First Macquarie Real Estate Investment Trust In Korea

08 January 2004

Macquarie Property today announced the listing on the Korea Stock Exchange of Macquarie's first real estate investment trust (REIT) in Korea - and Korea's first by a wholly owned foreign manager.

The Macquarie Central Office Corporate Restructuring REIT, or MCO CR-REIT, acquired the 23-storey Kukdong Building in the Seoul Central Business District (CBD) as its initial asset for KRW158.4 billion or about $180 million.

Office properties under Macquarie management in Seoul now total over $500 million, all settled during 2003. This represents 20 per cent of investment grade commercial property transactions in Seoul in that calendar year. With this latest acquisition Macquarie is now the third largest foreign manager of investment grade commercial property in Korea.

MCO CR-REIT sought to raise approximately $41 million from Korean domestic retail and small institutional investors, and closed with the retail portion being 2.25 times oversubscribed. The issue was fully underwritten by joint underwriters Samsung Securities, Daewoo Securities and SK Securities.

MCO CR-REIT will be managed by Macquarie International Asset Management Company (MIAMC), a wholly owned subsidiary of the Macquarie Group licensed by the Ministry of Construction & Transportation in Korea, under the Real Estate Investment Company (REIC) Act.

Total equity raised for the REIT was approximately $95 million, of which 54 per cent has been committed by cornerstone investors including Macquarie Bank Limited (MBL). MBL, both directly and indirectly, has invested approximately $18.5 million of equity into MCO CR-REIT out of the total equity of $95 million, which includes a 2.99 per cent investment by MIAMC. The balance of cornerstone equity committed has been contributed by major Korean institutions, with a large US life insurance company acquiring almost $6 million (6.5%) through the IPO process.

Corporate Restructuring REITs in Korea have a fixed life span of five years, and Macquarie is anticipating an average distribution yield of 11.4 per cent per annum over this forecast period. The property is being acquired below independent valuations leaving prospect for capital growth for investors.

David Schaefer, Division Director of Macquarie Bank and head of Macquarie's Real Estate Asia business said: "This is a significant milestone for Macquarie Bank and its Asian property business. We believe the strength of the retail demand for this CR-REIT is indicative of the acceptance that new REIT products have achieved in Korea and we continue to predict a strong future for REITS in this market."

"Macquarie believes that the REIT market in Korea will evolve and become a valuable emerging sector.

"We have targeted the Seoul CBD market as an opportunity because of the low vacancy rates, the lack of new supply and the anticipated recovery of the Korean economy.

"We believe there is an opportunity to add considerable value through intensive asset management to reposition the building in the market by minor refurbishment and reorganising the leases.

"This new fund will be a very exciting addition to the Macquarie funds management platform in Asia. One of the key planks of the strategy has been to focus on office buildings in Seoul," said Mr Schaefer.

This transaction follows the successful repositioning of the Schroder Asian Properties Fund, a $US308 million ($401 million) real estate investment fund with significant property holdings in Korea, Japan and Hong Kong. Macquarie was appointed as Senior Adviser to the Schroder Fund in early 2002. In addition, Ascendas-MGM Funds Management Limited (a joint venture between Ascendas and Macquarie Goodman Management) manages the first business and industrial REIT, Ascendas Real Estate Investment Trust (A-REIT), which listed on the Singapore Exchange in November 2002. The Macquarie Central Office CR-REIT, along with other Macquarie Property initiatives, further strengthens Macquarie's position in the expanding property funds management business in Asia.

The Korean REIT is part of the international export of Macquarie Bank's specialist funds management model which has been a key growth driver for the Bank. As at September 30, 2003, specialist funds under management in Australia and internationally totalled $23.2 billion.

For further information please contact:

David Schaefer
Division Director
Head of Macquarie Real Estate - Asia
Tel: (822) 3782 2801

Robyn Turner
Public Relations
Macquarie Property
Tel: (612) 8232 6989

Erica Sibree
Investor Relations
Macquarie Bank Limited
Tel: (612) 8232 5008