust Allocated to Unitholders 

An important component of our assessment as to whether the merger is fair and 

reasonable and in the best interests of unitholders has been the assessed 

appropriateness of the proportion of the Merged Trust that will be allocated to the 

unitholders of each existing trust. 

This has been considered on two bases: 

(i) 

(ii) 

the market capitalisation of each of the four trusts prior to the announcement of 

the merger; and 

the net assets of each of the four trusts based on the latest available financial data. 

3.2.1 Allocation Based on Market Capitalisation 

The bar chart below compares the relative market capitalisation of each existing trust 

to the proposed allocation of stapled securities in the Merged Trust. Data underlying 

this chart is presented in Appendix 5. 

Allocation Based on Market Value 

100% 

Develo pment 

Develo pment 

11.4% 9.9% 12.4% 

80% 

32.2% 

Retail 

32.9% 

Retail 

32.5% 

60% 

1.7% 


1.7% 


1.7% 

40% 

24.1% Commercial 24.3% 

Commercial 

23.6% 

20% 

30.6% 

Industrial 

31.2% 

Industrial 29.8% 

0% 


30 Day Weighted Average 


90 Day Weighted Average 

Ownership of 

Merged Trust 

As set out in Section 3.3.2 below, none of the trusts are considered to have a 

particularly high level of liquidity. As a consequence, while we believe that relative 

market capitalisations are an appropriate basis to consider, a lack of high levels of 

liquidity increases the relevance of a net assets approach as is considered below. It is 

noted that the Commercial Property Trust enjoys greater liquidity than all other trusts 

with the Development Trust historically having the lowest level of liquidity. 



89



November 1999 

The bar graph above illustrates that in general the proportion of units allocated to each 

group of unitholders approximates the relative market capitalisation of the individual 

trusts prior to the announcement of the merger. 

Notwithstanding this overall conclusion, we make the following observations: 

· Development Trust unitholders appear to be receiving a marginally higher 

proportion of units in the Merged Trust than would occur based solely upon the 

market capitalisation of the individual trusts; 

· each of the Commercial Property Trust and Industrial Property Trust unitholders 

appear to be receiving a marginally lower proportion of the Merged Trust than 

they would solely based upon the existing market capitalisation of these trusts; and 

· unitholders of the Retail Property Trust appear to be receiving a proportion of the 

Merged Trust which closely approximates the proportion that they would have 

received based solely on the relative market capitalisation of the various trusts. 

We have been conscious of these factors as we have assessed the other impacts of the 

merger as discussed below. 

3.2.2 Allocation Based on Net Assets 

The bar graph below compares the relative net assets of each existing trust to the 

proposed allocation of units in the Merged Trust. Data underlying this table is 

presented in Appendix 5. 

Allocation Based on Net Assets 

100% 

Development 

13.0% 12.4% 

80% 

32.0% 

Retail 

32.5% 

60% 


2.0% 1.7% 

40% 

Commercial 

24.1% 23.6% 

20% 

28.9% 

Industrial 

29.8% 

0% 

Net Assets 

Ownership of Merged Trust 

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November 1999 

As with the assessment based on relative market capitalisations, the proportion of the 

stapled securities of the Merged Trust allocated to each group of unitholders appears 

to be closely related to the net assets of the individual trusts. 

It is relevant to note, however, that based on net assets: 

· the proportion of the Merged Trust allocated to Development Trust unitholders is 

less than they contribute in net assets; 

· the proportion of the Merged Trust allocated to Industrial Property Trust 

unitholders is marginally higher than that contributed on the basis of net assets; 

· the proportion of the Merged Trust allocated to Retail Property Trust unitholders is 

slightly greater than the proportion that would be allocated on the basis of net 

assets; and 

· the proportion of the Merged Trust allocated to Commercial Property Trust 

unitholders is slightly less than that contributed on the basis of net assets. 

3.2.3 Conclusion – Allocation of Value 

Based on the information presented above, in our view the exchange ratios, and 

therefore the proportion of the Merged Trust allocated to each group of unitholders are 

reasonable after taking into consideration: 

· the relative market capitalisation of the existing trusts; and 

· the relative net assets of the existing trusts. 

3.3 Market Perception of the Merged Trust 

In our view there is a strong likelihood that the Merged Trust will be rated more highly 

by the stock market than the individual trusts. The reasons for this view are set out 

below. 

3.3.1 Size 

In recent years size and liquidity have become increasingly important in the Australian 

and international share markets. This includes the property trust sector. Therefore a 

substantial cause of any re-rating will be the size of the Merged Trust in the listed 

property trust sector and its greater weighting in ASX indices. 

Factors that contribute to this position include: 

· investors prefer stocks with reasonable to high levels of liquidity such that shares 

can be readily bought and sold without dramatically affecting the market price; 

· index investors manage their portfolios to track market indices. Smaller entities, 

and those that lack liquidity have lesser index weightings and are hence less 

attractive to such investors; and 



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November 1999 

· international investors have little interest in stocks that do not have appropriate 

size and liquidity. 

In general it is notable that institutional investors and the broking community are not 

strongly supporting smaller property trusts (for example those with a market 

capitalisation below, say $500 million). These trusts have generally underperformed 

the sector as a whole. 

The following table sets out the market capitalisation of each of the existing trusts 

together with the market capitalisation of the Merged Trust in the event that no 

re-rating occurs: 

Existing Trust 

Market Capitalisation at 


$million 

Ranking in the 


Index (AS20) 

Proportion 

of Index 

% 

Industrial Property Trust 343.2 27 1.2 

Commercial Property Trust 263.8 30 0.9 

Commercial Property Trust – CEU 1,2 18.3 N/A N/A 

Retail Property Trust 361.2 25 1.2 

Development Trust 127.9 - N/A 

Merged Entity 1,114.4 7 3.6 


2 Not listed on the ASX. This estimate of market capitalisation is based on the trading price of an ordinary 

Commercial Property Trust unit discounted for the lack of a current distribution entitlement. 

Each of the existing trusts is relatively small in the context of the Property Trust Index 

(AS20). The market capitalisation of the largest of the existing trusts (the Retail Property 

Trust) represents only 1.2 percent of Property Trust Index. 

However, as a consequence of the Merger, even without a re-rating, the Merged Trust is 

expected to become the 7 th largest property trust included in the Property Trust Index. 

Based on the market capitalisation of the existing trusts it would represent 

approximately 3.6 percent of the index. 



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November 1999 

Clear market evidence exists that larger trusts tend to trade on lower yields than 

smaller trusts. This is illustrated in the following table. 

Trust 

Market 

Capitalisation at 



Distribution 

Yield 

$million % % 

Market capitalisation > $750 million 

Westfield Trust 4,969 16.7 7.3 

General Property Trust 3,837 12.9 7.6 

Mirvac Group 1,702 5.7 7.5 

Westfield America Trust 1,531 5.2 8.2 

Stockland Trust Group 1,451 4.9 7.6 

Gandel Retail Trust 1,311 4.4 7.8 

AMP Diversified Property Trust 998 3.4 8.0 

National Mutual Property 918 3.1 7.6 

BT Office Trust 802 2.7 7.5 

AMP Shopping Centre Trust 783 2.6 8.1 

Weighted average distribution yield 8.0 

Market capitalisation 

$300 million - $750 million 

Commercial Investment Trust 667 2.2 7.5 

Advance Property Fund 655 2.2 8.5 

Prime Industrial Property Trust 617 2.1 9.0 

Centro Properties Group 594 2.0 8.7 

AMP Office Trust 581 2.0 7.4 

Macquarie Office Trust 563 1.9 9.2 

Westpac Property Trust 526 1.8 8.2 

Commonwealth Office Property Fund 496 1.7 8.4 

Prime Credit Property Trust 496 1.7 9.3 

BT Property Trust 420 1.4 8.4 

Goodman Hardie Industrial Property Trust 393 1.3 8.9 

Paladin Commercial Trust 380 1.3 8.5 

Macquarie Countrywide Trust 379 1.3 8.7 

AMP Industrial Trust 362 1.2 9.0 

Colonial First State Retail Property Trust 361 1.2 9.4 

Thakral Holdings Group 359 1.2 9.1 

Colonial First State Industrial Property Trust 343 1.2 9.1 


Other 3,220 10.8 

Total 29,714 100.0 

Source: 

Bloomberg LLP. 



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November 1999 

The following table sets out the projected distribution yields for the four existing trusts 

for the year ending 30 June 2000 and contrasts these to the projected yields for listed 

trusts with a market capitalisation in excess of $750 million. 

Trust 



$million 


Distribution Yield 1 

% 

Industrial Property Trust 343.2 9.1 

Commercial Property Trust (excluding CEUs) 263.8 9.4 

Retail Property Trust 361.2 9.4 


Weighted average (existing trusts) 9.3 

Weighted average (all trusts >$750 million) 8.0 

1 Excluding the Development Trust which is not expected to commence distributions until 2001. 

Source: Bloomberg LLP. 

The above table indicates that there is potential scope for a re-rating of the 

Merged Trust relative to the existing trusts. 

However, it should be recognised that the property portfolio created by merging the 

four existing trusts may not immediately be optimal for a larger diversified trust. 

Consequently, the balance of the portfolio may need to change over time to reflect the 

Merged Trust’s new size and profile. Therefore, while some re-rating is likely to be 

achieved in the short term, continued rebalancing of the portfolio over the medium to 

longer term is likely to be required for the Merged Trust to be rated as highly as some 

of the other larger diversified trusts. This is discussed further in Section 3.3.3. below 

and is likely to involve the sale of a number of non-core properties with the 

reinvestment of funds in properties more appropriate for a larger diversified property 

trust. 

3.3.2 Liquidity 

Historical levels of liquidity for each of the existing trusts are illustrated in the 

following table: 

Proportion of Units Traded 

Trust 

Last 30 days 

% 

Last 90 days 

% 

Last 180 days 

% 

Last 12 months 

% 

Industrial Property Trust 1.0 3.6 13.8 32.2 

Commercial Property Trust 1 2.0 10.1 25.1 49.8 

Retail Property Trust 1.5 5.8 11.7 32.2 

Development Trust 0.4 5.2 11.3 16.4 

1 Excluding capital entitlement units. 

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November 1999 

For comparison purposes the liquidity of the four existing trusts is compared to other 

major listed property trusts in the following table: 

Proportion of Units Traded 

Trust 

Last 30 days 

% 

Last 90 days 

% 

Last 180 days 

% 

Last 12 months 

% 

Westfield Trust 3.1 9.2 19.5 39.4 

General Property Trust 3.6 10.7 21.4 39.0 

Stockland Trust 4.9 6.6 9.1 14.6 

Westfield America Trust 4.2 14.1 26.2 42.5 

Gandel Retail Trust 2.2 9.9 17.6 32.3 

BT Office Trust 5.4 15.6 32.4 73.7 

AMP Shopping Centre Trust 7.6 15.6 25.7 39.7 

It should be noted that particular events (for example new issues) has the potential to 

distort reported liquidity levels. 

Notwithstanding, it is clear that with the possible exception of the Commercial 

Property Trust, each of the existing trusts currently experiences lower levels of 

liquidity than other major listed property trusts. To the extent that liquidity improves 

as a result of the merger, this should benefit unitholders and assist in the re-rating. 

3.3.3 Property Profile 

If the merger proceeds, units in the Merged Trust will have a risk profile that is 

different from the risk profile of the individual trusts. 

A summary of the key changes to the property risk profile are summarised below: 

a) Geographic Profile 

Geographic 

Profile 

Industrial 


Trust 

Commercial 


Trust 

Retail 


Trust 

Development 

Trust Total 

$m % $m % $m % $m % $m % 

State 

NSW 349 76 82 23 - - 275 100 706 44 

QLD 41 9 68 19 218 43 - - 327 20 

VIC 72 15 62 18 130 25 - - 264 17 

SA - - 52 15 108 21 - - 160 10 

WA - - 86 25 45 9 - - 131 8 

ACT - - - - 8 2 - - 8 1 

Total 462 100 350 100 509 100 275 100 1,596 100 



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November 1999 

In general terms, the Merged Trust will have a relatively well balanced geographic 

spread, having regard to the population base of each State. By property value, the 

Merged Trust will have a 44.2 percent exposure to New South Wales followed by 

Queensland (20.5 percent) and Victoria (16.6 percent). 

The following pie charts reflect the geographic distribution of the assets of the 

Merged Trust and also the geographic distribution for the sector as a whole: 

Merged Trust 

Geographic Distribution 





VIC 

WA 

8.2% 

ACT 

0.5% 

VIC 

16.1% 

WA 

6.2% 

ACT 

4.7% 

16.6% 

SA 

10.0% 

QLD 

20.5% 

NSW 

44.2% 

SA 

3.7% 

QLD 

11.0% 

NT 

6.1% 

NSW 

52.1% 



Notwithstanding that the Merged Trust has a lesser bias towards New South Wales 

and a greater bias towards Queensland and South Australia, in our view, the 

Merged Trust will still provide a generally well balanced geographic spread. 

b) Property Type 

The Merged Trust will have an evenly balanced distribution by property type, with 

retail at 31.4 percent, industrial at 28.1 percent and office at 40.5 percent. There will be 

no other property types such as carparks or hotels. 

A comparison of the asset composition of the Merged Trust to diversified property 

trusts as a whole shows that other diversified property trusts generally have a higher 

exposure to retail and office assets and a lower exposure to industrial property. 

Although industrial property can provide higher than average yields, it generally does 

not provide significant capital growth. Therefore, relative to other diversified property 

trusts, at least initially, the Merged Trust may be somewhat overexposed to the 

industrial sector. Given this sector generally has a lower capital growth profile, this 

may restrict the extent to which re-rating occurs. 


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November 1999 

The following pie charts reflect the distribution of the property types of the 

Merged Trust and the sector as a whole: 

Merged Trust 






Industrial 

28.1% 

Industrial 

4.8% 

Car Park 

1.4% 

Hotel/leisure 

Hot./Leis 

3.7% 

3.7% 

Office 

40.5% 

Retail 

45.4% 

Office 

44.7% 

Retail 

31.4% 



c) Number of Properties and Other Characteristics 

Other characteristics of the property portfolio include: 

Property Profile 

Industrial 


Trust 

Commercial 


Trust 

Retail 


Trust 

Development 

Trust 

Total 

Number of 

Properties 

24 

7 

10 

2 

43 

Number of Tenants 

144 

118 

824 

41 

1,127 

Weighted Average 

Lease Expiry (Yrs) 

4.7 

5.5 

4.3 

7.3 

5.0 

Vacancies (%) 

2.6 

1.8 

1.4 

15.5 

2.8 

The Merged Trust will have 43 properties, which is more than the other Australian 

diversified trusts, which have between 11 and 30 properties each. A larger number of 

properties decreases the investment risk assuming that there is an even geographic and 

property type distribution. However, it can also increase management and 

administrative costs. Therefore, there is a limit to which a larger number of properties 

will be viewed favourably by the market. 



