Market Commentary

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MARKET COMMENTARY

RETAIL

Darwin

The retail trade in Darwin is dominated by one large service area, being Casuarina Shopping Square in the heart of the northern suburbs. The CBD retail area previously centered on the Smith Street Mall, with arcade style shops and retail shops with mall frontage. There has been a shift away from retail trade in the Mall towards the recently completed Mitchell Centre on Mitchell Street, which comprises Coles Supermarket as its anchor tenant. The Mitchell Centre is fully air conditioned and the majority of these internal retail shops are fully leased.

The northern suburbs retail area is characterised by Casuarina Shopping Square and to a far lesser extent, the Homemaker Village complex in Millner. Local neighbourhood shops are located within each suburb.

Casuarina is the largest fully air-conditioned shopping centre in the Northern Territory and the preferred retail area due to the large number of national brands & retail chains within the precinct.

Alice Springs

In Alice Springs the retail area is limited to the Central Business District and includes the Todd Mall and two major shopping centres. Current proposals exist for the expansion of the Yeperenye Complex. There are limited vacancies at ground level with regards to retail in Alice Springs.

PASTORAL

The large cattle export trade & the sale of cattle in interstate markets (mostly Queensland, SA) dominate pastoral production in the Territory.

Cattle contributes approximately 50% of the total value of NT primary industry production. The pastoral industry is a major contributor to incomes in rural areas of the Northern Territory and it also provides considerable flow on benefits to other industries, particularly transport and retail trade services.

The NT cattle population is estimated to be 1,900,000 head, about 7% of the Australian total. By pastoral district, Alice Springs has 20%, Barkly and Tennant Creek 30%, Victoria River District and Katherine 32% & Darwin, Elsey and Gulf 18% of the NT herd.

HORTICULTURE

The Territory horticulture industry includes fruit, vegetables, nurseries and cut flowers. Horticulture contributes approximately 18% of the total value of the Territory rural industries and fishery’s production. The main fruits produced in the NT comprise mango, banana, melons, tablegrapes and other exotic fruits such as dragonfruit & star apple.

The main vegetables produced comprise snake bean, cucumbers and okra.

The small locality of Ti Tree in the central region is the primary grape production area in the Territory. The grapes are supplemented by mango and other horticultural crops.

The Territory enjoys certain comparative advantages due to its capacity to supply markets with a range of early season and out of season produce including tablegrapes, mangoes, dates, melons, tropical exotic fruits, Asian vegetables and herbs. Favourable climatic conditions, relatively disease free status, improved product quality, expanded marketing efforts and relatively unrestricted access to domestic and international markets underpin future industry growth.

RESIDENTIAL

Darwin

As at September 2007, overall Darwin house prices had increased by 3.9% over the past 12 months, with the median price of a detached house rising to $400,000, however, overall sales decreased by 5.3% over the June to September quarter.

The unit market continues to remain strong with Darwin prices increasing by 28.3% for the last 12 months, bringing the median price of a unit/townhouse/flat to $320,000.

Inner Darwin suburbs showed a slight increase of house sales and median price for the September quarter. However as inner Darwin suburbs have become less desirable to purchasers due to recent interest rate rises and high entry costs, a decrease of 1.6% on the median price was observed over the last 12 months. Unit sales increased considerably over the September quarter as did the median price achieved.

Northern suburbs houses recorded decreases in sales and median price over the September quarter. Units recorded an increase of sales and a slight decrease in median price. The median price for houses was $400,000, and for units was $263,500.

In Palmerston, the house sales slowed by 10.1% for the quarter and median prices increased slightly, however the overall increase in median price for the past 12 months was strong at 16.8%. Unit sales were flat for the same period but median prices increased significantly. The median price for houses was $371,000, and for units was $285,000.

Darwin rural areas continued to show steady sales and increasing median prices over the quarter. As at September 2007 the median prices for the past 12 months indicated a 24.4% increase to $485,000.

Inner city Darwin continues to grow with the development of the Darwin wharf precinct and Convention Centre, Chinatown and Darwin’s first two “skyscrapers”, the Pandanas and Evolution developments.

The development of the new suburb of Lyons at Lee Point continues to move forward with the Stage 6 land release of Lee Point Crossing due on January 15, 2008. This subdivision totals approx. 650 blocks and of these approx. 300 blocks will be used to construct new housing for ADF (Australian Defence Force) members and their families. In 2005 DHA (Defence Housing Authority) purchased 152 hectares of land at Muirhead in Darwin with a view to future residential development. This is located adjacent to Lyons and has the potential to deliver about 1,000 new residential allotments but will not commence until Lyons has been completed.

A new subdivision for Palmerston, Bellamack, was also announced on September 4, 2007. Bellamack is expected to comprise up to 700 new lots, incorporating parks and open spaces, a shopping village and a community hub. The project is expected to set aside 15% of the available land for first home buyers and public housing. Currently this project is seeking expressions of interest from developers.

On October 8, 2007 the NT Government announced the release of land at Berrimah on a 220 hectare site. The release of this land will aid in easing the pressure on the Darwin housing market by providing an expected 700 further residential allotments.

