Charter Hall Office REIT : Half Year Results

ASX/MEDIA ANNOUNCEMENT

Charter Hall Office Management Limited

ABN 75 006 765 206

AFS Licence No. 247075 as responsible entity of Charter Hall Office REIT

CHARTER HALL OFFICE REIT DELIVERS SOLID OPERATIONAL PERFORMANCE

Tuesday, 21 February 2012
Charter Hall Office REIT (ASX:CQO) (the 'REIT') today announced its results for the six months to
31 December 2011.

Key financial results:

• Statutory loss of ($59.9) million, significantly impacted by offshore asset sales and various non- cash items

• Half year operating earnings1 of $65.0 million or 13.2 cents per unit

• Half year distributions of 11.0 cents per unit (99% tax deferred)

• Net tangible assets (NTA) of $3.66 per unit

• Look-through gearing reduced from 42.9% to 38.6%2

• Australian only pro-forma look through gearing of 28.0%

Key portfolio results:

• Increased Australian portfolio occupancy to 97%

• Agreed lease terms on 46,151 square metres, or 12%, of the Australian portfolio

• Australian portfolio value of $1,848 million with an average cap rate of 7.79%

• Finalised the sale of seven United States assets

1 Operating earnings represents the profit under AIFRS adjusted for fair value adjustments, impairment of assets, gains or losses on sale of investments, acquisition costs and non-cash items such as straight lining of fixed contracts, amortisation of lease incentives and movements in US capital gains tax. A reconciliation of operating earnings to statutory loss is provided in Note 20 of the Financial Statements

2 Defined as debt less cash divided by total assets less cash.

1
The REIT's Chief Executive Officer, Adrian Taylor, said: "We have remained focused on delivering on our strategic initiatives during the period, with the REIT achieving its operating earnings target, solid operational results across the Australian portfolio and completing the sale of seven of our United States assets."

Australian portfolio performance

The REIT's Australian portfolio performed solidly during the period, with lease terms agreed across
46,151 square metres or 12% of the Australian portfolio. Tenant retention of 86% was a strong contributor to this result. Key deals included five lease agreements at 175 Eagle Street, Brisbane, totalling nearly 13,000 square metres or 57% of the building. Lease terms were also agreed across
10,000 square metres of space at 2 Park Street Sydney. The Australian asset and property management team also maintained or achieved 100% occupancy across 12 assets, which led to the total Australian portfolio occupancy increasing to 97% and the weighted average lease expiry being maintained at 4.5 years.
The Australian portfolio's book value increased to $1,848 million during the period with an average capitalisation rate of 7.79%.

Capital management

The REIT successfully refinanced its $365 million Australian CMBS debt facility in September 2011, drawing upon a new $290 million 'back stop facility' with Australian banks, with the REIT now having no debt maturing until 2014.
The last of the REIT's capital hedge in the form of cross currency swaps also matured during September 2011. When offset against the forward currency hedges, the REIT received net proceeds of approximately A$22 million.

United States portfolio and sale update3

As part of the sale of its United States (US) portfolio to entities affiliated with Beacon Capital Partners, LLC (Beacon) the REIT has closed the sale of seven US assets, including three assets post balance

3 See the Explanatory Memorandum dated 10 February and released to the ASX on 13 February 2010 (available at www.charterhall.com.au/cqo) for full details as well as the qualifications and assumptions applicable to the estimates and other information provided in this section.

date. These sales have generated gross proceeds of US$726.1 million of the US$1.71 billion contracted sale price before the deduction of sales costs or debt transferred or repaid.
The REIT has now repatriated or contracted to transfer US$294 million of net portfolio sale proceeds, at an average foreign exchange rate of AU$1.00:US$1.01. Of the total estimated net proceeds of US$575 million, the remaining US$281 million of proceeds are unhedged.
Despite the focus on the US asset sales, the US team maintained leasing momentum across the remaining 10 assets (as at 31 December 2011) with over 400,000 square feet of lease terms agreed during the period delivering occupancy of 84%.

Scheme update4

On 31 December 2011, Charter Hall Office Management Limited (CHOML) entered into a Scheme Implementation Agreement (SIA) with Reco Ambrosia Pte Ltd (an affiliate of the Government of Singapore Investment Corporation (Realty) Pte Ltd), the Public Sector Pension Investment Board (of Canada) and a member of the Charter Hall Group (the 'Bidders') in relation to a proposed trust scheme (the 'Proposal') under which they will acquire all CQO units, except certain of those held by the Bidders and their associates ('Scheme Units') subject to approval of unitholders and satisfaction of certain other conditions.
CHOML's Independent Directors have unanimously recommended the Proposal in the absence of a superior proposal and the Independent Expert has found the Proposal to be fair and reasonable to, and in the best interests of holders of Scheme Units ('Scheme Unitholders') in the absence of a superior proposal.
Under the Proposal, Scheme Unitholders will receive $2.49 in cash per Scheme Unit referable to CQO's Australian assets on or as soon as reasonably practicable after the Implementation Date (which is currently expected to be 30 March 2012). This is a discount of 3.9% to the adjusted Pro Forma Australian NTA as at 31 December 2011 of $2.59 and a discount of 2.4% to the Pro Forma Australian
Total Assets5.