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November 1999 

The following table compares key characteristics of the Merged Trust with a selection 

of other diversified property trusts: 

Trust Name 

Total 

Lettable 

Area 

sqm 

Current 


Value 

$m 

Current 

Vacancy 

(approx) 

% 

Number of 

Properties 

AMP Diversified Trust 683,073 1,214 1.9 22 

Advance Property Fund 317,299 817 3.4 18 

BT Property Trust 223,941 466 0.4 11 

Colonial First State Property Trust Group 913,747 1,596 2.8 43 

General Property Trust 1,113,494 3,619 3.1 30 

National Mutual Property Trust 418,504* 775 1.1 17 

Stockland Trust Group 289,191 773 1.5 13 

* Plus 3,681 car bays 

Source: Property Investment Research/Colonial First State Investments 

Key points to note include: 

· Property value – the Merged Trust will have a total property value of $1.6 billion. 

This will place it as the second largest diversified trust, behind General Property 

Trust with $3.6 billion. 

· Lease expiry – the Merged Trust will have a weighted average lease expiry of 

5.0 years. This expiry profile is considered to be generally representative of 

diversified trusts. 

· Vacancies – the Merged Trust will have a total vacancy of approximately 

2.8 percent. This vacancy rate is towards the upper end of the vacancy rate for other 

diversified trusts but is still considered to be generally acceptable. 

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November 1999 

There is also evidence to suggest that on average, diversified property trusts trade on 

lower yields than sector specific property trusts. This is demonstrated in the following 

table: 

Trust 

Market 

Capitalisation at 



Distribution 

Yield 

$million % % 

Diversified Property Trusts 

General Property Trust 3,837 12.9 7.6 

Mirvac Group 1,702 5.7 7.5 

Stockland Trust Group 1,451 4.9 7.6 

National Mutual Property 918 3.1 7.6 

Advance Property Fund 655 2.2 8.5 

BT Property Trust 420 1.4 8.4 

Thakral Holdings Group 358 1.2 9.1 


Specialised Property Trusts 

Westfield Trust 4,969 16.7 7.3 

Westfield America Trust 1,531 5.2 8.2 

Gandel Retail Trust 1,311 4.4 7.8 

AMP Diversified Property Trust 998 3.4 8.0 

BT Office Trust 802 2.7 7.5 

AMP Shopping Centre Trust 783 2.6 8.1 

Commercial Investment Trust 667 2.2 7.5 

Prime Industrial Property Trust 617 2.1 9.0 

Centro Properties Group 594 2.0 8.7 

AMP Office Trust 581 2.0 7.4 

Macquarie Office Trust 563 1.9 9.2 

Westpac Property Trust 526 1.8 8.2 

Commonwealth Property Office Fund 496 1.7 8.4 

Prime Credit Property Trust 496 1.7 9.3 

Goodman Hardie Industrial Property Trust 393 1.3 8.9 

Paladin Commercial Trust 380 1.3 8.5 

Macquarie Countrywide Trust 379 1.3 8.7 

AMP Industrial Trust 362 1.2 9.0 

Colonial First State Retail Property 

Trust 361 1.2 

Colonial First State Industrial Property 

Trust 343 1.2 9.1 


Other 3,220 10.8 

Total 29,714 100.0 

Source: Bloomberg LLP 

9.4 



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November 1999 

Therefore the diversified nature of the Merged Trust’s portfolio may also aid in the 

re-rating of the stapled securities 

3.3.4 Summary – Re-rating Potential 

In summary, we believe there is significant potential for the Merged Trust to be 

re-rated relative to the existing trusts. 

This potential is demonstrated in the following table: 

Trust 



$million 


Distribution Yield 1 

% 

Industrial Property Trust 343.2 9.1 

Commercial Property Trust (excluding CEUs) 263.8 9.4 

Retail Property Trust 361.2 9.4 


Weighted average (existing trusts) 9.3 

Weighted average (Diversified trusts >$300million) 7.4 

Weighted average (All trusts >$750 million) 8.0 

1 Excluding the Development Trust that is not expected to commence distributions until 2001. 

The key reasons for a re-rating are as follows: 

· The dramatically increased size of the Merged Trust. Without re-rating it will 

have a market capitalisation of approximately $1.1 billion. This would make the 

Merged Trust the 7 th largest trust in the Property Trust Index; 

· The move from being a sector specific trust to being a diversified property trust. 

There is some evidence to suggest that diversified property trusts are presently 

rated more highly than sector specific trusts; and 

· Other transactions have achieved similar results. For example: the merger of 

Mirvac Limited, Capital Property Trust and Mirvac Property Trust into the 

Mirvac Group is considered, for the purposes of comparison, a substantially 

similar transaction. In that particular case the market capitalisation of the merged 

entity over the 30 days after the merger was implemented was nearly 40 percent 

higher than that of the individual entities over the 30 days prior to the 

announcement. 

While we believe that some re-rating may occur in the short term, a full re-rating is 

likely to take a longer period and may require some rebalancing of the property 

portfolio. 

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November 1999 

3.4 Distributions 

The following table sets out the Manager’s forecast distributions for each of the 

existing trusts and for the Merged Trust (assuming the merger proceeds) for the years 

ending 30 June 2000 and 30 June 2001. 

Industrial 


Trust 

Commercial 


Trust 

Retail 

Trust 

Development 

Trust 

Merged 

Trust 

Cents Per Unit 

2000 1 17.00 17.35 10.50 - 18.00 

2001 16.80 17.45 10.55 15.75 18.10 

Cents Per Existing Unit 2 

2000 1 17.10 17.37 10.53 18.45 na 

2001 17.20 17.47 10.59 18.55 na 

1 2000 represents the forecast for the six months ended 30 June 2000 annualised. 

2 Adjusting the per unit distribution for the Merged Trust to be comparable to the units held in the existing trust. 

In general the increases in distributions are relatively minor. The two exceptions are: 

(i) 

(ii) 

Colonial Limited currently holds all of the 11.642 million capital entitlement units 

in the Commercial Property Trust. Fifty (50) percent of these are to be converted 

into ordinary units on 30 June 2000 and 50 percent are to convert into ordinary 

units on 30 June 2001. These capital entitlement units would not have been 

entitled to receive distributions until converted into ordinary units. However, as 

a consequence of the merger, Colonial Limited will receive units in the 

Merged Trust that will be entitled to distributions on the same basis as other 

unitholders; and 

holders of units in the Development Trust will receive distributions six months 

earlier from the Merged Trust than they would have as continuing unitholders in 

the Development Trust. 

In effect, the ability to increase distributions arises as a consequence of a number of 

factors. These include: 

(i) 

(ii) 

(iii) 

a reduction in expenses incurred in the management of the Merged Trust; 

an increase in the interest expense as a consequence of higher debt levels in lieu 

of the equity call that would otherwise have been payable by unitholders in the 

Development Trust; and 

transfers from capital reserves increasing amounts able to be distributed. As set 

out in the Explanatory Memorandum, transfer from capital reserves are forecast 

to be $4.1 million in 2000 and $8.1 million in 2001. In 2001 this would be the 

equivalent of approximately $0.014 per unit. 



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November 1999 

The forecast distributions referred to in this independent expert’s report are before 

taking into consideration any impact of the introduction of the Goods and Services Tax 

(“GST”) on 1 July 2000. The likely impact of GST on distributions on net income, and 

therefore distributions, are discussed in the Explanatory Statement and are forecast to 

be in the range of 0.2 percent to 1.4 percent of distributions for the four existing trusts 

for the year ended 30 June 2001. 

In our view, the forecast increase in distributions in itself is not a compelling argument 

for the merger. The forecast increases are minor and are supported by transfers from 

capital reserves which may not be sustainable in the longer term. Notwithstanding, 

subject to the performance of the Manager, long term prospects for the Merged Trust, 

as a substantially larger trust with greater investor support should be favourable from 

a distributions perspective. 

3.5 Tax Profile of Proposed Merger 

The Manager has received tax advice from KPMG regarding the tax implications of the 

merger for unitholders. This advice is set out in the Explanatory Memorandum. 

Unitholders are advised to refer to this taxation advice. 

In brief, based on the KMPG’s taxation letter, the following general taxation 

implications arise: 

· the merger will not result in a disposal of unitholders’ original units unless units are 

sold prior to the restructure or a unitholder receives the cash alternative at the time 

of the restructure; 

· the special capital distribution of $0.03 should be treated as a return of capital and 

not as assessable income; 

· an adjustment to the tax cost base of the original units will be necessary for the 

special capital distribution received, in the same way as ordinary tax deferred 

distributions require adjustment. This will only result in a capital gain to the 

unitholders to the extent the special distribution exceeds the cost base of the original 

units; 

· the application of the special distribution to the purchase of units in the other three 

trusts will be treated as an acquisition of assets for capital gains tax (“CGT”) 

purposes. Each new unit will have a cost base of $0.01; 

· when a stapled security is sold, the unitholder will be treated as having sold units in 

each of the underlying trusts. Depending on the cost base of the units, this may 

result in a capital gain or capital loss being realised; 

· the calculation of the capital gain or loss will require a reasonable apportionment of 

the consideration received across the units of each trust which form the stapled 

unitholding; 

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November 1999 

· it is likely that unitholders will incur a capital loss on the sale of the original units 

and capital gains on the sale of the units acquired in the three trusts with the 

application of the capital return monies; 

· the capital loss on the disposal of the original units will be reduced by any tax free 

distributions previously received in respect of these units. Further, when calculating 

the capital loss, the cost base of the original units will not indexed for inflation. 

Accordingly, unitholders may effectively lose the benefit of indexation and tax free 

distributions in respect of their original units; 

· the capital loss can be offset against the capital gain on the new units in the three 

trusts; 

· a CGT discount has recently been proposed for individuals, trusts and complying 

superannuation funds. Under the proposal, individuals and trusts will include in 

assessable income half (without indexation) of the realised nominal gain whilst 

complying superannuation funds will be assessed on two thirds of the nominal 

capital gain. For unitholders to qualify for the CGT discount, units must be held for 

at least 12 months; 

· in relation to trust distributions, unitholders will be assessed on their portion of the 

net income of each trust. These distributions will consist of the net income, capital 

gains, tax free and tax deferred income components; and 

· to the extent the cumulative tax deferred amounts per unit exceed the cost base of 

the unit, a capital gain will arise. In respect of the new units with a cost base of 

$0.01, the practical consequence of tax deferred amounts in relation to these units 

will be capital gains to the unitholders. 

The historic tax free and tax deferred distribution components of each of the merging 

trusts are shown in the Earnings and Distributions section of each respective Appendix 

to this report. 

3.6 Gearing 

Each of the existing trusts has a different level of borrowings within its capital 

structure. The table set out below shows the current gearing ratio (borrowings/total 

assets) for each of the existing trusts together with the gearing ratio that will exist for 

the Merged Trust. 

Gearing Ratios 

Industrial 

% 

Commercial 

% 

Retail 

% 

Development 

% 

Merged 

Trust 

% 

1999 (actual) 27 13 27 34 1 27 

2000 (forecast) 28 14 24 27 28 

2001 (forecast) 28 25 25 30 29 

1 Net of the final equity instalment due from unitholders on 30 June 2001. 



103



November 1999 

Key points to note in respect of the above table include: 

· the significant increase in gearing in the Commercial Property Trust reflects the 

final payment of approximately $46 million for the SRA building in Sydney. This 

payment is due in September 2000; 

· as a consequence of the merger, unitholders in the Development Trust will not 

need to pay the unpaid amount on their existing units. The Merged Trust will in 

effect borrow to meet the requirement for these funds; 

· excluding the Commercial Property Trust in 2000 and 2001, the level of gearing is 

not forecast to be significantly greater in the Merged Trust than it is in the 

individual trusts; and 

· for comparative purposes it is relevant to note that the forecast gearing level for the 

Merged Trust will be higher than the gearing levels of a number of the other large 

property trusts. This is illustrated in the following table: 

Trust Name Gearing 1 

% 

Westfield Trust 19.8 

General Property Trust 10.5 

Mirvac Group 5.6 

Stockland Trust Group 5.5 

Westfield American Trust 59.7 

Gandel Retail Trust 19.2 

National Mutual Property Trust 10.6 

AMP Shopping Centre Trust 30.2 

Commercial Investment Trust 20.0 

Advance Property Fund 14.3 

Merged Property Trust 28.0 

1 Debt divided by total assets. 

Notwithstanding the above comparison, in our view the Merged Trust’s gearing 

ratio is not excessive. It is relevant to note, for example, that based upon the 

Manager’s forecasts the interest expense is covered 1 4.5 times in the six months to 

30 June 2000 and 4.2 times in the year to 30 June 2001. 

3.7 Net Tangible Asset Backing 

Property trusts typically trade at either a premium or a discount to their net tangible 

assets and therefore net tangible assets are not necessarily reflective of how the stock 

market assesses value. Notwithstanding, many investors are conscious of the net asset 

backing of their investments. 

1 Interest coverage is calculated as net income before interest expense divided by interest expense. 

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November 1999 

The net tangible asset (“NTA”) position in respect of each of the existing trusts is as 

follows: 

Trust 

NTA 

Per Unit Unit Price Premium/(Discount) 

Industrial Property Trust $1.82 $1.87 +2.7% 

Commercial Property Trust $1.95 $1.84 (5.6%) 

Retail Property Trust $1.14 $1.11 (2.6%) 

Development Property Trust $2.14 $1.80 (15.9%) 

Factors that may affect whether units in a trust trade at a premium or discount to net 

tangible assets include: 

· the current stock market perception of the value of the trust and its underlying 

assets. In contrast to net tangible assets that are reported at a point in time 

(normally six monthly) the stockmarket is dynamic providing continuous valuation 

data; 

· the performance and perception of a manager. Unitholders in listed trusts do not 

typically have the ability to realise or cause the realisation of underlying property 

assets. Therefore investors views of the Manager can be important to the value of 

units in a listed property trust; 

· the level of administration cost incurred by the trust. Such costs are generally not 

included in individual property valuations; and 

· other stockmarket related factors. Such factors include, for example, the size of a 

trust, the indices within which it is included and potentially its overall taxation 

profile. The level of liquidity in a stock may also affect investors (particularly 

institutional) interest in a stock. In this regard it is relevant to note the information 

in respect of the four existing trusts presented in Section 3.3.2. 

The NTA of the Merged Trust is estimated by the Manager to be $1.98. On a 

comparable basis, allowing for the exchange ratio, this is equivalent to the following 

amounts per existing security: 

$ 

Industrial Property Trust 1.88 

Commercial Property Trust 1.91 

Retail Property Trust 1.16 

Development Trust 2.03 



105



November 1999 

Unitholders of the Commercial Property Trust and the Development Trust will each 

experience dilution in their net asset backing as a consequence of the merger. The 

dilution represents approximately 2.0 percent and 5.2 percent respectively. It should be 

noted that each of these was trading at a discount to net tangible assets prior to the 

merger. 

3.8 Cost Savings 

The Manager anticipates that the merger will result in a number of cost savings. These 

include: 

· savings enjoyed by the Manager will allow a reduction in the Manager’s fee. The 

Manager has agreed that its fee will be capped at 0.6 percent of gross assets per 

annum; 

· a reduction in listing fees, financial reporting costs and statutory compliance costs; 

and 

· a reduction in the administration required for maintaining separate entity 

accounting records. 

The Manager estimates the following management expense ratios in respect of the 

individual trusts (assuming the merger proposal is not implemented) and the 

Merged Trust (assuming the merger proposal is implemented). 

