Generation Healthcare REIT : 2016 Annual Report to Unitholders

ANNIVERSARY

01

2 ANNUAL REP6ORT 2016

GENERATION HEALTHCARE REIT01

Generation Healthcare REIT (ASX code: GHC) is Australia's only ASX-listed real estate investment trust that invests exclusively

in healthcare property. The portfolio of eighteen1 properties includes hospitals, medical centres, laboratories, residential aged care facilities and other purpose-built healthcare facilities. Generation Healthcare REIT™ (the 'Fund') partners with high quality healthcare tenants with well diversified income streams. The Fund has total assets under management of $516 million with investments located in Victoria,

New South Wales and Queensland.

1. Includes debt interest in Waratah Private Hospital.

2. Excludes non-controlling interests.

3. Pro-forma values including acquisition of RSL Care RDNS Darlington which settled 25 June 2015, but remains subject to an interim structure prior to subdivision of the land.

01	GENERATION HEALTHCARE REIT™
02	INVESTMENT STRATEGY
03	RESULTS
04	LETTER FROM THE CHIEF EXECUTIVE OFFICER
10	FUND UPDATE
19	KEY ORGANIC GROWTH INTIATIVES
26	PROPERTY PORTFOLIO
35	SENIOR MANAGEMENT
36	CORPORATE GOVERNANCE
45	FINANCIAL INFORMATION
97	SUMMARY OF UNITHOLDERS
99	INVESTOR RELATIONS
100	CORPORATE DIRECTORY

CONTENTS

$516m

TOTAL ASSETS

$1.382

NET TANGIBLE ASSETS PER UNIT

98.6%3

PORTFOLIO OCCUPANCY

12.2years3

WEIGHTED AVERAGE LEASE EXPIRY

116

TENANTS

28.3%

NET DEBT TO TOTAL ASSETS

ABOUT THE RESPONSIBLE ENTITY

APN FUNDS MANAGEMENT LIMITED

APN Funds Management Limited (APNFM) is the Responsible Entity of Generation Healthcare REIT. The Board of APNFM consists of four directors, of which three, including the Chairman are Independent Directors.

APNFM is a wholly owned subsidiary of APN Property Group (APNPG) Limited, a specialist real estate investment manager. APNPG is listed on the ASX (Code: APD).

Further information on APN can be found at www.apngroup.com.au

ABOUT THE MANAGER

GENERATION HEALTHCARE MANAGEMENT PTY LIMITED

Generation Healthcare REIT ("GHC", the "Fund")(ASX: GHC) benefits from the experience, proven track record, healthcare focus and global platform of its manager, Generation Healthcare

Management Pty Ltd, a wholly-owned subsidiary of NorthWest Healthcare Properties REIT ("NWH REIT", the "REIT") (TSX: NWH.UN), a Canadian listed dedicated healthcare real estate investor. The REIT is also strategically aligned as the largest unitholder of GHC.

The Manager's primary responsibilities include the day to day administration of the Fund, portfolio management, sourcing new opportunities and conducting due diligence on potential acquisitions. The Manager is also responsible for providing specialist property, project and development management and leasing services to the Fund as and when required by the Responsible Entity.

NWH REIT is a Canadian listed real estate investment trust focused on providing investors with access to a portfolio of high quality international healthcare real estate infrastructure comprised of interests in a diversified portfolio of 139 income-producing properties and 864,000 square metres of gross leasable area located throughout major markets in Canada, Brazil, Germany, Australia and New Zealand. In Canada, the REIT is the largest non-government owner and manager of medical office buildings and healthcare facilities with 62 properties located from coast to coast, including major concentrations in Calgary, Edmonton, Toronto, Montreal, Quebec City and Halifax. In its international markets, the REIT partners with leading healthcare operators and has built leading management platforms in global gateway cities comprised of high quality healthcare real estate infrastructure assets characterised by long term indexed leases and stable occupancies.

NWH REIT is an expert in owning, managing and developing healthcare real estate with a dedicated and growing team of more than 180 professionals located in Auckland, Berlin, Melbourne, Sao Paulo and Toronto.

