Slide 1: Business Banking Property Finance Analyst Presentation December 2003
Slide 2: Property Finance
Property Finance ™” Development Finance e Project finance for real estate developments Property Investment e Term finance for investment properties
Slide 3: Development Loans and Property Investment Loans
Development Loans e 80% of hard cost resulting in exposure ranging between 55% - 65% of end value; e Flexibility to go to 90% if risk mitigant present (pre-sales, pre- lease, take-out). Property Investment Loans e 70% of valuation with property rental income covering interest exposure 1.5:1 times; e
Slide 4: Establishment fee and margins
e Establishment fee 0.25% - 0.5% of loan amount; e Margin over market indicator reflecting our cost of funds plus transfer price; e Property Investment - margin of 1% - 2% depending on size, term, risk etc; e Development Finance margin range 2.75%-4.25% depending on risk grade, LVR etc.
Slide 5: Development and Property Investment within Business Banking
Development Property Finance $2,521m $1,473m Investment Business Banking $9,911m Banking $23,256m Banking @ Business Banking Property Investment Development Finance
Slide 6: Portfolio by Location
Portfolio by Location _ Receivables as at 30 June 2003: QLD Development Finance Property Investment Total NSW Development Finance Property Investment Total VIC Development Finance Property Investment Total WA Development Finance Property Investment Total AUSTRALIA Development Finance Property Invest
Slide 7: Portfolio by product - June 2003
Portfolio by product - June 2003 e Residential - land sub- divisions, houses, home units, townhouses, villas. Commercial 40% Retail 36% Other 6% Industrial 11% Residential 7% Development Finance $1473M Property Investment: $2521M Development Finance @ Property Investment Commercial Industrial 8% 3%
Slide 8: Portfolio Growth
Portfolio Growth QLD $M $M $M DF 481 513 7 580 15 PI 1,234 1,321 7 1,396 6 NSW DF 404 406 - 621 53 PI 398 459 15 545 19 VIC DF 185 208 12 220 6 PI 281 407 45 536 32 WA DF 14 32 129 52 63 PI 20 24 20 44 83 AUS DF 1,084 1,159 7 1,473 27 PI 1,929 2,211 15 2,521 14
Slide 9: Receivables and Bad Debt Expense
Property Investment Receivables Bad Debt Expense Bad Debt/Receivables Development Finance Receivables Bad Debt Expense Bad Debt/Receivables 2001 $M 1,929 (0) 0% 1,084 1.0 0.092% 2002 2003 $M $M 2,211 2,521 (0.2) 3.7 (0.009%) 0.147% 1,159 1,473 0.7 (0.5) 0.060% (0.034%)
Slide 10: Customer Accounts - June 2003
‘Customer Accounts - June 2003. Number Total Average Debt of Clients Receivables per Client Development Finance 524 $1,473M $2.81M Property Investment 875 $2,521M $2.88M Total 1399 $3,994M $2.85M
Slide 11: Professional real estate developers and investors
Professional real estate developers and investors Prior successful experience in type and scale of project proposed; Financial capacity to fund reasonable adverse contingency; Exposure limit of $200 million for a single customer; Preferably spread over several projects; Most projects requiring loans
Slide 12: Loan Security
Loan Security |= e First real property mortgage security; e Personal guarantee from project sponsors; e Tripartite deed with project builder; e Credit facility deeds; e Fixed and floating charge over borrowing/project owning entity; e Common documentation between states.
Slide 13: Organisation Chart December 2003
Organisation Chart December 2003 _ Property F istane x5 SiCoas x 4 Ce ~~ Brisbane x 5 SiCoas SiCuasr x4 FYE 120.1 Sydney x5
Slide 14: Direct sales force property specialist BDMs
Direct sales force 45 property specialist BDMs; Target client database; Sign boards on sites; Industry association membership and sponsorship; Client cocktail functions; Boardroom luncheons; Direct mail to listings of town planning applications prospects from Cordell’s; Recent alliance with Balmain
Slide 15: Property expertise used to partner clients throughout the project
e Property expertise used to partner clients throughout the project; — Lead in time; — Working the project up. e Track record of stability and rational behaviour in both good and bad markets; e Product delivery - staff make it happen; ~ Decisive at loan application; ~ Formal approval matches indicat
Slide 16: Risk Mitigation
Risk Mitigati e Panel of expert consultants engaged in due diligence process (valuers, quantity surveyors, civil and environment engineers, lawyers); e Confirmation of project feasibility through standard model; e Quarterly project overview; e Culture (internal and external) to bring issues out in t
Slide 17: Key Challenges
KeyChallenses si ss titi iti Ss e Real estate markets at mature stage of cycle — Particularly residential investment units; e Increasing interest rates; e Rises in building costs; e Sites seen as risky; e Ensure customers manage cash flows; e Staff retention, resourcing levels and work life balance.
Slide 18: Key Challenges - Mitigants
Key Challenges - Mitigants - Supply of housing just keeping pace with demand: e Ten year increase in number of households to 2002 - 1.34 million or 22%; e Ten year increase in housing stock - 1.32 million dwellings or 20%. Sustained demand for housing: e Population growth, particularly immigration;