Management Expense Ratio Comparison (based on gross assets) 

Year ending 

30 June 

(30 September for 

Retail) 

Industrial 


Trust 

(%) 

Commercial 


Trust 

(%) 

Retail 


Trust 

(%) 

Development 

Trust 

(%) 

Merged 

Trust 

(%) 

2000 0.74 0.73 0.75 0.94 0.62 

2001 0.83 0.74 0.78 0.91 0.69 

The above table indicates that in all instances the forecast management expense ratio is 

expected to fall in the event that the merger is implemented. 

4. Opinion and Conclusions 

In our opinion, the merger proposal is fair and reasonable and in the best interests of 

unitholders: 

· of the Industrial Property Trust taken as a whole; 

· of the Commercial Property Trust taken as a whole; 

· of the Retail Property Trust taken as a whole; and 

· of the Development Trust taken as a whole. 

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November 1999 

The key reasons for our conclusion are drawn from our evaluation of the merger set 

out in Section 3. 

These include: 

The Apportionment of Units in the Merged Trust 

Based on the relative market capitalisation of each existing trust and the net assets of 

each existing trust, we consider that the allocation of stapled securities in the 

Merged Trust to unitholders is within a range that is considered reasonable. 

Size and Diversification 

The merger will mean that investors will move from having an interest in a single 

sector trust to having an interest in a much larger diversified property trust. As a 

consequence a re-rating of the security is expected, partially in the short term and 

partially over the longer term. This is the key objective of the merger and the most 

important element of our conclusion that the merger is fair and reasonable and in the 

best interests of unitholders. 

Increase in Forecast Distributions 

The Managers’ forecasts indicate that as a consequence of the merger a moderate 

increase in distributions will occur for the unitholders of each existing trust. While this 

is favourable for unitholders, we do not consider this in itself to be a compelling 

argument for the merger. 

Taxation Consequences 

Unitholders are referred to the KPMG letter contained in the 

Explanatory Memorandum for a comprehensive description of the taxation 

consequences of the merger. In broad terms, the merger should not result in a capital 

gains tax event for unitholders accepting stapled securities in the Merged Trust. 

Therefore they should not realise either a capital gain or a capital loss for taxation 

purposes. Unitholders selling their interests on market or via the book build process 

will, however, be treated as having sold their units for tax purposes and therefore may 

realise either a gain or a loss. 

Unitholders should be aware that a disadvantage of the merger is the potential 

reduction in value of the tax deferred component of future distributions. 



107



November 1999 

Matters Specific to Individual Trusts 

The following additional points should be considered by certain unitholders: 

(a) 

Development Trust 

As a consequence of the merger: 

· unitholders in the Development Trust will not be required to pay the final 

instalment of $1.00 per existing unit that would otherwise be payable on 

30 June 2000; 

· unitholders in the Development Trust are not presently expected to receive 

distributions until the 2001 financial year. As unitholders in the Merged 

Trust they are forecast to receive their first distribution in respect of the six 

month period ended 30 June 2000; and 

· unitholders in the Development Trust previously held an investment 

focused more on development profits and capital gains than on 

distribution yields. As a consequence of the merger, they will gain an 

interest in diversified property portfolio. This change in nature of their 

investment is potentially greater than occurs for the other groups of 

unitholders. 

(b) 

Commercial Property Trust – Capital Entitlement Units 

Colonial presently holds 11.64 million capital entitlement units in the 

Commercial Property Trust. Fifty (50) percent of these are due to convert into 

ordinary units on 30 June 2000 and 50 percent on 30 June 2001. In the interim 

they are not listed on the ASX and they do not receive distributions. The merger 

will result in Colonial in effect exchanging these units for stapled securities in the 

Merged Trust. These will be listed on the ASX and are forecast to pay 

distributions commencing in the 6 months ended 30 June 2000. 

On balance we have concluded that the benefits that may arise from the larger size and 

diversification of the Merged Trust relative to the existing trusts is of sufficient potential 

benefit to unitholders to cause the transaction to be fair and reasonable and in the best 

interests of unitholders. 

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November 1999 

APPENDICES 



109



November 1999 

Appendix 1 

Profile of the Industrial Property Trust 

Background 

The Industrial Property Trust is a property trust which currently invests in and manages industrial 

estates, warehouses and high technology facilities in Sydney, Melbourne and Brisbane. 

The trust was established in 1971 as the Parkes Property Trust No. 1 by 

Parkes Developments Pty Limited, and was listed on the ASX on 9 March 1972. In 1979 

Universal Management Holdings Limited, a subsidiary of QBE Insurance Group Limited, was 

appointed manager of the Trust. Universal Management Holdings Limited changed its name to 

Equitable Group Limited and accordingly, in April 1987, the Trust changed its name to 

Equitable Property Trust No. 1. 

In January 1989 Colonial Mutual Funds Limited was appointed manager of the Trust. In the 

subsequent months, the Colonial Mutual Property Trust No. 1, a Trust managed by 

Colonial Mutual Funds Limited, made an offer to acquire all of the issued units of the Trust at 

$2.05 per unit. This resulted in Colonial Mutual Property Trust No. 1 holding 73.53 percent of the 

Equitable Property Trust. No. 1. 

In March 1996 the Trust’s name was changed to Colonial Industrial Property Trust and in 

November 1998 the name again changed to Colonial First State Industrial Property Trust. 

With effect from 1 January 1999 the Trust merged with the 

Legal & General Industrial Property Trust (LGI). This merger significantly increased the Trust’s 

market capitalisation. As at 30 September 1999, the Industrial Property Trust had grown it’s property 

portfolio to a value of $461.6 million comprising 24 properties. 

Profile of Property Portfolio 

A summary of the Industrial Property Trust’s property portfolio at 30 September 1999, based on 

independent valuations for each property undertaken over a period from September 1998 to 

September 1999, is set out in the table below. 



110



November 1999 

Property Address State Classification 

Date of 

Construction 

Gross 

Building 

Area (sqm) 

Current 

Valuation 

$ 

Date of 

Valuation 

Portfolio 

Composition 

(%) 

Industrial Estate, 42-62 Maddox Street, Alexandria NSW Ind. Estate 1950’s + 43,600 35,000,000 03/99 7.6 

25 Pavesi Street, Smithfield NSW Warehouse 1997 7,527 7,450,000 08/99 1.6 

390 Eastern Valley Way, Chatswood NSW Ind. High Tech 1988 5,221 8,250,000 08/99 1.8 

91 Mars Road, Lane Cove NSW Warehouse 1985 6,794 10,600,000 08/99 2.3 

13-15 Lyon Park Road, North Ryde NSW Ind. High Tech 1990 7,569 16,250,000 03/99 3.5 

Brodie Industrial Park, 40 Brodie Street, Rydalmere NSW Ind. Estate 1980’s 19,814 17,400,000 08/99 3.8 

14 Aquatic Drive, Frenchs Forest NSW Ind. High Tech 1988 17,815 26,300,000 08/99 5.7 

Mascot Central, Gardeners Road, Mascot NSW Warehouse 1999 17,146 26,800,000 03/99 5.8 

77-91 Roberts Road, Chullora NSW Warehouse 1994 32,975 28,000,000 08/99 6.1 

Gateway Estate, Walters Road, Arndell Park NSW Ind. Estate 1999 27,928 28,500,000 08/99 6.2 

Slough Business Park, Silverwater Road, Silverwater NSW Ind. Estate 1980’s 71,279 80,000,000 03/99 17.3 

85 Epping Road and 376 Lane Cove Road, North Ryde NSW Ind. High Tech 1980 & 1985 (est.) 13,153 19,000,000 08/99 4.1 

8 Giffnock Avenue, North Ryde NSW Develop. Site N/A N/A 2,400,000 08/99 0.5 

Allders Building, 17 O’Riordan Street, Alexandria NSW Warehouse 1995 6,097 7,800,000 09/98 1.7 

Industrial Estate 317-321 Woodpark Rd, Smithfield NSW Ind. Estate 1990’s 14,903 10,300,000 03/99 2.2 

Industrial Estate 364-368 Woodpark Rd, Smithfield NSW Ind. Estate 1980’s 16,729 11,400,000 03/99 2.5 

339-345 Military Road, Cremorne NSW Office 1987 4,476 13,100,000 09/99 2.8 

299 Montague Road, West End QLD Ind. High Tech 1994 (refurbished) 5,995 8,400,000 03/99 1.8 

60 Enterprise Place, Tingalpa QLD Ind. Estate 1996 11,564 12,140,000 08/99 2.6 

Boundary Industrial Park, Coopers Plains QLD Ind. Estate 1986 - 1991 35,144 21,000,000 08/99 4.5 

100-128 Bridge Road, Keysborough VIC Warehouse 1994 6,875 8,800,000 08/99 1.9 

80 Turner Street, Port Melbourne VIC Warehouse 1994 11,820 11,000,000 11/98 2.4 

197-205 Fitzgerald Road, Laverton North VIC Warehouse 1996/97 17,705 11,725,000 08/99 2.5 

Lot 1, Old Geelong Road, Hoppers Crossing VIC Warehouse 1990 52,612 40,000,000 08/99 8.7 

Total 24 Properties 454,741 461,615,000 100.0 



111



November 1999 

Comments on Trust Portfolio 

· Portfolio mix – no single asset dominates the portfolio, however, there is a significant 

range of property values within the portfolio with Slough Business Park, Silverwater, 

NSW at $80 million representing 17.3 percent of the total portfolio by value and the 

development site at 8 Giffnock Avenue, North Ryde at $2.4 million representing only 

0.5 percent of total value. The majority of assets have a value range of between 

$7.5 million and $35 million and are either fully or substantially leased. 

· Geographic distribution – the Industrial Property Trust has a substantial exposure to 

New South Wales of (75.5 percent of the portfolio), with the balance of the portfolio made 

up by Victoria (15.5 percent) and Queensland (9.0 percent). Following the proposed 

merger, a more balanced geographic distribution will exist. 




Merged Trust 



QLD 

9.0% 

VIC 

15.5% ACT 

WA 

0.5% 

8.2% 

VIC 

16.6% 

SA 

10.0% 

NSW 

44.2% 

NSW 

75.5% 

QLD 

20.5% 



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November 1999 

· Property type – The Industrial Property Trust has a relatively balanced exposure to 

industrial estates (46.8 percent), warehouses (33.0 percent) and high technology facilities 

(16.9 percent). The balance of the fund is made up by office facilities (2.8 percent) and a 

development site (0.5 percent). Following the merger, industrial property will form 

approximately 28.1 percent of the total assets of the Merged Trust. 




Merged Trust 



W'house 

33.0% 

Develop. 

Site 

0.5% 

Industrial 

28.1% 

Office 

40.5% 

Ind. Estate 

46.8% 

Office 

2.8% 

Ind. High 

Tech 

16.9% 

Retail 

31.4% 



· Value – Based on current valuations, the Industrial Property Trust’s assets have a total 

value of $461.6 million. This places the Trust second in the listed industrial trust sector, 

significantly behind the market leader, Prime Industrial Property Trust at $763 million but 

also significantly above the third highest, AMP Industrial Trust, at $389.4 million. 

This is illustrated as follows: 

Listed Industrial Property Trusts (selection) 

Trust Name 

Gross Floor 

Area 

sqm 

Current 


Value 

$m 

Current 

Vacancy 

(approx) 

% 

Current Lease 

Expiry (approx) 

Yrs 

Prime Industrial Property Trust 983,016 763.0 3.9 7.3 

Colonial First State Industrial Property Trust 454,741 461.6 2.6 4.7 

AMP Industrial Trust 458,812 389.4 1.3 3.2 

Goodman Hardie Industrial Trust 328,100 235.7 0.6 5.0 

Paladin Industrial Property Trust 280,282 226.2 0.0 4.3 

Flinders Industrial Property Trust 650,622 223.8 0.0 4.9 

Armstrong Jones Industrial Fund 256,390 168.4 0.0 6.0 




113



November 1999 

· Vacancies – The current vacancy rate across the entire portfolio is approximately 

2.6 percent. This compares satisfactorily with the selection of listed industrial trusts which 

range from 0.0 percent to 3.9 percent. 

· Lease expiry – The current average remaining lease term (weighted by income) is 

4.7 years. This compares with the selection of listed industrial trusts which range from 

3.2 years to 7.3 years. In this regard, the lease expiry profile for the Trust is considered to 

be average for its sector. 

· Age of Assets – Virtually all property assets contained within the Trust have been 

constructed progressively over a period of some 20 years, with the oldest buildings 

(85 Epping Road and 376 Lane Cove Road, North Ryde) constructed in 1980 and Mascot 

Central, Gardeners Road, Mascot, constructed during 1999. The Maddox Street, 

Alexandria, New South Wales property was built in stages from the 1950’s onwards. The 

average age of the portfolio is 10 years, weighted by value. 

· Strengths of Portfolio 

- Significant exposure to the Sydney industrial property market, the largest and 

currently strongest industrial market in Australia. 

- The Industrial Property Trust is only exposed to the Sydney, Melbourne and Brisbane 

industrial markets, considered to be the three strongest industrial property markets in 

Australia. 

- No exposure to properties in non-capital city locations or to secondary markets such as 

Adelaide, Hobart and Darwin. 

- Properties are generally considered to be well leased, relatively modern assets, 

primarily in sound locations within large metropolitan centres. 

· Weaknesses of Portfolio 

- Some assets are over-rented which will limit rental and capital growth. Property 

Investment Research has estimated that the total Trust portfolio is approximately 

1.4 percent over-rented. Part of this over-renting is attributed to the major asset at 

Old Geelong Road, Hoppers Crossing, Victoria. 

- Industrial Property Trust assets require active management and periodic capital 

injections to upgrade or redevelop older style structures. 

- A significant vacancy of 11,715 square metres will soon arise at Boundary Industrial 

Park, Coopers Plains, Queensland with the imminent departure of Coles Supermarkets. 

- Capital and rental growth from many of the industrial properties will be limited, 

particularly where these properties are located in middle to outer metropolitan 

locations and where the buildings are in excess of 10 to 15 years old. 

114 


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November 1999 

Industrial Property Trust Market Overview 

Economic conditions have been favourable over the three months ending September 1999 

despite the slowdown in economic activity from January until March of this year. The major 

indicators, namely GDP growth of 4.8 percent and improving consumer and business 

confidence levels augur well for steady industrial market activity as 2000 approaches. 

The demise of certain Asian economies was anticipated to impact negatively on our 

economy, but this does not appear to have occurred and many commentators believe an 

improvement in Asian trade should begin to occur within the next 6 months. Markets remain 

buoyant in line with high levels of industrial activity construction and take-up activity 

remains fundamentally sound with the low interest rate environment during the first three 

quarters of 1999 continuing to fuel demand. Rents remain stable, or are increasing slightly, 

with yields continuing to firm. There is strong investor demand for the limited offering of 

good quality, well leased industrial premises coming to the market. 

Development activity remains strong across most cities with high levels of completions. 

· A significant level of space remains under construction and due for completion during the 

last quarter of 1999 and beyond. The Sydney industrial market leads the country with the 

largest amount of activity taking place in the north and south-west corridor. ‘Design and 

construct’ and pre-lease activity continues to underpin development, despite increases in 

small scale speculative developments in Melbourne, Perth and Sydney. 

Absorption levels strengthened especially between April and August of this year. 

· Brisbane and Adelaide recorded strong increases in demand whilst Sydney, Perth and 

Melbourne experienced modest rises. 

Vacancies are falling in most metropolitan areas although the secondary markets in Perth 

and Adelaide are experiencing a ‘softening’ in performance. 