Alice Springs

As at December 2007, Alice Springs house prices have increased at a relatively steady rate over the previous year with a 12.7% increase to a median price of $307,000.

The median price for units was $240,000; a 10.2% increase over the 12 months.

Vacant Land sales over the past 12 months have mainly been limited to sales of allotments in the outer-lying new subdivisions of Stirling Heights (Larapinta Stage 2) and Northedge. There are very few allotments available in the more established suburbs.

Future land releases on the horizon include the Larapinta Stage 4 subdivision containing 39 new allotments and the Mount Johns subdivision which is set to make a further 70 new allotments available. There are also a number of rural residential subdivisions at Emily Hills which will produce a supply of land, not seen for some time in the Alice. The effect of this increased supply is yet to be felt.

Construction of new housing has almost come to a stand-still recently, which is a reflection of the costs of construction being above values achieved for newly built dwellings.

COMMERCIAL

Darwin

The commercial market comprises 3 main areas, those being the Darwin CBD, Casuarina and Palmerston.

The Darwin CBD office rental market continues to be influenced to a large extent via the NT Government with relocation to newer buildings such as Mitchell Centre the TIO building and the new Chinatown office complex.

The NT Government represents approximately 70% of the office market.

There remains a large supply of “B” grade office accommodation, however the premium grade vacancy rate is now in the order of less than 1% and “A” grade accommodation vacancy is in the vicinity of 5%. We would expect, (given the high labor costs and high construction material costs), that refurbishment of existing buildings in the CBD may be more prevalent than new construction in the medium term. AANT House is currently undergoing major refurbishment which is expected to be completed in late 2008.

Rents for full floors range from $350m² to $400m² pa plus GST in the premium and “A” grade office market.

There is very little Class “A” office space available in either Casuarina or Palmerston, however many smaller businesses are being attracted to these areas because of parking issues in the CBD and locality to home offices.

Demand for larger retail tenancies in the Darwin CBD remains slow and many small specialised retailers other than tourist related operations are struggling.

Strengthening land values in the CBD due to flexible planning approvals and a desire on the part of investors to secure land stock is assisting in increasing the underlying land values.

Alice Springs

Commercial development in Alice Springs is limited to the Central Business District. Demand for ground floor accommodation is strong with upper floor space remaining vacant for some time. The issue of quality supply is a factor in the upper level vacancy rates in the Alice.

INDUSTRIAL

Darwin (December 2007)

The Darwin industrial market is dominated by 5 main areas, those being Winnellie/Sadgroves industrial estate, Berrimah, Pinelands, 11 Mile/Holtze and Yarrawonga.

The Winnellie/Sadgroves area is dominated by newer style warehouse developments (particularly Sadgroves locale) with current land values in the vicinity of $275/m² to $320/m² for blocks of between 1,500m² to 3,000m².

Berrimah is located approximately 10 kilometres south of the CBD and consists of a mix of light and general industry with underlying land values in the range of $150/m² to $150/m².

Pinelands is situated half way between Palmerston and Berrimah comprising a mix of light and general industry with larger blocks of 3,000m² to 15,000m².

Directly opposite Pinelands is 11 Mile/Holtze, a newer industrial subdivision with vacant internal land available at between $185/m² up to $275/m² for highway frontage blocks.

Yarrawonga Industrial Estate is the industrial precinct for Palmerston. Stage 7, which is the final stage for this estate, has vacant industrial land available at between $150m² to $185/m² for block areas of 1,500m² and 2,500m².

The Tivendale Estate located south of Berrimah, comprises light industry and the Hudson Creek industrial area has been set aside for port & rail related industry with land areas currently between 3,000m² to 10,000m² at asking prices from $115/m² to $150m². Demand for Hudson Creek has increased over the past 18 months.

HOSPITALITY & TOURISM

The tourism industry is a Territory single largest employer and second largest revenue earner, after the mining industry. Tourism contributes over $1 billion directly to the Territory economy each year. The total worth of the tourism industry (including indirect effects) is estimated at over $2 billion annually.

Territory tourism provides over 15,000 jobs in the Territory, directly and indirectly.

Regional motel/hotels in the Northern Territory have seen increased sales activity over the past 18 months. Freehold capitalisation rates in the Northern Territory are considered more attractive then those of similar freehold regional hotel/motels in areas such as regional Queensland where net yields of 10% for regional freehold pubs are being achieved. The yields available in the Northern Territory remain attractive and this has seen keen interest from interstate investors.

LAND ACQUISITION/NATIVE TITLE / EXPERT WITNESS VALUATIONS

Land acquisition is a specialist area, in which our valuers have significant experience appearing on a number of occasions in relation to the Alice Springs to Darwin rail corridor.

In relation to our experience as expert witnesses, we have been involved in a number of court cases, particularly in relation to work health matters, where our assessments have set precedents in relation to the assessment of non-cash benefits where limited, if any, evidence of comparison exist.

Our valuers are very experienced in relation to general property disputes and have acted as independent arbitrators in determining rental and capital values.

NOTE:- All rates and opinions expressed in this report are current at the date of publication and are likely to change with time. These opinions should not be relied upon for valuation purposes.

INTEGRATED VALUATION SERVICES