Further information can be found at www.nwhreit.com

GENERATION HEALTHCARE REIT 01

RESULTS

FINANCIAL POSITION TOTAL ASSETS	2016 $515.7m	2015 $407.5m
TOTAL LIABILITIES NET DEBT TO TOTAL ASSETS UNITS ON ISSUE NET TANGIBLE ASSETS PER UNIT MARKET CAPITALISATION*	$186.4m 28.3% 218.2m $1.38 $480.1m	$148.9m 26.6% 212.3m $1.22 $347.1m

INVESTMENT STRATEGY

The strategy of the Fund is to:

➤ Own quality healthcare-related real estate over the long term that will add value and provide attractive risk adjusted returns for the Fund's investors;

➤ Partner with high quality healthcare tenants, providing secure, long term cashflows; and

➤ Deliver value-add by consistently seeking ways of improving the Fund's

existing assets and sourcing other high quality opportunities for the Fund. Management's depth of experience and track record of success within the sector, enables us to leverage value adding opportunities.

FINANCIAL PERFORMANCE 2016 2015

STATUTORY NET PROFIT $51.4m $31.3m

UNDERLYING NET OPERATING INCOME $21.8m $17.2m UNDERLYING NET OPERATING INCOME PER UNIT 10.11c 9.57c DISTRIBUTIONS PER UNIT 8.84c 8.58c

TAX DEFERRED COMPONENT 34.8% 68.6%

* Market capitalisation as at 30 June 2016 based on a closing unit price of $2.20.

02 GENERATION HEALTHCARE REIT ANNUAL REPORT 2016

GENERATION HEALTHCARE REIT 03

04 GENERATION HEALTHCARE REIT ANNUAL REPORT 2016

LETTER FROM THE CHIEF EXECUTIVE OFFICER

Miles Wentworth

Chief Executive Officer Generation Healthcare REIT

Dear Investors,

It has been another busy year for the Fund.

This included the commencement of construction on two key organic growth projects, a couple of smaller but important acquisitions, strong leasing results and inclusion in the S&P/ASX 300 index. This culminated in a total return for the year of 41.6% significantly outperforming the S&P/ASX 300 A-REIT Accumulation Index by 17%.

Financial Performance and Position

Underlying net operating income increased by 27% to $21.8 million for the twelve months to 30 June 2016 compared to $17.2 million for the prior corresponding period. This increase is largely

attributable to higher net property income from like- for-like rental growth, twelve months rental income from the Casey Specialist Centre (completed in February 2015), the June 2015 acquisition of the RSL Care portfolio of three aged care facilities and a decrease in ground rent following the purchase

of the Epworth Freemasons Victoria Parade land freehold in December 2015.

Underlying net operating income per unit was up 5.6% to 10.11 cents, compared to 9.57 cents per unit for the 2015 year reflecting the higher operating performance.

The distribution for the 2016 financial year was 8.84 cents per unit compared to 8.58 cents per unit paid for the 2015 year, an increase of 3.0%. This represented a payout ratio of 88%.

Total assets increased by $108.2 million or 27% to

$515.7 million, over the year. This was mainly due to the acquisition of the freehold interest at Epworth Freemasons Victoria Parade, the acquisition of six ground floor suites at Waratah Private Hospital, material increases in the fair value of existing investment properties and further investment in two projects that are currently under construction.

New equity of $4.8 million was raised during the year under the Distribution Reinvestment Plan and units to the value of $5.6 million were issued in satisfaction of the Manager's performance fee due. Overall,

the total number of units on issue increased by 5.9 million to 218.2 million. The net tangible asset backing (excluding non-controlling interests) of the Fund increased by 16 cents (13%) to $1.38 and the net debt to total asset ratio was 28.3%.

Property Portfolio

With like-for-like rental growth of 2.9%, portfolio occupancy of 98.6%, a weighted average lease term of 12.2 years and a strong market appetite for high quality long dated and secure investment income, the capitalisation rate for the portfolio firmed by 81 basis points to 7.01%. This resulted in a material revaluation gain of $48.6 million for the year.