Prime rents have increased marginally in Sydney, Perth and Brisbane, while remaining 

stable in Adelaide and reducing in Melbourne. 

· While there has been growth in rentals across the board in the last 18 months it has been 

rather protracted. Most prospective tenants have been extremely cautious and demanding 

when making the final decision on location. 

· Rents continue to fall in Melbourne as a highly competitive pre-lease market continues to 

place downward pressure on rents generally. Pre-lease rents are now being struck at 

levels below existing market rents with lower commencement rentals being accepted by 

developers in return for structured leases with fixed rental increases. 

Levels of investment sales remain subdued in most cities due to limited stock availability. 

· Investor demand remains reasonably strong, especially for quality stock, with the net 

result that trusts in particular have become enthusiastic participators in this market, 

placing firm pressure on yields. 



115



November 1999 

· All capital cities except for Brisbane have witnessed an increase in capital values during 

the last 12 months. This is due to the shortage of investment grade stock. 

Valuation Review 

We have undertaken a review of all current valuations of the Industrial Property Trust 

properties. A summary of our comments is as follows: 

· The majority of valuations have been based upon a capitalisation of either net passing or 

net market income, often supported by a discounted cashflow analysis. 

· Capitalisation rates range between 9.0 percent and 10.75 percent on market net income, 

with internal rates of return ranging between 10.50 percent and 13.00 percent, apart from 

Hoppers Crossing, Victoria at 9.0 percent. These yields and discount rates are generally 

considered appropriate. 

116 


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November 1999 

Earnings and Distributions 

The following table sets out the Industrial Property Trust’s earnings performance for the two 

years ended 30 June 1999, the Manager’s forecast earnings performance for the six months 

ending 30 June 2000 and the Manager’s forecast earnings for the year ending 

30 June 2001: 

Income 

Actual Actual Forecast Forecast 

Year Ended 

30 June 1998 

Year Ended 

30 June 1999 

Six Months Ending 

30 June 2000 

Year Ending 

30 June 2001 

$000s $000s $000s $000s 

Net property income 18,984 32,345 21,265 41,925 

Interest income 1,053 2,122 187 248 

Expenses 

20,037 34,467 21,452 42,173 

Trust expenses 1,813 2,613 1,769 3,934 

Interest expense 2,616 4,472 4,096 8,395 

4,429 7,085 5,865 12,329 

Abnormal items (1,427) 2 (15,755) 1 - - 

Net income 14,181 11,627 15,587 29,844 

Transfer from/(to) reserves 1,786 15,755 1 15 992 

Distributable income 15,967 27,382 15,602 30,836 

Weighted number of units in 

issue 

91,661,825 152,062,534 183,551,660 183,551,660 

Statistics 

Earnings per unit 15.47 7.65 1 16.98 16.26 

Diluted earnings per unit 14.54 7.65 1 16.98 16.26 

Distributions per unit (June 

2000 annualised) 

17.40 17.70 17.00 16.80 

Tax free amount of distribution 2.28 2.09 N/A N/A 

Tax deferred amount of 

distribution 

Distribution yield (based on 

balance sheet date unit price) 

4.86 5.59 N/A N/A 

8.8% 10.0% N/A N/A 

1 Abnormal items for the year ended 30 June 1999 comprise of the writedown of premium on acquisition of a controlled 

entity of $13,383,000 and a swap cancellation fee of $2,372,000. Earnings per unit are after this abnormal expense. 

2 In the year ended 30 June 1998, the abnormal expenses represented unit issue costs of $1,427,000. 



117



November 1999 

Balance Sheet 

Industrial Property Trust’s balance sheet as at 30 June 1999 (adjusted to reflect the effect of 

property revaluations since that date) and as at 30 June 1998 is summarised below: 


30 June 1998 

$000s 

30 June 1999 

$000s 


Receivables 44,975 1,355 


47,872 9,213 

Properties 229,680 463,064 

229,680 463,064 

Total Assets 277,552 472,277 


Accounts payable 678 2,501 

Distributions payable 4,220 8,168 

Borrowings 12,000 - 

16,898 10,669 


Borrowings 45,000 127,700 

45,000 127,700 

Total Liabilities 61,898 138,369 

Net Assets 215,654 333,908 

Statistics 

Units on issue 118,616,456 183,551,660 

Net tangible assets per unit ($) 1.82 1.82 

Borrowings/Total assets (%) 20.5 27.0 

Capital Structure and Ownership 

The Industrial Property Trust listed on the ASX on 9 March 1972. 

As at 30 June 1999, Industrial Property Trust had 183,551,660 units in issue which includes 

64,935,204 units which were allotted on 24 December 1998 pursuant to the acquisition of 

Legal & General Industrial Property Trust. 

According to the Industrial Property Trust’s unit register as at 30 June 1999, the following 

unitholders held in excess of 5 percent of the issued units: 

118 


CORPORATE FINANCE



November 1999 

Unitholder % 

Permanent Trustee Australia Limited 12.0 

Colonial Financial Corporation Limited 8.8 

Westpac Custodian Nominees Limited 7.6 

National Nominees Limited 5.0 

Sharemarket Performance 

Industrial Property Trust Unit Price and Trading Volumes 

2.50 

18,000 

16,000 

2.00 

14,000 

12,000 

Price ($) 

1.50 

1.00 

10,000 

8,000 

Volume (000s) 

6,000 

0.50 

4,000 

2,000 

- 

Jan-95 Jul-95 Jan-96 Jul-96 Jan-97 Jul-97 Jan-98 Jul-98 Jan-99 Jul-99 

0 

Volume 

Price 


Industrial Property Trust vs. All Ordinaries Index and Property Trust Index 

Index 

180 

170 

160 

150 

140 

130 

120 

110 

100 

90 

80 


Industrial Property Trust All Ordinaries Index Property Trust Index 




119



November 1999 

Appendix 2 

Profile of the Commercial Property Trust 

Background 

The Commercial Property Trust is a property trust which invests in and manages office 

buildings and office parks throughout Australia. 

The Trust was established as the Colonial Commercial Property Trust and listed on the ASX 

on 27 November 1995. In September 1996 the manager of the Trust changed from Colonial 

Funds Limited to Colonial Investment Trust Limited. 

At the time of the initial public offering, the Commercial Property Trust issued 10,000,000 

capital entitlement units to Colonial Mutual Life Assurance Society Limited. 50 percent of 

these units convert to ordinary units on 30 June 2000 and 50 percent convert to ordinary 

units on 30 June 2001. For the period from the date of issue to 30 June 1998, the capital 

entitlement units received a capital distribution of 6 percent per annum in the form of bonus 

capital entitlement units. The Colonial Group agreed to forego further accumulation of the 

capital entitlement units as from 30 June 1998 in order to reduce the dilutionary effect of the 

conversion of such units into ordinary units. There are now 11.642 million capital entitlement 

units on issue. 

In order to enhance future distributions, the Manager announced in February 1999 that: 

· Management fees were reduced from 0.85 percent of gross assets to 0.65 percent of gross 

assets with effect from 1 January 1999. This represents a saving to the trust of 

approximately $710,000 per annum; and 

· An interest rate swap of $33 million was renegotiated at a new average interest rate of 

5.35 percent per annum down from 7.21 percent per annum. Although a swap 

cancellation fee of $1.6 million was incurred, an annual saving of approximately 

$614,000 per annum will be enjoyed by the Trust. 

As at 30 September 1999, the Commercial Property Trust had grown its property portfolio to 

a value of $350 million comprising seven office properties. 


A summary of the trust’s property portfolio at 15 October 1999, based on independent 

valuations for each property undertaken between April 1998 and 15 October 1999 is set out 

below: 

120 


CORPORATE FINANCE



November 1999 


Date of 

Construction 

Net Lettable 

Area 

sqm 

Current 

Valuation 

$ 

Date of 

Valuation 

Portfolio 

(%) Notes 

SRA Building, 32 Lee Street, Sydney NSW A Grade Est. Sep 2000 14,391 4,550,000 04/98 1.3 1 

150 George Street, Parramatta NSW A Grade 1992 21,964 77,800,000 11/98 22.2 

300 Queen Street, Brisbane QLD A Grade 1984 19,052 67,500,000 09/99 19.3 

45 Pirie Street, Adelaide SA Prime Grade 1989 19,805 51,500,000 11/98 14.7 2 

Brandon Office Park, Glen Waverley VIC A Grade 1988 - 1990 16,862 41,500,000 05/99 11.9 

675-679 Victoria Street, Abbotsford VIC B Grade 1984 - 1987 9,474 20,750,000 10/99 5.9 

197 St Georges Terrace, 1 & 5 Mill Street, Perth WA A Grade 1972, 1983 

& 1986 

39,675 86,400,000 12/98 24.7 3 

Total 7 properties 141,223 350,000,000 100.0 

Notes: 

1. This property is presently under construction. Completion is expected to occur in September 2000. The value upon completion is projected to be 

$51.0 million. 

2. Includes vendor income support totalling $1.0 million over the years ending June 2000 and June 2001. 

3. A maximum shortfall indemnity of $6 million has been provided by the vendor. This expires in June 2000. 

4. Building classification – buildings are not officially graded and the classifications provided above are the opinion of Arthur Andersen, with 

reference to Property Investment Research Pty Ltd, the Manager and individual valuation reports. 



121



November 1999 

Comments on Trust portfolio 

· Portfolio mix – No single asset dominates the portfolio. The range of property values 

extends from the lowest value asset at $20.75 million (Abbotsford) to the highest value 

asset at $86.4 million (Perth). Upon completion, 32 Lee Street, Sydney will have a value of 

approximately $51 million. 

· Geographic distribution – The Commercial Property Trust properties have a generally 

balanced geographic spread. However, having regard for the likely continuing dominance 

of the Sydney office market within Australia, greater exposure to the New South Wales 

market may be regarded as preferable. If the merger proceeds, this increased exposure 

will be achieved with the incorporation of the two Development Trust properties. On a 

global basis, the Merged Trust will have a 44.2 percent exposure to 

New South Wales for all property types. 




Merged Trust 



WA 

24.7% 

NSW 

23.5% 

VIC 

16.6% 

WA 

8.2% 

ACT 

0.5% 

VIC 

17.8% 

SA 

14.7% 

QLD 

19.3% 

SA 

10.0% 

QLD 

20.5% 

NSW 

44.2% 



122 


CORPORATE FINANCE



November 1999 

· Property Type – The portfolio comprises one Prime grade, five A grade and one B grade 

property. Although a greater concentration of Prime grade property would be more 

attractive to the market, the current diversification has a similar profile to several other 

office trusts and the office component of diversified trusts. Following the proposed 

merger, commercial property will comprise 40.5 percent of the total portfolio, though this 

ratio will increase to approximately 43.7 percent following the completion of construction 

and letting up of 32 Lee Street, Sydney and the absorption of 56 Pitt Street and 

60 Castlereagh Street, Sydney. 




Merged Trust 



Prime 

B Grade 

5.9% 

14.7% 

Industrial 

28.1% 

Office 

40.5% 

A Grade 

79.4% 

Retail 

31.4% 



· Value – With a current value of the trust assets of $350.0 million, the Trust is relatively 

small compared to a selection of other similar listed commercial property trusts. The 

following table shows a range in total asset values for similar trusts of between 

$253 million to $1,060 million. 



123



November 1999 

Listed Commercial Property Trusts (selection) 

Trust Name 

Net Lettable 

Area 

sqm 

Current 


Value 

$m 

Current 

Vacancy 

(approx) 

% 

Current Lease 

Expiry 

(approx) 

Yrs 

Australian Commercial Property Trust 95,293 253.3 8.3 3.6 

Armstrong Jones Office Fund 124,152 490.0 21.0 8.0 

AMP Office Trust 256,190 523.5 2.9 5.0 

BT Office Trust (excl 400 George St, Sydney) 246,187 755.2 1.0 4.4 

Commercial Investment Trust 181,068 1,060.0 3.0 5.8 

Colonial First State Commercial Property Trust 141,223 350.0 1.8 5.5 

Commonwealth Property Office Fund 216,790 619.5 7.0 7.5 

Prime Credit Property Trust 251,460 580.0 1.2 7.4 

Westpac Property Trust 251,953 687.9 4.0 3.0 

Source: Property Investment Research/Colonial First State Investments. 

· Vacancies – Based on floor area, the Commercial Property Trust has a current vacancy 

rate of approximately 1.8 percent across the total portfolio. This rate generally compares 

favourably with the other selected trusts outlined above. 

· Lease expiry – The Commercial Property Trust has an average lease expiry of 

approximately 5.5 years, which places it in the middle of the range of other sector specific 

commercial property trusts. Over 55 percent of leases (by floor area) have expiry dates 

beyond July 2004. The Trust has approximately 118 tenants with an exposure to its 10 

largest tenants of 64.7 percent. There are two significant lease expiries (Telstra and NEC) 

at Brandon Office Park, Victoria in 1999 and 2000. However, discussions with the 

Manager indicate that negotiations are at an advanced stage to retain both tenants on new 

leases, albeit at lower rentals than those currently being paid. 

· Strengths 

- Even geographic distribution which partially minimises risks in fluctuating markets. 

- Trust assets comprises mainly A grade and one Prime grade buildings. 

· Weaknesses 

- Only limited exposure to New South Wales market. 

- No exposure to Prime grade buildings in either Sydney or Melbourne. 

These weaknesses will be partially addressed following the proposed merger with the 

Development Trust. 


124 

CORPORATE FINANCE



November 1999 

Office Market Overview 

There is wide disparity between performance and positioning in the rental cycle of the major 

Australian office markets. Although at quite different stages, Sydney CBD and Canberra 

stand out as being currently positioned outside the upturn cycle, with Sydney at or close to 

the upturn peak and Canberra either static or in decline. 

Sydney CBD and Parramatta’s vacancies fall, despite significant supply coming on stream. 

· Driven by the strength of demand and with no major completions in the second quarter 

of the year, vacancies declined again in Sydney CBD to 6.1 percent. Parramatta’s vacancy 

rate decreased to 5.6 percent, but with approximately 17,000 square metres of supply 

pending the rate is expected to generally increase. 

· It is apparent that Sydney’s increasingly significant role as a major financial centre, which 

has driven the current construction cycle, continues to underpin absorption. 

Nevertheless, company rationalisation, mergers and consolidations continue and may 

have a bearing on a likely oversupply position in the future. 

· The leasing market remains active and net absorption has been boosted by tenant 

relocations to the Sydney CBD and expansion from small space users who have 

contributed to 70 percent of leasing transactions. The significant supply of over 

190,000 square metres due to come on stream in Sydney CBD over the second half of 1999 

has yet to impact on rental levels, with prime gross effective rents remaining stable at 

$480 per square metre. Secondary rents have declined for much of this year and currently 

stand at $310 per square metre. In Parramatta, both prime and secondary rentals 

increased to $290 and $260 per square metre respectively. 

· Despite continuing strength in the investment market nationally, investment yields 

remain fixed at 6.0 percent to 7.0 percent for prime space in Sydney and 8.5 percent to 

9.0 percent in Parramatta. 

Brisbane, Perth and Adelaide are experiencing protracted growth in income stream and 

capital values, although Perth’s vacancy factor has increased. 

· No major, new supply has been reported in Brisbane, Adelaide or Perth over the course 

of the last six months. Construction activity has increased in Brisbane CBD, however, 

with only 50,000 square metres being released to the market, no major detrimental 

impact on performance is foreseen. 

