Local Convenience Based Retail Assets

• Convenience retail assets, focused on non-discretionary spend retailers offers a resilient, defensive cashflow that is marginally affected by economic downturn or global health disasters.

• Local convenience assets are typically anchored by supermarkets, leased to such operators as Coles, Woolworths and IGA, offering a strong national tenant covenant with strong footfall generation.

• Neighbourhood assets have recently moved to the forefront of institutional and private investment. Growing popularity has been driven by major’s and non-discretionary retailersʼ contribution towards total income, which offers sustainable future income growth.

• Due to limited exposure to apparel and discretionary spend, neighbourhood assets are more desirable than their larger counterparts, being sub-regional and regional retail assets.

• Neighbourhood retail assets have remained less impacted by COVID-19 and the push to online shopping. Valuations for these assets have remained stable, underpinned by strong investment interest in resilient retail assets, as evident by several recent transitions settled during COVID-19.

• The push towards essential services and neighbourhood retail assets will remain a key investment driver given the limited volatility evidenced during COVID-19.

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Medical / Healthcare Assets

• Over the last 15 years, the healthcare / medical property sector has experienced low volatility when compared to traditional real estate asset classes, while generating strong returns.

• Healthcare is a largely inelastic, non-discretionary expenditure type limiting exposure to negative macro-economic factors.

• The sector has undergone a secular shift, with increased non-cyclical demand for core medical services.

• An ageing population, increased life expectancy and increased rates of chronic disease are driving increased demand for acute and long-term healthcare.

• Australians are spending more money, and a greater proportion of their income, on health services than ever before with $201bn spent in 2019-20, equating to 10% of Australiaʼs GDP. Expenditure has grown at an average of 4% per annum for the last 20 years.

• The healthcare sector is generally characterised by resilient and consistent income profiles, supported by State and Federal governments which typically account for 60% of all funding.

• The sector benefits from a stable profile of tenants due to factors including minimal leasing turnover, government support, location dependency, purpose-built assets, and co-location in hubs. Increasing consolidation of tenants is further improving covenants.

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Commercial Office Mandates

• Office leases are typically longer in tenure. Most anchor tenants sign 10 year leases with in built annual income increases not exposed to market conditions like residential.

• Lease covenants are normally more secure with for example corporate or government tenants.

• Risk adjusted long term commercial office property returns in Australia are very strong.

• Commercial office properties can provide a portfolio with enhanced after tax returns, due to factors such as depreciation, and providing tax deferral benefits.

• Returns can be enhanced with active management and suitable levels of leverage.

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