4 See the Explanatory Memorandum dated 10 February and released to the ASX on 13 February 2010 (available at www.charterhall.com.au/cqo) for full details as well as the qualifications and assumptions applicable to the estimates and other information provided in this section.

5 Please refer to Annexure 1 in the 31 December 2011 CQO results.

Regardless of the outcome of the Proposal, unitholders will receive one or more payments in respect of the US sale proceeds. The US sale proceeds are currently estimated at $1.11 per CQO unit. Under the Proposal, CHOML must hold back part of the US sale proceeds from distribution to provide for certain payments and to meet certain types of contingent liabilities and costs.
If the Proposal is implemented, it is currently expected that Scheme Unitholders will receive in aggregate an estimated $3.60 per unit assuming that no contingent liabilities are crystallised. Full details of the Proposal are available in the REIT's Explanatory Memorandum released to the market on
13 February 2012.

Outlook

Mr Taylor said: "As we approach the CQO unitholder meeting, we remain focused on the active management of the portfolio to maximise high tenant retention, occupancy and quality of earnings with the closing of the remaining seven US asset sales, a key priority."
Barring unforeseen circumstances, the Australian business is still on track to deliver an operating earnings contribution of between 17.5 and 18.0 cents per unit on a full year basis; and FY12 US net earnings of between 0.5 and 1.0 cent per unit, depending on the timing of closing the US sales.

The CQO unitholder meeting to vote on the Proposal is scheduled for 10.00am, 15 March 2012. For further information please contact:

Adrian Taylor Chief Executive Officer Charter Hall Office REIT Tel: [phone] [e-mail]	Jill Rikard-Bell Chief Operating Officer Charter Hall Office REIT Tel: [phone] [e-mail]
Investor enquiries: Kylie Ramsden Head of Listed Investor Relations Charter Hall Tel: [phone] [e-mail]	Media enquiries: Rachel Mornington-West Head of Marketing and Communications Charter Hall Tel: [phone] [e-mail]

About Charter Hall Office REIT

Charter Hall Office REIT is a leading listed real estate investment trust with a portfolio of high grade office buildings predominantly located in major business districts across Australia and the United States (under contract for sale). A customer focused approach to asset management drives the leasing and refurbishment initiatives with a view to maximising returns of the underlying assets.

Charter Hall Office REIT is managed by Charter Hall Office Management Limited (ABN 75 006 765 206; AFSL 247 075), a member of the Charter Hall Group (ASX:CHC), one of Australia's leading fully integrated property groups, with 20 years' experience managing high quality property on behalf of institutional, wholesale and retail clients. Charter Hall has over $10 billion of funds under management across the office, retail, industrial and residential sectors. The Group has offices in Sydney, Melbourne, Brisbane, Adelaide, Perth, Warsaw and Chicago.

Charter Hall's success is underpinned by a highly skilled and motivated team with diverse expertise across property sectors and risk-return profiles. Sustainability is a key element of its business approach and by ensuring its actions are commercially sound and make a difference to its people, customers and the environment, Charter Hall can make a positive impact for its investors, the community and the Group.

For further information on Charter Hall Group and Charter Hall Office REIT go to www.charterhall.com.au

Information set out in this announcement (other than the information in the section entitled 'Scheme update') is based on the following key assumptions

Financial

- All references to dollars ($) are to Australian dollars, unless otherwise stated

- 30 December 2011 exchange rate: A$1.00 : US$1.0209

- Average 1H FY12 exchange rate: A$1.00 : US$1.0349

- Property income includes straight-lining of rent free incentives and amortisation of leasing commissions, but excludes amortisation of fitout lease incentives and straight-lining of fixed contracts

Portfolio

- All property level data will include letters of intent unless otherwise stated

- All property level data is weighted by gross income unless otherwise stated

For full details of the qualifications and assumptions applicable to the estimates and other information provided in the section entitled "Scheme update", it is important that you refer to the Explanatory Memorandum dated 10 February 2012 released to ASX on 13 February 2012.

Key CQO data:

	Australia	US	31 December 11
Operational
Number of properties	18	10
Average capitalisation rate	7.8%	n/a
Occupancy	97%	84%
Weighted average lease expiry (years)	4.5	5.2
Financial
Net property income ($m) 1	120.9
Statutory loss ($m)	(59.9)
Operating earnings ($m)	65.0
Operating earnings per unit (cents)	13.2
Distributions per unit (cents)	11.0
Total assets (look-through) ($m)	3,420
Cash and deposits (look-through) ($m)	168
Total debt (look-through) ($m)	(1,422)
Look-through gearing (less cash) 2	38.6%
NTA $ per unit	3.66
Units on issue (million)	493

1 Net property income has been expressed on a look through basis consistent with the definition in Operating

Earnings.

2 Defined as debt less cash divided by total assets less cash