· Demand, although remaining positive, has generally been subdued across these markets. 

No new tenants of significance have entered these markets. The improvement in 

performance can be attributed to expansions by incumbent tenants in the market place. 

In Adelaide, with State Government rationalisation taking place the current vacancy rate 

of 18.6 percent is expected to rise over the next 18 months. 

· Yields remain stable on the back of solid investor interest and the significant weight of 

funds looking to secure direct property. 



125



November 1999 


We have undertaken a review of all current valuations of the trust’s properties. A summary 

of our comments is as follows: 

· The majority of valuations have been based upon a capitalisation of either net passing or 

net market income, together with a discounted cashflow analysis. 

· Capitalisation rates range between 7.75 percent and 10.25 percent on market net income, 

with internal rates of return ranging between 10.5 percent and 13.0 percent. These yields 

and discount rates are generally considered appropriate. 

126 


CORPORATE FINANCE



November 1999 


The following table sets out Commercial Property Trust’s earnings performance for the two 

years ended 30 June 1999, the manager’s forecast earnings performance for the six months 

ending 30 June 2000 and the manager’s forecast earnings performance for the year ending 

30 June 2001. 

Income 

Actual Actual Forecast Forecast 

Year Ended 

30 June 1998 

Year Ended 

30 June 1999 

Six Months 

Ending 

30 June 2000 

Year Ending 

30 June 2001 

$000s $000s $000s $000s 

Net property income 32,822 30,102 15,207 33,676 

Rental indemnities 895 1,946 925 150 

Interest income 311 893 140 350 

Expenses 

34,028 32,941 16,272 34,176 

Trust expenses 3,636 3,170 1,335 3,050 

Interest expense 3,084 3,289 1,408 5,408 

6,720 6,459 2,743 8,457 

Gain on revaluation of property 

investments 

43 4,136 - - 

Abnormal items - (864) 1 - - 

Net income 27,351 29,754 13,529 25,719 

Transfer (to)/from reserves (43) (3,272) (1,089) 320 

Distributable income 27,308 26,482 12,440 26,039 

Weighted number of units on 

issue 143,387,514 143,387,514 143,387,514 149,208,684 

Statistics 

Earnings per unit (June 2000 

annualised) 19.07 20.75 18.87 17.24 

Diluted earnings per unit 18.43 19.19 18.87 17.24 

Distributions per unit (June 2000 

annualised) 18.176 19.04 17.35 17.45 

Tax free amount of distribution 2.34 2.30 N/A N/A 

Tax deferred amount of 

distribution 3.90 4.29 N/A N/A 

Distribution yield (based on 

balance sheet date unit price) 8.9% 11.5% N/A N/A 

1 Abnormal items for the year ended 30 June 1999 comprise a capital profit on disposal of an investment property of 

$741,000 and a swap cancellation fee of $1,605,000. 



127



November 1999 

Balance Sheet 

Commercial Property Trust’s balance sheet as at 30 June 1999 (adjusted to reflect the effect of 

property revaluations since that date) and as at 30 June 1998 is summarised below: 

30 June 1998 

$000s 

30 June 1999 

$000s 




4,946 4,145 


Properties 379,397 350,631 

379,397 350,631 

Total Assets 384,343 354,776 




Borrowings 79,000 - 

86,896 7,258 


Borrowings - 45,300 

- 45,300 


Net Assets 297,447 302,218 

Statistics 

Units on issue 155,029,854 155,029,854 



128 


CORPORATE FINANCE



November 1999 


Commercial Property Trust listed on the ASX on 27 November 1995. As at 30 June 1999, 

Commercial Property Trust had 143,387,514 ordinary units and 11,642,340 capital entitlement 

units in issue. According to Commercial Property Trust’s unit register as at 30 June 1999, 

ordinary unitholders with a unitholding in excess of 5 percent of issued units are: 

Unitholder % 

Citicorp Nominees Pty Limited 9.80 

National Nominees Limited 9.65 

Westpac Custodian Nominees Limited 9.33 

Chase Manhatten Nominees Limited 5.22 

Colonial Mutual Life Assurance Society Limited holds 100 percent of the capital entitlement 

units on issue. 


Commercial Property Trust Unit Price and Trading Volumes 

3.00 

25,000 

2.50 

20,000 

Price ($) 

2.00 

1.50 

1.00 

15,000 

10,000 

Volume (000s) 

0.50 

5,000 

- 

Nov-95 May-96 Nov-96 May-97 Nov-97 May-98 Nov-98 May-99 

0 

Volume 

Price 




129



November 1999 

Commercial Property Trust vs. All Ordinaries Index and Property Trust Index 

150 

140 

130 

Index 

120 

110 

100 

90 

80 

Nov-95 May-96 Nov-96 May-97 Nov-97 May-98 Nov-98 May-99 

Commercial Property Trust All Ordinaries Index Property Trust Index 



130 

CORPORATE FINANCE



November 1999 

Appendix 3 

Profile of Colonial First State Retail Property Trust 

Background 

The Retail Property Trust is a property trust which currently manages nine shopping centres 

and one commercial office building. The focus of the trust is to invest in shopping centres 

with some or all of the following characteristics: 

· high food base and daily shopping convenience; 

· centres which enjoy a degree of dominance; 

· location within high population growth areas; and 

· centres which present the opportunity to add value through refurbishment or 

redevelopment. 

The Retail Property Trust was established in July 1984 as the Hooker Property Trust which 

was established by Hooker Corporation Limited to acquire a portfolio of commercial, 

industrial and retail properties. The trust was listed on the ASX in November 1984. 

In June 1989, Colonial Mutual Funds Limited, a wholly owned subsidiary of The Colonial 

Mutual Life Assurance Society Limited, acquired the management rights of the trust and 

changed its name to Colonial Mutual Australian Property Fund. In April 1990, the 

management rights were transferred to Colonial Mutual Funds Management Limited, 

another wholly owned subsidiary of The Colonial Mutual Life Assurance Society Limited. 

The fund changed its name from Colonial Mutual Australian Property Fund to 

Colonial Retail Property Trust in May 1996 and in October 1998 the name was changed again 

to Colonial First State Retail Property Trust. 

As at 30 September 1999, the Retail Property Trust had grown the value of its property 

portfolio to $509.2 million comprising nine retail assets and one office property. 


A summary of the Retail Property Trust’s property portfolio at 30 September 1999, based on 

independent valuations for each property undertaken between September 1998 and 

May 1999, is set out below: 



131



November 1999 

Property Address State Type of Centre 

Ownership 

(%) 

Construction 

Date 

Total Lettable 

Area (sqm) 

Date of 

Valuation 

Valuation 

$ 

15 Bowes Street, Woden ACT Suburban Office 100.0 1984 9,196 03/99 8,000,000 1.6 

Grand Plaza Shopping Centre, 

Browns Plains 

Runaway Bay Shopping Village, 

Runaway Bay 

Clifford Gardens Shopping Centre, 

Toowoomba 

Castle Plaza Shopping Centre, 

Edwardstown 

Golden Grove Village Shopping 

Centre, Golden Grove 

Portfolio 

% 

QLD Sub-Regional 50.0 1994 & 1998 38,209 11/98 71,000,000 13.9 

QLD Sub-Regional 50.0 1974 & 1995 37,468 09/98 59,050,000 11.6 

QLD Sub-Regional 100.0 1983 25,384 05/99 88,000,000 17.3 

SA Sub-Regional 100.0 1970’s & 1987 22,766 11/98 57,800,000 11.4 

SA District 100.0 1992 & 1997 14,074 11/98 50,000,000 9.8 

Brimbank Central, Deer Park VIC Sub-Regional 100.0 1979 & 1997 35,667 05/99 82,500,000 16.2 

Corio Village Shopping Centre, 

Geelong 

Thornlie Square Shopping Centre, 

Thornlie 

Rockingham City Shopping Centre, 

Rockingham 

VIC Sub-Regional 100.0 1973 27,723 03/99 48,000,000 9.4 

WA Community 100.0 1971 & 1987 13,030 09/98 21,750,000 4.3 

WA Sub-Regional 12.5 1972, 1975, 

1978, 1989 & 

1995 

46,444 03/99 23,050,000 1 4.5 

Total 10 properties 269,961 509,150,000 100.0 

1 Comprises 12.5 percent of total value for shopping centre component at $170 million which is owned outright and 12.5 percent of total value for commercial land and warehouse at 

$14.4 million which has been acquired on a terms basis which expires on 30 April 2003. 


132 

CORPORATE FINANCE



November 1999 


· Portfolio mix – No single asset dominates the portfolio, with the lowest value (Thornlie 

Square) at $21.75 million and the highest value (Clifford Gardens) at $88 million. This 

excludes the office building at Woden, ACT at $8 million. 

· Geographic distribution – On a property value basis, the portfolio has a 42.8 percent 

exposure to the Queensland market and no exposure to the New South Wales market. 

Although exposure to the New South Wales market is not considered essential for a retail 

portfolio, it is considered preferable as a risk minimisation strategy. Following the 

proposed merger, a more even geographic spread will result relative to the population 

base of each State. 




Merged Trust 



VIC 

25.6% 

WA 

8.8% 

ACT 

1.6% 

QLD 

42.8% 

VIC 

16.6% 

WA 

8.2% 

ACT 

0.5% 

SA 

21.2% 

SA 

10.0% 

QLD 

20.5% 

NSW 

44.2% 



· Property type – The portfolio comprises nine retail properties and a relatively small office 

building in suburban Canberra. The retail properties comprise seven sub-regional centres 

and two smaller district and community centres. One of the smaller centres, 

Thornlie Square, WA is currently on the market for sale. Sub-regional and district centres 

generally provide higher yields than regional centres, though sub-regional centres 

generally suffer from lower capital growth and higher vacancies. They can also be 

significantly affected by competition if nearby regional centres expand. 



133



November 1999 

The principal centres at Clifford Gardens, Brimbank Central, Browns Plains and 

Runaway Bay are effectively new centres, convenience orientated, located in strong 

population growth areas and generally trading strongly. These four centres make up 

approximately 59 percent of the total portfolio by value. 




Merged Trust 



Office 

1.6% 

District/ 

Community 

14.1% 

Industrial 

28.1% 

Office 

40.5% 

Sub-Regional 

84.3% 

Retail 

31.4% 



· Value – At a current value of the trust’s property portfolio of $509.2 million, the trust is 

one of the smaller sector specific retail property trusts. Three trusts have assets in excess 

of $1 billion (AMP, Gandel and Westfield). 

Listed Retail Property Trusts (selection) 

Trust Name 

Lettable Floor Area 

sqm 

Current Property 

Value 

$m 

Current Vacancy 

(approx) 

% 

Armstrong Jones Retail Fund 169,096 388.1 1.0 

AMP Shopping Centre Trust 582,913 1,004.1 1.2 

Centro Properties Group 387,855 727.6 0.7 

Colonial First State Retail Property Trust 269,961 509.2 1.4 

Gandel Retail Trust 457,378 1,590.7 0.5 

Prime Retail Group 122,815 152.3 2.7 

Westfield Trust 1,856,276 4,924.4 Negligible 


· Vacancies – Current vacancies within the Trust are approximately 1.4 percent, which 

although not considered significant, are at the upper end of the vacancy levels 

experienced by sector specific trusts. 


134 

CORPORATE FINANCE



November 1999 

· Lease expiry – Analysis of retail centres by overall lease expiry is of limited significance, 

as virtually all centres have specialty shop leases between 4 and 6 years duration. The 

following graph provides a break-down of all lease expiries within the Retail Property 

Trust. However, as the majority of lease expiries for the major tenants are beyond 

2003/04, this graph provides a general representation of specialty shop lease expiries over 

the next five years. This lease expiry profile is considered to be generally comparable with 

other retail property trusts. 


Lease Expiry (% of Total Area) 

53.2% 

5.4% 

8.0% 7.6% 

5.2% 

11.3% 

9.3% 

Current 2000 2001 2002 2003 2004 2004 + 

Source: Colonial First State Investments 

In relation to major tenancies (eg department stores, discount department stores, and 

supermarkets), our analysis shows that the weighted average lease expiry profile for the 

Retail Property Trust is 11.0 years, which is within the range of other retail property trusts 

from approximately 10.2 to 12.9 years. 

· Strengths of Portfolio 

- Good geographic spread, apart from New South Wales. 

- Several of the larger assets are modern and in strong population growth areas. 

· Weaknesses of Portfolio 

- No exposure to regional shopping centres. 

- No exposure to New South Wales. 

- The small office property in Canberra (Woden) has short term lease profile and is not 

well suited to the Trust. 



135



November 1999 

- Runaway Bay Shopping Centre, Queensland may suffer from increased competition 

due to the recently completed Harbour Town Shopping Centre and the proposed 

Westfield/QIC centre at Helensvale, both of which are within 5 kilometres of the 

subject property. 

Retail Market Overview 

Retailers’ profitability is improving after a number of years of relative inactivity. The 

national retail sector has continued its strong performance this year with generally positive 

results reported across most retail categories during the course of this year. While positive 

retail conditions exist, retailers especially the larger chains, have been experimenting with 

new innovations and strategies in order to gain a competitive advantage. A number of retail 

property owners are concerned about future performance degeneration, caused by non-store 

competition like the internet. 

Retail sales market is generally buoyant 

· Retail turnover has been increasing strongly driven by a solid economic performance. The 

retail sales volume in percentage terms has risen by 3.7 percent for the year (Westpac 

Market Insights report). The low interest rate environment has significantly boosted the 

housing and retail sectors. The strength of the local sharemarket has bolstered consumer 

confidence. 

· The income tax cuts, due to be introduced in mid-2000 to coincide with the introduction 

of GST, are anticipated to strengthen consumer demand and maintain growth in retail 

spending. 

Construction sector still lively 

· The retail supply pipeline for 1999 is at record levels, with just under 

550,000 square metres due for completion this calendar year. The supply cycle is likely to 

peak in the next 9 months. The existing construction remains dominated by the regional 

centre sector, where expansion and re-engineering of centres accounts for the majority of 

total supply due to complete in 1999. However, the bulky goods sector has increased in 

significance over the first half of this year. 

On the investment side, sentiment remains strong with most trusts eager to invest in 

regional shopping centres. 


We have undertaken a review of all current valuations of the trust properties. A summary of 

our comments is as follows: 

· All valuations have been based upon a capitalisation of either net passing or net market 

income, together with a discounted cashflow analysis. 

· Capitalisation rates range between 7.75 percent and 11.50 percent have been applied on 

market net income, apart from Woden, ACT at 14.0 percent. Internal rates of return have 

ranged between 11.0 percent and 12.6 percent. These yields and discount rates are 

generally considered appropriate. 

136 


CORPORATE FINANCE



November 1999 


The Retail Property Trust has a 30 September year end. Retail Property Trust’s earnings 

performance for the year ended 30 September 1998 is set out below. As the other existing 

trusts and the Merged Trust have 30 June year ends, for comparative purposes the Manager 

has forecast earnings performance for the six months ending 30 June 2000 and the year 

ending 30 June 2001. 