Significant leasing activity occurred during the year, which was assisted by some key asset management initiatives including upgrade, rebranding and signage works to assets and a proactive approach to tenant and industry relationships. The leasing resulted in

$2.87 million of new and renewed leases. Tenant retention remained consistently high at 84.5%.

Transactions during the year

In September 2015, the Fund contracted to acquire 6 ground floor suites and 30 carparks at Waratah Private Hospital for $5 million plus costs. Settlement occurred in mid-January 2016 with the Fund having leased the suites and carparks to the hospital

operator for a 20 year term at a circa 7% initial income yield.

The conditions for the acquisition of the Epworth Freemasons Victoria Parade freehold were satisfied in December 2015 and as such the land settled for $10.7 million plus costs. The contract to acquire the freehold interest was entered into at the inception of the

Fund in 2006 when the Fund acquired the leasehold interest.

Organic Growth Projects

The Fund has three major organic growth projects. They are the Casey Stage 2 project in Berwick, Victoria, the Frankston Private expansion project in Frankston, Victoria and the Epworth Freemasons Clarendon Street project, in East Melbourne, Victoria.

Casey Stage 2

This $114 million new 190 bed, 6 theatre private hospital project in Casey, Victoria is a joint venture with St John of God Health Care, Australia's largest private not-for-profit hospital operator. The joint ownership of the asset will see the Fund with an investment of circa

$44.5 million. In December 2015 financial close was achieved and work started on site in January 2016.

The project is progressing well and is scheduled to be completed in the first half of FY18.

Frankston Private Expansion

The expansion of Frankston Private to accommodate its major tenant, Healthscope Limited, is a $45 million project. This will see the addition of 60 inpatient beds, 2 theatres, expanded recovery and 99 underground carparks. With the project being in a joint venture, the Fund's investment will be circa $29.5 million.

Construction started in December 2015 and is well advanced. The forecast for overall completion is for late FY17 and will be subject to delivery in stages.

Epworth Freemasons Clarendon Street

In December 2015, a town planning application was lodged for a 10 level, 6,805 sqm building to be known as the Grey Street Centre and a 309 bay below ground car park on the Albert Street side

of the site. The forecast project cost is $69 million and is to be a 50/50 joint venture with Epworth Foundation. In August 2016 a planning permit was issue by Melbourne City Council. Design work is now being progressed towards construction start with outstanding conditions for commencement being finance and governance.

10 year anniversary

2016 marks ten years since the formation of the Fund in 2006 when it listed on the ASX with two seed assets and an initial public offering of $30.5 million.

As at 30 June 2016, funds under management had grown to $516 million with an additional $109 million of organic growth in progress and 18 properties.

Performance over the 10 year period has delivered investors a total return (income and capital) of 17.6% per annum, outperforming the S&P/ASX300 A-REIT Accumulation index by 14.6% per annum. This is a very satisfying outcome for all stakeholders in the Fund.

Change of ownership of Investment Manager

On 27 June 2016 the sale of 100% of Generation Healthcare Management Pty Ltd (GHM), the Investment Manager of the Fund, occurred from APN Property Group Limited, and interests associated with myself and Chris Adams (Director of GHM) to

Canadian listed NorthWest Healthcare Properties Real Estate Investment Trust (NWH). This transaction also included the sale of approximately 27.1 million units in the Fund which completed on 24 August 2016.

NWH is a Canadian listed real estate investment trust focused on providing investors with access to a portfolio of high quality international healthcare real estate infrastructure comprised of interests

in a diversified portfolio of 139 income-producing properties and 864,000 square metres of gross leasable area located throughout major markets in Canada, Brazil, Germany, Australia and New

Zealand. NWH is an expert in owning, managing and developing healthcare real estate with a dedicated and growing team of more than 180 professionals located in Auckland, Berlin, Melbourne, Sao Paulo and Toronto.

04 GENERATION HEALTHCARE REIT ANNUAL REPORT 2016

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