Income 

Actual Forecast Forecast 

Year Ended Six Months Ending 

30 September 1998 30 June 2000 

Year Ending 

30 June 2001 

$000s $000s $000s 

Net property income 45,155 22,317 45,010 

Interest income 227 79 158 

Expenses 

45,382 22,396 45,168 

Trust expenses 3,540 1,868 3,878 

Interest expense 7,759 3,587 7,846 

11,299 5,455 11,723 

Net income 34,083 16,941 33,445 

Transfer from reserves 259 145 877 

Distributable income 34,342 17,086 34,322 

Weighted number of units in issue 306,573,878 325,443,693 325,443,693 

Statistics 

Earnings per unit (before revaluations) 11.12 10.41 10.28 

Diluted earnings per unit (before revaluations) 10.78 10.41 10.28 

Distributions per unit (June 2000 annualised) 10.55 10.50 10.55 

Tax free amount of distribution 1.70 N/A N/A 

Tax deferred amount of distribution 2.61 N/A N/A 

Distribution yield (based on balance sheet date 

unit price) 8.4% N/A N/A 



137



November 1999 

Balance Sheet 

The following table sets out the Retail Property Trust’s audited balance sheet as at 

30 September 1998 and 1999: 

30 September 1998 

$000s 

30 September 1999 

$000s 




8,541 8,605 


Properties 491,939 512,027 

Other investments 35 - 

491,974 512,027 

Total Assets 500,515 520,632 




11,756 12,510 


Borrowings 121,500 138,500 

121,500 138,500 


Net Assets 367,259 369,622 

Statistics 

Units on issue 325,443,693 325,443,693 



138 


CORPORATE FINANCE



November 1999 


The Retail Property Trust listed on the ASX on 8 November 1984. As at 30 September 1999, 

the Retail Property Trust had 325,443,693 ordinary units in issue. According to Retail 

Property Trust’s unit register, Permanent Trustee Australia Limited, with a unit holding of 

13.6 percent of Retail Property Trust’s issued units, is the only unitholder which holds in 

excess of 7 percent of the Retail Property Trust’s issued units. 


Retail Property Trust Unit Price and Trading Volumes 

1.60 

18,000 

1.40 

16,000 

Price ($) 

1.20 

1.00 

0.80 

0.60 

0.40 

14,000 

12,000 

10,000 

8,000 

6,000 

4,000 

Volume (000s) 

0.20 

2,000 

- 


0 

Volume 

Price 


Retail Property Trust vs. All Ordinaries Index and Property Trust Index 

Index 

180 

170 

160 

150 

140 

130 

120 

110 

100 

90 

80 


Retail Property Trust All Ordinaries Index Property Trust Index 




139

Independent Experts Report 


November 1999 

Appendix 4 

Profile of Colonial First State Development Trust 

Background 

The Development Trust is a property trust which was established to provide investors with 

the opportunity to participate in the forecast development profits and capital gains arising 

from two commercial office developments which are located in Sydney’s CBD. These 

developments are now complete and substantially let. 

The Trust was established by Prudential Property Funds Management Limited, a subsidiary 

of Prudential Corporation PLC (“Prudential”) and was listed on the ASX on 27 October 1997. 

In September 1998, the Colonial Group acquired the Australian and New Zealand operations 

of Prudential, including the manager of the Trust. Pursuant to this merger, the Trust name 

was changed from Prudential Development Trust to Colonial First State Development Trust, 

effective from 10 May 1999. 


A summary of the Development Trust’s property portfolio at 30 September 1999, based on 

independent valuations for each property as at 30 September 1999, is set out below: 

140 


CORPORATE FINANCE



November 1999 


Ownership 

(%) 

Date of 

Construction 

56 Pitt Street, Sydney NSW A Grade 100 1998 

(refurbished) 

Net Lettable 

Area sqm 

Valuation 

$ 

Date of 

Valuation 

Portfolio 

(%) 

20,911 115,000,000 09/99 41.8 

60 Castlereagh Street, Sydney NSW A Grade 100 1999 26,911 160,000,000 09/99 58.2 

Total 2 properties 47,822 275,000,000 1 100.0 

1 Net valuations for each property after allowing for all actual and anticipated capital expenditure unpaid as at 30 September 1999. 



141



November 1999 


· Individual properties – The Development Trust comprises two properties in the Sydney 

CBD which are now completed and substantially let. 

56 Pitt Street is a fully refurbished 27 level building comprising a total area of 

21,161 square metres, including a small retail component of 243 square metres and 80 car 

spaces. As at 30 September 1999, the property was 81 percent tenanted on a floor area 

basis with major tenants including Perpetual Trustee and Paladin. Assuming the property 

is fully leased and any outstanding capital payments have been made, the valuer 

considers the property value to be in the order of $122.9 million, however, the valuation 

as at 30 September 1999 at $115 million reflects an allowance for these outstanding items. 

60 Castlereagh Street is a recently completed new building comprising 

25,611 square metres of office space over 20 levels, together with 1,300 square metres of 

retail and 61 car spaces. The property is 85 percent committed as at 30 September 1999 on 

a floor area basis, with the major tenants including Banque Nationale De Paris, Schroders 

and Sapient. Upon payment of all outstanding construction costs and assuming the 

building is fully leased, the valuer has assessed the value of the property at approximately 

$197.1 million. Accordingly, the current valuation of $160 million as at 30 September 1999 

makes an allowance for these outstanding items. 

· Market comment – Both properties are centrally located within the financial sector of the 

Sydney CBD. Although not major assets by floor size, they provide the trust with a 

substantial exposure to the Sydney CBD commercial market spread over two assets, 

which have been generally successful in attracting tenants on a pre-commitment basis. 

· Lease expiry – The average lease term, weighted by income is 7.3 years. This is likely to 

change following the completion of the leasing program for both properties. Based on 

current lettings, 69.7 percent of leases expire after 2004. 

Development Property Trust 

Lease Expiry (% of Total Area) 

69.7% 

15.5% 

0.2% 0.0% 

4.3% 

2.1% 

8.2% 

Curent 2000 2001 2002 2003 2004 2004 + 

Source: Colonial First State Investments 

142 


CORPORATE FINANCE



November 1999 


Both Trust properties have been valued as at 30 September 1999. The basis of valuation in 

each case has been to assess the value of the property assuming completion of all works and 

fully tenanted, with deductions as appropriate for letting up allowances and costs to 

complete. 

The valuation methodology has incorporated a capitalisation approach and discounted 

cashflow analysis. The capitalisation rates range from 6.25 percent to 7.0 percent and the 

internal rate of return (discount rate) ranges from 10.0 percent to 10.25 percent. These rates 

are considered appropriate having regard for the nature of each property. 



143



November 1999 


The following table sets out the Development Trust’s earnings performance for the period 

ended 30 June 1998, the year ended 30 June 1999, and the Manager’s forecast earnings for the 

six months ending 30 June 2000 and for the year ending 30 June 2001. 

Income 

Actual Actual Forecast Budget 

Period Ended 

30 June 1998 

Year Ended 

30 June 1999 

Six Months 

Ending 

30 June 2000 

Year Ending 

30 June 2001 

$000s $000s $000s $000s 

Net property income - 129 2,955 20,250 

Interest income - 260 72 131 

Expenses 

- 389 3,027 20,381 

Trust expenses 227 798 1,476 2,895 

Interest expense - 3,529 4,615 5,971 

227 4,327 6,091 8,866 

Abnormal item (6,661) 1 - - - 

Net income (6,888) (3,938) (3,064) 11,515 

Transfer from/(to) reserves 6,661 - - (328) 

Distributable income (227) (3,938) (3,064) 11,187 

Weighted number of units in issue 71,028,528 71,028,528 71,028,528 71,028,528 

Statistics 

Earnings per unit (June 2000 annualised) (5.54) (0.32) (8.63) 16.21 

Distributions per unit (June 2000 annualised) - - - 15.75 

Tax free amount of distribution N/A N/A N/A N/A 

Tax deferred amount of distribution N/A N/A N/A N/A 

Distribution yield (based on balance sheet 

date unit price) 

1 Abnormal item comprises of unit issue costs written off. 

N/A N/A N/A N/A 


144 

CORPORATE FINANCE



November 1999 

Balance Sheet 

The Development Trust’s balance sheet as at 30 June 1999 (adjusted to exclude the equity 

receivable from unitholders and to reflect the effect of property revaluations since that date) 

and as at 30 June 1998 is summarised below: 


30 June 1998 

$000s 

30 June 1999 

$000s 


Equity receivable 71,029 - 


74,204 7,239 

Properties 162,748 275,000 

Equity receivable 71,029 - 

233,777 275,000 

Total Assets 307 ,981 282,239 



28,124 7,445 


Borrowings 73,659 123,000 

73,659 123,000 


Net Assets 206,198 151,794 

Statistics 

Units on issue 71,028,528 71,028,528 




The Development Trust listed on the ASX on the 27 October 1997. As at 5 September 1999, 

the Development Trust had 71,028,528 partly paid ordinary units in issue. Unitholders paid 

$1 per unit on application in October 1997 and a further $1 instalment on 31 December 1998. 

Unless the merger is implemented, unitholders will be required to pay one further 

instalment of $1 per unit on 30 June 2000. 

According to Development Trust’s unit register as at 30 June 1999, Colonial Portfolio 

Services Limited, with a unitholding of 40.02 percent, is the only unitholder which holds in 

excess of 6 percent of Development Trust’s issued units. 



145



November 1999 


Development Property Trust Unit Price and Trading Volumes 

2.50 

4,000 

3,500 

2.00 

3,000 

Price ($) 

1.50 

1.00 

2,500 

2,000 

1,500 

Volume (000s) 

0.50 

1,000 

500 

- 

Oct-97 Apr-98 Oct-98 Apr-99 

0 

Volume 

Price 


Development Property Trust vs. All Ordinaries Index and Property Trust Index 

130 

120 

110 

Index 

100 

90 

80 

70 

60 

Oct-97 Apr-98 Oct-98 Apr-99 

Development Property Trust All Ordinaries Index Property Trust Index 


146 


CORPORATE FINANCE



November 1999 

Appendix 5 

Allocation of Value of Individual Trusts 

Industrial 


Trust 

Commercial 


Trust 

Commercial 


Trust 

CEU 

Retail 


Trust 

Development 

Trust 

Total 

Weighted market 

$ $ $ $ $ 

prices 1, 2 

Last 30 days 1.86 1.88 1.62 1.11 1.79 

Last 90 days 1.90 1.89 1.63 1.13 1.56 

Market capitalisations $ million $ million $ million $ million $ million $ million 

Last 30 days 342.3 269.7 18.9 360.4 126.9 1,118.2 

Last 90 days 348.3 271.3 18.0 367.4 111.0 1,117.0 

Proportion of Total (%) (%) (%) (%) (%) (%) 

Last 30 days 30.6 24.1 1.7 32.2 11.4 100.0 

Last 90 days 31.2 24.3 1.7 32.9 9.9 100.0 

1 To 29 October 1999. 

2 Implicit weighted market prices for the Commercial CEUs have been calculated by adjusting the respective weighted 

market prices of Commercial ordinary units for the present value of distributions which are not receivable by Commercial 

CEUs until conversion in June 2000 (50 percent) and June 2001 (50 percent). 

Relative Proportions based on Net Asset Value 

Industrial 


Trust 

Commercial 


Trust 

Commercial 


Trust 

CEU 

Retail 


Trust 

Development 

Trust 

Net assets as at 

30 June 1999 ($million) 333.9 279.5 22.7 369.6 151.8 1,157.5 

Issued units (million) 183.6 143.4 11.6 325.4 71.0 

Net assets per unit ($) 1.82 1.95 1.95 1.14 2.14 

Total 

(%) (%) (%) (%) (%) (%) 

Relative values 28.9 24.1 2.0 32.0 13.0 100.0 



147



November 1999 

Annexure 

Qualifications, Declarations and Consents 

Qualifications 

Arthur Andersen is an international accounting and consulting firm. 

Arthur Andersen Corporate Finance (“AACF”) is a practice entity of Arthur Andersen and 

holder of Securities Dealer Licence 15226. AACF provides a full range of corporate finance 

services, including the preparation of Independent Expert Reports. 

Stuart Bright, a Director of AACF and a Partner of Arthur Andersen, has been responsible 

for the preparation of this report. Stuart holds a Bachelor of Business in Accounting from 

RMIT, and is a member of the Institute of Chartered Accountants in Australia and the 

Securities Institute of Australia. He has extensive experience in the preparation of valuations 

and Independent Experts Reports. 

Oliver Klotz is the Chief Executive Officer of AACF and a Partner of Arthur Andersen. 

Oliver holds a Bachelor of Commerce degree from the University of Melbourne and is a 

member of the Institute of Chartered Accountants in Australia and the Development Capital 

Association of Australia. He specialises in engagements which involve, inter alia, strategic 

corporate advice, valuations and expert reports. 

Roger Scrivener, FAPI, FRICS, a Director in Arthur Andersen’s Real Estate and Hospitality 

Services, Group was responsible for services provided to AACF by Arthur Andersen’s 

Real Estate and Hospitality Services Group. 

Independence 

At the date of this Report, AACF does not have any interest in the outcome of the proposed 

merger. 

The fee to be received for the preparation of this Report is based on the time spent at 

professional rates plus out of pocket expenses. The fees are not dependent upon whether or 

not unitholders approve the proposed merger. With the exception of those fees, neither 

AACF nor Stuart Bright, or any persons associated with this report, nor Arthur Andersen 

have received, nor will or may they receive, any pecuniary or other benefits, whether direct 

or indirect, for or in connection with the preparation of this Report. 

Neither AACF nor Arthur Andersen hold any securities in Colonial Limited. There are no 

pecuniary or other interests of AACF, or Stuart Bright, that could be reasonably argued as 

affecting their ability to give an unbiased and independent opinion in relation to the 

proposed merger. 

148 


CORPORATE FINANCE



November 1999 

Declaration 

This Report has been prepared at the request of the Trustees of Industrial Property Trust, 

Commercial Property Trust, Retail Property Trust and Development Trust (“the merging 

trusts”) in order to assist the unitholders of all above Trusts in their assessment of whether 

the proposed merger is to their overall advantage. This Report has been prepared for the 

benefit of the above unitholders and those persons only who are entitled to receive a copy of 

the Report as part of the proposed merger. 

AACF does not imply, and it should not be construed, that it has carried out any procedures, 

audit or investigation on the accounting or other records of the merging trusts. 

A draft copy of this Report was provided to the Manager of the merging trusts, for comment 

on any factual matters contained within the report. Changes were made to the Report as a 

result of comments by the Manager and their advisers, however, no alterations were made to 

the opinions or conclusions we have expressed in relation to the proposed merger. 

Neither the whole or any part of this Report, nor any reference thereto may be included in or 

with, or attached to any document, circular, resolution, letter or statement, without the prior 

written consent of AACF to the form and context in which it appears. 

AACF will receive an estimated fee of $240,000 for the preparation of this Report. This fee is 

not contingent on the outcome of the proposed merger. AACF will not receive any other 

benefit for the preparation of this Report. 

Disclaimer 

This Report has been prepared by AACF with care and diligence. However, except for that 

responsibility which by law cannot be excluded, no responsibility arising in any way 

whatsoever from errors or omissions (including responsibility to any person for negligence) 

is assumed by AACF, its Directors, employees or consultants for the preparation of this 

Report. 

AACF is not obliged to amend the Report to reflect events or changes in market conditions 

which occur subsequent to the date of this Report, however AACF reserves the right to make 

amendments at AACF’s sole discretion. 



149



November 1999 

Indemnity 

With respect to the proposed engagement, we will seek the following indemnification from 

Colonial First State. 

“Colonial First State agrees to indemnify Arthur Andersen Corporate Finance Pty Ltd, 

Arthur Andersen, their related entities, successors, directors, officers or employees 

against all losses, claims, liabilities, damages and litigation (collectively “the losses”) 

resulting from reliance on information supplied by Colonial First State or with their 

knowledge (except information originating, created or supplied by persons or entities 

other than Colonial First State) and failure by Colonial First State to disclose material 

information, except to the extent that the losses arise from wilful misconduct, breach of 

law, recklessness or negligence by Arthur Andersen Corporate Finance Pty Ltd, 

Arthur Andersen or their associates. This indemnity shall survive the termination or 

completion of the engagement.” 

Consents 

AACF was involved in the preparation of this Independent Expert’s Report only. 

Notwithstanding that the Report may be referred to elsewhere in the 

Explanatory Memorandum, we shall not be taken to have been involved in the preparation 

of, or to have authorised or caused the issue of, the abovementioned Explanatory 

Memorandum. 

AACF and Stuart Bright hereby consent to the inclusion of this Report in the form and 

context in which it is included in the Explanatory Memorandum and dispatch to the merging 

trust unitholders. 

The statements and opinions contained in this report are given in good faith. 

150 


CORPORATE FINANCE

8. Trust Deed Amendments 

The following is a description of the effect of the proposed amendments of the Trust Deeds. 

Except where otherwise indicated the amendments will be made to each of the four Trust Deeds. 

On-going Stapling Amendments 

1.1: Number Of Units and Options 

While Stapling applies, the number of Units issued at any time must equal the number of Stapled Units issued at that time 

in each of the Stapled Trusts and the number of Options issued at any time must equal the number of Stapled Options 

issued at that time in each of the Stapled Trusts, and Units and Options must not be issued to a person unless at the same 

time an identical number of Stapled Units or Stapled Options (as the case may be) in each of the Stapled Trusts are issued 

to that person. 

1.2: Consolidation and Division of Units 

Units may be consolidated or divided as determined by the Manager but while Stapling applies there must occur 

contemporaneously a corresponding consolidation or division of a corresponding number of Stapled Units in each of 

the Stapled Trusts so that each Unit Holder continues to hold an equal number of Units and Stapled Units in each of the 

Stapled Trusts. 

1.3: Transfer of Units and Options 

While Stapling applies, a transfer of Units will only be accepted as a proper transfer in registrable form if, in addition to the 

requirements of the relevant Trust Deed and applicable law, the transfer relates to or is accompanied by, a contemporaneous 

transfer of an identical number of Stapled Units in each of the Stapled Trusts by the transferor to the transferee. 

1.4: Units To Remain Stapled 

Subject to applicable law and while Stapling applies, Units must not be dealt with without a contemporaneous dealing in a 

corresponding number of Stapled Units in each of the Stapled Trusts. The Manager, the Trustee and the Unit Holders must 

not do any act, matter or thing or refrain from doing any act, matter or thing, if to do so or refrain from doing so, as the 

case may be, would result directly or indirectly in a person not holding at any time an equal number of Units and Stapled 

Units in each of the Stapled Trusts. 

1.5: Rights Issues 

While the Trust is Listed, the Manager may offer Units for subscription at a price determined by the Manager to those 

persons who were Unit Holders on a date determined by the Manager not being more than 30 days immediately prior to 

the date of the offer if: 

the Manager complies with the Listing Rules applicable to the issue and any applicable ASIC relief; 

the Application Price of the Units is not less than: 

– 50% of Average Market Price on the day preceding the date the issue was announced to the ASX; minus 

– while Stapling applies, the total issue price of the Stapled Units in each of the Stapled Trusts issued 

contemporaneously with the Units; and 

while Stapling applies, any offer of Units must be accompanied by a contemporaneous and corresponding offer of 

Stapled Units in each of the Stapled Trusts, which offer is capable of acceptance only if the Unit Holder or other 

subscriber takes up an identical number of Units and Stapled Units in each of the Stapled Trusts. 

1.6: Placements 

While the Trust is Listed, the Manager may at any time issue Units to any person, whether by way of a placement or 

otherwise, and at a price and on terms determined by it, if the Manager complies with the Listing Rules applicable to the 

issue and any applicable ASIC relief and if the Application Price is not less than: 

90% of the Average Market Price on the day preceding the date the Manager (or its agents) offered the Units to 

potential investors; minus 

the total issue price of the Stapled Units in each of the Stapled Trusts issued contemporaneously with the Units. 

While Stapling applies, any offer of Units which are to be issued pursuant to the previous clause must be accompanied by 

a contemporaneous and corresponding offer of Stapled Units in each of the Stapled Trusts, which offer is only capable of 

acceptance if the recipient takes up an identical number of Units and Stapled Units in each of the Stapled Trusts. 

151

8. Trust Deed Amendments (continued) 

1.7: Contemporaneous Applications for Stapled Units 

While Stapling applies, an applicant for Units must contemporaneously apply for an identical number of Stapled Units in 

each of the Stapled Trusts and an applicant for Options must contemporaneously apply for an identical number of Stapled 

Options in each of the Stapled Trusts. 

1.8: Manager Must Reject Certain Applications 

While Stapling applies, the Manager must reject an application if the applicant does not apply at the same time for an 

identical number of Stapled Units in each of the Stapled Trusts or if an identical number of Stapled Units in each of the 

Stapled Trusts will not be issued to the applicant at the same time as the issue of Units to the applicant. 

1.9: Forfeiture of Partly Paid Units 

While Stapling applies, if Partly Paid Units are forfeited by the Manager under the Trust Deed, the consideration, if any, 

given for a forfeited Unit on any sale thereof must be applied: 

first, towards the payment of all costs and expenses incidental to the forfeiture and sale; 

secondly, in satisfaction of the instalment owing at the date of forfeiture together with interest (if any) payable thereon 

under the Trust Deed; 

thirdly, if the terms of the issue so provide and while Stapling applies, in paying up forfeited Stapled Units previously 

held by the person who was on the date of forfeiture the Unit Holder in respect of the forfeited Unit; and 

fourthly, by payment of the balance remaining to the person who was on the date of forfeiture the Unit Holder in 

respect of the forfeited Unit. 

While Stapling applies, the Manager must take all reasonable steps to ensure that if Partly Paid Units are forfeited, a 

corresponding number of Stapled Units in each of the Stapled Trusts are also forfeited and dealt with in the same way as the 

forfeited Units. 

1.10: Bonus Issues 

While Stapling applies, a distribution by way of bonus Units under the Trust Deed may not be made to a Unit Holder unless 

the Unit Holder is contemporaneously issued with an identical number of Stapled Units in each of the Stapled Trusts. The 

Manager may provide for and pay the application moneys for those Stapled Units to the Stapled Trusts on the Unit Holder’s 

behalf out of the amount otherwise available to be distributed. 

1.11: Reinvestment of Income 

While Stapling applies, if a Unit Holder is permitted to reinvest in additional Units under the Trust Deed, the Manager must 

ensure that the Unit Holder is simultaneously issued with a corresponding number of Stapled Units in each of the Stapled 

Trusts (whether or not paid for out of an income entitlement or other distribution). 

If Stapling applies, the Application Price for each additional Unit upon reinvestment is the Average Market Price on the fifth 

trading day after the record date for the distribution less: 

such discount, if any, not exceeding 10% of the Average Market Price as the Manager may determine; and 

while Stapling applies, the total issue price of the Stapled Units in each of the Stapled Trusts issued contemporaneously 

with the Units. 

1.12: Buy Back and Redemption of Units 

While Stapling applies, the Manager must ensure that no Units are bought back or redeemed unless at the same time for an 

identical number of Stapled Units in each Stapled Trust are bought back or redeemed. 

152

1.13: Powers of Manager When Stapling Applies 

It is intended that, once and for so long as Stapling applies: 

each Unit Holder at all times holds an identical number of Units and Stapled Units in each of the Stapled Trusts; 

the Trust and the Stapled Trusts are jointly listed on the ASX; 

Units and Stapled Units are jointly traded on the stock market of the ASX and, so far as the law permits, the Units and 

Stapled Units are traded and otherwise dealt with as though they were a single security; and 

so far as the law permits, the Trust and the Stapled Trusts are managed and dealt with by the Manager as though they 

were assets of a single trust, 

and the Manager has power: 

to take such action as it reasonably considers necessary or appropriate to ensure that Stapling applies and that, once 

Stapling applies, Units and Stapled Units continue to be Listed as Stapled Securities; and 

to the extent permitted by law, to deal with the Assets as though the Assets and the assets of the Stapled Trusts were 

assets of a single trust including, for example, giving any form of security over the Assets in connection with 

obligations and liabilities incurred in connection with any of the Stapled Trusts. 

1.14: Joint Meetings of Unit Holders 

While Stapling applies, meetings of Unit Holders may be held in conjunction with meetings of the holders of Stapled Units 

and the chairman may determine such procedures for the conduct of such meetings as the chairman considers necessary. 

1.15: Other Attendees at Joint Meetings 

While Stapling applies, the Manager, the auditor of the Trust and the representatives of the Manager of the Stapled Trusts 

may attend and speak at any meeting, or invite any other person to attend and speak. 

1.16: Expenses 

All expenses reasonably and properly incurred by the Manager in relation to the Stapling of the Trust to the Stapled Trusts 

and the Listing and maintenance of Listing of Stapled Securities are payable or reimburseable out of the gross income to the 

extent that such reimbursement is not prohibited by the Corporations Law. 

1.17: Stapled Trusts’ Expenses 

The Manager may pay or reimburse the Stapled Trusts for expenses properly incurred by the Stapled Trusts in connection 

with the listing of Stapled Units and such other expenses as the Manager considers appropriate for the Trust to bear on 

behalf of the Stapled Trusts. 

1.18: Notice of Termination to Manager of Stapled Trusts 

On or before commencement of the termination of the Trust, the Manager must give the manager or managers of the 

Stapled Trusts written notice that the Trust is to be terminated. 

1.19: Modification of Trust Deed 

While Stapling applies, the Manager must not modify the Trust Deed if the effect of the modification would be to cause or 

allow Stapling to cease to apply except with the approvals by special Resolution of the Unit Holders and the members of 

each of the Stapled Trusts. 

1.20: Paramountcy of Stapling Provisions 

If there is an inconsistency between any of the Stapling Provisions and any other provision of the Trust Deed, then the 

Stapling Provisions prevail to the extent of the inconsistency, except where this would result in a breach of the Corporations 

Law, the Listing Rules or any other law. The Stapling Provisions prevail in this way, even if the other provisions are 

expressed to apply notwithstanding any other provisions of the Trust Deed. 

153

8. Trust Deed Amendments (continued) 

Implementation of Stapling Amendments 

2.1: Consolidation and Division 

The Manager must on the Stapling Date consolidate or divide Units in the proportions previously advised to Unit Holders. (1) 

2.2: Distribution to Unit Holders 

Following the consolidation or division of Units under clause 2.1, the Manager must on the Stapling Date cause a 

distribution to be made to each Unit Holder out of the Assets of the Trust of $0.03 per Unit held by that Unit Holder 

at that time and this distribution must be applied in subscribing for one unit in each of the Stapled Trusts at an issue price 

of $0.01 per unit. Each Unit Holder appoints the Manager as the Unit Holder’s attorney and agent to: 

apply for units in the Stapled Trusts on the Unit Holder’s behalf and agree to the Unit Holder becoming a member 

of each of the Stapled Trusts and be bound by the Trust Deed of each of the Stapled Trusts; and 

execute any other document that the Manager reasonably considers necessary or appropriate for the Unit Holder 

to become a member of each of the Stapled Trusts. 

2.3: Issue of Units to Members of Stapled Trusts 

Simultaneously with the subscription for units in the Stapled Trusts under clause 2.2 (or as soon as practicable thereafter 

on the Stapling Date), the Manager must issue Units to unit holders of each of the Stapled Trusts on the basis of one Unit 

for each unit held in the relevant Stapled Trust immediately before the subscription for units in the Stapled Trusts under 

clause 2.2 at an issue price of $0.01 per Unit. 

2.4: Stapling 

Forthwith after completion of the subscription for units in the Stapled Trusts under clause 2.2 and the issue of Units under 

clause 2.3 the Stapling commences to apply for the purposes of the Trust Deed. 

2.5: Tranfers of Stapled Securities 

Forthwith after Stapling commencing to apply under clause 2.4, the Manager must execute one or more instruments of 

transfer on behalf of all Unit Holders other than Unit Holders who: 

have registered addresses in Australia or New Zealand; and 

have elected in writing, in a form acceptable to the Manager, to have Stapled Securities issued to them in respect of 

all Units held by those Unit Holders 

transferring all of the Stapled Securities held by those Unit Holders to the Cash Alternative Nominee at a price per Stapled 

Security equal to the Cash Alternative Price and each Unit Holder whose Stapled Securities are to be transferred under 

this clause appoints the Manager as the Unit Holder’s attorney and agent to execute that transfer or those transfers 

together with any other document that the Manager reasonably considers necessary or appropriate to complete the 

transfers of those Stapled Securities to the Cash Alternative Nominee. 

2.6: Sale of Stapled Securities transferred to Cash Alternative Nominee 

The Manager must take all steps necessary to arrange for the sale of the Stapled Securities comprising the Units transferred 

to the Cash Alternative Nominee and the units in the Stapled Trusts issued to the Cash Alternative Nominee and for that 

purpose may enter into an arrangement with such persons as it considers appropriate to have the Units offered for sale 

using such process as the Manager reasonably considers appropriate. The sale of the Stapled Securities must however be 

completed by no later than 24 March 2000. 

(1) See Section 3 of this Explanatory Memorandum under the heading ‘The Merger Proposal’ for the 

relevant proportions. 

154

8. Trust Deed Amendments 

Definitions Applying to Amendments 

Other Amendments 

3.1: Capital Entitlement Units 

This section applies only to Colonial First State Commercial Property Trust. 

As from the Stapling Date the Units issued pursuant to the Trust Deed of Colonial First State Commercial Property Trust 

and referred to in the terms of issue as ‘Series 2000 Capital Entitlement Units’ and ‘Series 2001 Capital Entitlement Units’ 

(together referred to in this section as ‘CE Units’) are, on the Stapling Date, consolidated in the ratio of 0.850 CE Units for 

each existing CE Unit and the Manager may agree with the holder of CE Units to vary the terms of issue of the CE Units to 

shorten the period during which the holder is entitled to capital distributions. (2) 

3.2: Partly Paid Units 

This section applies only to Colonial First State Development Trust. 

The Manager may cancel unpaid instalments on partly paid Units but may only do so in respect of all partly paid Units issued 

under the same terms of issue. On cancellation of an unpaid instalment, the Issue Price of the partly paid Unit will be fully paid. (3) 

3.3 Income entitlements for December 1999 quarter 

This section applies to each of the four Trusts. 

The record date for determining entitlements to the income distribution for each Trust for the quarter ending 31 December 1999 

will be brought forward to 16 December 1999 (ie. the day before the meeting). The effect of this amendment is that unit holders 

in each of the Trusts will be entitled to the income of the relevant Trust for the quarter ending 31 December 1999 based on their 

unit holding on 16 December 1999. Their entitlement to income from the Trust in which they held units prior to the Merger for 

the quarter ending 31 December 1999 will therefore not be affected by the Merger Proposal. 

3.4: Definitions 

In the amendments set out above, the following words have the following meanings: 

Application Price: the price paid on application for a Unit. 

Average Market Price: the average weighted market price of fully paid Stapled Securities (or, while Stapling does not apply, 

Units) sold on the ASX in the ordinary course of business during the five trading days ending on the relevant date, or, if no 

sale occurred in the ordinary course of business during that five day period, the average market price is the last price at 

which a sale took place on the ASX immediately preceding the relevant date. If the Manager believes that the calculation of 

average market price does not provide a fair reflection of the market price of a Stapled Security (or, while Stapling does not 

apply, Unit) on that day, the average market price will be the price determined by an Independent Valuer. 

Cash Alternative Nominee: the party selected by the Manager to hold Stapled Securities transferred under clause 2.5 

pending the sale of those Stapled Securities under clause 2.6. The Cash Alternative Nominee may but need not be a 

party independent of the Manager. 

Cash Alternative Price: the total selling price of all the Stapled Securities sold by the Cash Alternative Nominee under 

clause 2.6 (minus expenses, stamp duty and brokerage) divided by the number of Stapled Securities sold. 

Listed: admitted to the official list of ASX whether or not quotation is deferred, suspended or subjected to a trading halt. 

Listing Rules: the listing rules of ASX as amended, varied or waived (whether in respect of the Trust or generally) from 

time to time. 

Unit Holder: the person registered as the holder of a Unit (including persons jointly registered). 

Partly Paid Unit: a Unit on which the Application Price has not been paid in full. 

Manager: the company which is management company of the Trust under the Corporations Law. 

Stapled Option: an option to subscribe for a unit in one of the Stapled Trusts. 

Stapled Security: a Unit and the Stapled Units which are issued contemporaneously with it. 

Stapled Trusts: whichever of Colonial First State Industrial Property Trust, Colonial First State Commercial Property Trust, 

Colonial First State Retail Property Trust and Colonial First State Development Trust (in each case by whatever name 

known) is not the Trust. 

Stapled Unit: means a unit in one of the Stapled Trusts. 

Stapling: the restriction on issue, transfer, redemption or any other type of dealing with a Unit that results in all such 

dealings having to occur simultaneously with a similar dealing with Stapled Units. 

Stapling Date: 4 January 1999. 

Stapling Provisions: the clauses set out above. 

Trust: the trust governed by this Trust Deed. 

Unit: an undivided share in the beneficial interest in the Trust. 

(2) The Manager has agreed with Colonial Mutual Life Assurance Society Limited, the holder of all of the CE Units, if the 

Merger Proposal proceeds to vary the period during which the holder is entitled to capital distributions so that it ends on 

the Stapling Date. The effect of this is that the CE Units will be the same as ordinary units as from the Stapling Date. 

(3) The Manager will, if the Merger Proposal proceeds, cancel the unpaid instalment on all partly paid Units currently 

on issue. 

155

9. Additional Information 

Rights Attaching to Units in COC, CIP, CMF and CFD 

General 

A number of rights attach to units in the Trusts. These rights arise from the Trust Deeds for the Trusts, the law of trusts 

and the Corporations Law. Some of the most significant rights are summarised in this section. However, this summary is 

not exhaustive. For further information about rights attaching to units, reference should be made in particular to the Trust 

Deeds and the Corporations Law. 

Beneficial Interest in the Trusts 

The beneficial interest in each Trust is divided into units which may be fully or partly paid units. The units in the Trusts 

to be issued to unitholders under the Merger Proposal are fully paid units and the rights attaching to the units in a Trust 

to be issued to unitholders in the other Trusts are substantially the same as the rights attaching to all other fully paid units 

in that Trust. 

A unit in a Trust does not confer any interest in any particular part of the trust fund of that Trust and no unitholder is 

entitled to require the transfer to them of any of the investments comprised in the trust fund of that Trust nor (subject to 

the rights of unitholders created by the Trust Deed and by law) is any unitholder entitled to interfere with or question the 

exercise or non-exercise by the Trustee or Manager of any of the trusts, powers, authorities or discretions conferred upon it 

in respect of a Trust. 

Entitlement to Trust Income 

The distributable income of a Trust is determined by the Manager and allocated between unitholders on a quarterly basis 

in accordance with the Trust Deed of the Trust. Distributable income is allocated and distributed to the holders of units in 

proportion to their unitholdings (except for units issued during the quarter, where units rank for distribution according to 

the number of days in the period that the unit has been on issue). 

Units issued in each Trust will rank for distributions from the date of allotment and will confer a proportionate entitlement 

to the distribution based on the number of days the units have been on issue during the quarter. 

Transfer of Units 

Subject only to the proposed restrictions to be imposed by the Trust Deed of each Trust in relation to the stapling of units 

in the Trusts, by law and by the ASX Listing Rules, the units are freely transferable. 

Voting 

Every unitholder is entitled to receive notice of unitholders’ meetings, to attend those meetings and, subject to certain 

restrictions on voting by interested parties, to vote at unitholders’ meetings. On a poll, a unitholder has one vote for each 

unit held. On a show of hands every unitholder who is present in person or by proxy has one vote. 

Accounts 

Every unitholder has a right to receive copies of a Trust’s annual accounts and accompanying reports which will be sent 

with the annual accounts and accompanying reports of each other Trust. 

Limitation of Liability 

The Trust Deeds for COC, CIP and CMF provide that a unitholder need not indemnify the Trustee or Manager of a Trust if 

there is a deficiency in the net assets of the Trust, or meet the claim of any creditor of the Trustee or Manager in respect of 

the Trust and the right (if any) of the Trustee or Manager or of a creditor to seek indemnity is limited to the assets of the 

Trust. The Trust Deed for CFD provides that, to the extent permitted by law, no unitholder will be personally liable for any 

obligation of, or liability incurred by, the Trustee or the Manager. 

Winding Up 

Upon winding up, the unitholders will be entitled to the proceeds of sale of the Trust’s assets (after deducting fees and 

winding up expenses and paying any distribution entitlements) in proportion to their unit holdings at the time of 

winding up. 

156

Application for Units by Foreign Persons 

Under the Foreign Acquisitions and Takeovers Act 1975, notification of acquisitions of interests in Australian urban land 

by certain persons is compulsory in certain circumstances. Investors requiring further information as to whether notification 

to the Foreign Investment Review Board is required in respect of the issue of units in a Trust to them should consult their 

professional adviser. 

How to Transfer Your Units 

Subject to the proposed restrictions to be imposed by the Trust Deeds, all units are transferable either through the electronic 

transfer and sub-register system known as Clearing House Electronic Subregister System (‘CHESS’) subject to complying 

with the requirement in relation to the stapling of units in the Trusts. Every instrument of transfer must be executed by the 

transferor and the transferee and must be lodged at the unit registry. 

Litigation 

There is no litigation of a material nature pending or threatened which may significantly affect any of the Trusts. 

Continuous Disclosure by the Trusts 

As each of the Trusts has been listed on the ASX for a number of years a substantial amount of information concerning the 

Trusts has previously been notified to ASX and is therefore publicly available. 

Each of the Trusts is a ‘disclosing entity’ for the purposes of the Corporations Law and, as such, is subject to regular 

reporting and disclosure obligations under the Corporations Law and the ASX Listing Rules. These obligations require the 

Manager to notify the ASX of information about specified events and matters as they arise for the purposes of the ASX 

making that information available to the stock market conducted by the ASX. In particular, the Manager has an obligation 

under the ASX Listing Rules (subject to certain limited exceptions), to notify the ASX immediately of any information of 

which it becomes aware concerning the Trust which a reasonable person would expect to have a material effect on the price 

or value of units in the Trust. Copies of documents lodged in relation to the Trusts may be obtained from, or inspected at, 

an office of the ASIC. 

The Manager will make copies of the following documents available for inspection (free of charge) during normal business 

hours at its registered office: 

the financial statements of the Trusts for the last financial year for the Trust; and 

all other financial statements (if any) lodged with ASIC and any documents used to notify the ASX of information 

concerning the Trusts under the ASX Listing Rules relating to continuous disclosure during the period after 

lodgement of the financial statements for the last financial year for the Trust and ending before the issue of this 

Explanatory Memorandum. 

Managed Investments Act 

The Managed Investments Act 1998 (‘the Act’), which amends the regulation of managed investment schemes (including 

unit trusts such as the Trusts) under the Corporations Law, took effect as from 1 July 1998. There is a transition period of 

two years after 1 July 1998 for existing schemes which are ‘managed investment schemes’ under the Act (such as the Trusts) 

to become registered by the ASIC. 

The effect of the Act is that the regulation of managed investment schemes (such as the Trusts) under the Corporations Law 

will be substantially altered. In particular, the existing split responsibility between the manager and the trustee will cease 

and be replaced with a single scheme operator called the ‘responsible entity’. As a result, the role of the trustee in holding 

the assets of a scheme and protecting the interests of unitholders of the scheme will cease and the single ‘responsible entity’ 

will become solely responsible for the management and operation of the scheme. 

In the case of the Trusts, the Trustees have each provided the Manager with a notice of their retirement as trustee of the 

Trusts on registration of the Trusts as ‘managed investment schemes’. It is expected that the Manager, Colonial First State 

Property Limited, will become the ‘responsible entity’ of the Trusts and will appoint Perpetual Trustee Company Limited to 

hold the assets of the Trusts as custodian. The Act sets out the procedures for the retirement of existing trustees of schemes, 

the appointment of the new ‘responsible entity’ and the registration of schemes as ‘managed investment schemes’ under the 

Act. At this stage, it is anticipated that an application will be made in December 1999 for the Trusts to be registered as 

‘managed investment schemes’ under the Act. 

157

9. Additional Information 

Rights Attaching to Units in COC, CIP, CMF and CFD (continued) 

Other significant effects on the operation of the Trusts include the following: 

independent directors/compliance committee members: a ‘responsible entity’ will be required to have either 50% 

independent directors, or establish a compliance committee with a majority of independent committee members; 

compliance plan: a compliance plan setting out the measures that the responsible entity is to apply in operating the 

scheme to ensure compliance with the Corporations Law and the Trust Deed must be prepared and lodged with the 

ASIC. The compliance committee (where one is required) will be required to monitor and report to the responsible 

entity on compliance with the compliance plan; and 

Trust Deed: it is likely that significant amendments will be necessary so that the Trust Deed complies with the new law, 

and does not contain requirements that are no longer relevant. 

158

10. Glossary 

Arthur Andersen 

ASIC 

ASX 

Bookbuild 

Bookbuild Price 

Cash Alternative 

Cash Alternative Nominee 

CFD 

CIP 

CMF 

COC 


Consolidated CFD Unit 

Consolidated CIP Unit 

Consolidated CMF Unit 

Consolidated COC Unit 

Consolidated COC Capital Entitlement Unit 

Consolidated Unit 

CPG or Colonial First State Property Trust Group 

Deutsche Bank 

DRP 

Group 

GST 

Independent Expert 

Joint Managers 

Arthur Andersen Corporate Finance Pty Limited 

Australian Securities & Investments Commission 

Australian Stock Exchange Limited 

The institutional bookbuild conducted by the Joint Managers 

through which Stapled Securities will be sold on behalf of 

unitholders who either do not elect to retain their Stapled Securities, 

or who have a registered address outside Australia or New Zealand. 

The average gross price of Stapled Securities sold through the 

Bookbuild. 

Parties not receiving Stapled Securities will have those Stapled 

Securities sold through the Bookbuild with the net proceeds of sale 

distributed to those parties. 

The party selected by the Manager to hold the Stapled Securities 

to be sold through the Bookbuild. 

Colonial First State Development Trust 

Colonial First State Industrial Property Trust 

Colonial First State Retail Property Trust 


Colonial First State Investment Managers (Australia) Ltd 

CFD units after consolidation of existing CFD units in the ratio of 

1.025 consolidated CFD units for each existing unit. 

CIP units after consolidation of existing CIP units in the ratio of 

0.950 consolidated CIP units for each existing unit. 

CMF units after consolidation of existing CMF units in the ratio of 

0.585 consolidated CMF units for each existing unit. 

COC units after consolidation of existing COC units in the ratio of 

0.965 consolidated COC units for each existing unit. 

COC Capital Entitlement Units after consolidation of existing COC 

Capital Entitlement Units in the ratio of 0.850 consolidated COC 

Capital Entitlement Units for each existing unit. 

Any of Consolidated CMF Unit, Consolidated CIP Unit, 

Consolidated COC Unit, Consolidated COC Capital Entitlement 

Unit or consolidated CFD Unit, as the case may be. 

Colonial First State Property Trust Group following the 

implementation of the Merger Proposal in full. 

Deutsche Bank AG 

Distribution Reinvestment Plan 



Arthur Andersen 

Warburg Dillon Read Australia Limited and Deutsche Bank AG 

159

10. Glossary (continued) 

Manager 

Merged Group or Merged Group Trusts 

Merger or Merger Proposal 

NLA 

NTA 

Perpetual 

Stapled Securities or Securities 

Trustee(s) 

Trust 

Trust Deed 

Warburg Dillon Read 


The combination of Colonial First State Industrial Property Trust, 

Colonial First State Retail Property Trust, Colonial First State 

Commercial Property Trust, and Colonial First State Development 

Trust following implementation of the Merger Proposal in full. 

The arrangement by which units in each of the Trusts are stapled to 

each other so that units in one of the Trusts may not be dealt with, 

without the units in the other Trusts being dealt with in an identical 

manner and at the same time. 

Net lettable area 

The net tangible asset backing of units or Stapled Securities. 


The securities created as a consequence of the Merger Proposal. 

Permanent Trustee Australia Limited or Perpetual Trustee Company 

Limited as the case may be. 

As the context requires, any or all of Colonial First State Retail 

Property Trust, Colonial First State Industrial Property Trust, 

Colonial First State Commercial Property Trust, or Colonial First 

State Development Trust. 

The trust deed of a Trust. 

Warburg Dillon Read Australia Limited 

160

Directory 

Manager of the Trusts 


Level 12 



Directors of the Manager 

PL Polson (Chairman) BCOM, MBL, PMD 

A Carstens BCOM (HONS), CA (SA) 

GS Ray LLB, BCOM, FCPA, FTIA 

FS Grimwade LLB (HONS), BCOM, MBA (COLUMBIA), ASIA 

CE Cuffe BCOM, ACA, ASIA 

A Bird BSC (URBAN LAND ADMIN) ARICS 

Trustees 


Level 6 




Level 7 

39 Hunter Street 

Sydney NSW 2000 

Solicitors for the Manager 

Mallesons Stephen Jaques 

Rialto, 525 Collins Street 


Adviser to the Manager 

Warburg Dillon Read 

Level 25 

Governor Phillip Tower 

Sydney NSW 2000 

Registry 

Corporate Registry Services Pty Ltd 

Level 12 

565 Bourke Street 


Client Services 


Telephone: 1 300 360 636 

Auditor for the Trust and Manager 

KPMG 

KPMG House 


Melbourne VIC 3000

Level 9, 330 Collins Street 

Melbourne Victoria 3000 

Telephone 1300 360 636

Colonial First State Property Trusts - First State Investments

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