CENTURIA OFFICE REIT — M&A Activity 2017

Mar 5, 2017

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Centuria Metropolitan REIT Centuria Property Funds Limited ("CPFL") (ABN 11 086 553 639 AFSL 231149) as Responsible Entity of Centuria Metropolitan REIT No. 1 (ARSN 124 364 718) and Centuria Metropolitan REIT No. 2 (ARSN 124 364 656) (together Centuria Metropolitan REIT)

CMA

MR SAM SAMPLE FLAT 123 123 SAMPLE STREET THE SAMPLE HILL SAMPLE ESTATE SAMPLEVILLE VIC 3030

SRN WITHHELD DEC

Dear Centuria Metropolitan REIT Securityholder,

As you are aware, Centuria Property Funds Limited ( CPFL ) as responsible entity of the Centuria Metropolitan REIT ( CMA ) dispatched a Notice of Meeting and Explanatory Memorandum convening an extraordinary general meeting ( EGM ) of CMA to be held on 15 March 2017.

The purpose of the EGM is to seek the approval of CMA Securityholders to the simplification of the structure of CMA from a listed stapled vehicle to a single listed fund ( Simplification Proposal ).

Merger

In this letter CPFL provides further information about a potential merger of Centuria Urban REIT ( CUA ) (of which Centuria Property Funds No.2 Limited ( CPF2L ) is the responsible entity) and CMA by a "trust scheme" on an NTA-forNTA basis ( Merger ).

The proposed Merger is subject to a number of conditions including implementation of the Simplification Proposal and the obtaining of certain regulatory approvals.

The Directors of CPFL have recommended that CMA Securityholders vote in favour of the Simplification Proposal and they maintain that recommendation. The Directors also believe that the Merger is in the best interests of CMA Securityholders. They are not aware of any information that is material to the decision of a CMA Securityholder on how to vote on the Simplification Proposal other than as is disclosed in the Explanatory Memorandum for the EGM and this letter.

CMA Securityholders who are supportive of the Merger should vote in favour of the Simplification Proposal, as the Merger is conditional on the Simplification Proposal being approved.

The validity of proxies already lodged in respect of the Simplification Proposal are unaffected by the Merger. However, if you have already lodged your proxy but now wish to change your vote, you can obtain a new proxy by calling the Simplification Proposal Information Line on 1300 651 367 (callers in Australia) or +61 3 9415 4282 (callers outside Australia) between 8.30 am and 5.00 pm (Sydney time) on business days.

First Merger discussions

As set out in the Explanatory Memorandum, CPF2L and CPFL explored the possibility of a merger initially with the intent that the proposed terms be announced at the same time as a Share Sale Agreement between 360 Capital Group Limited ( TGP ), Centuria Capital Limited ( CNI ) and Centuria Funds Management Limited (in its capacity as responsible entity of the Centuria Capital Fund) dated 23 November 2016 for the purchase by CNI of all of the shares in CPF2L from TGP was announced. CUA and CMA considered alternatives based on the consideration to be offered to be predominantly scrip and reflective of the respective NTA value of the underlying property portfolios.

However, there was no agreement as to terms on which a proposal would be put to members of CUA and discussions ceased. There were a number of reasons why CPF2L and CPFL were unable to reach agreement about the terms of any proposed merger.

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Centuria Metropolitan REIT Centuria Property Funds Limited ("CPFL") (ABN 11 086 553 639 AFSL 231149) as Responsible Entity of Centuria Metropolitan REIT No. 1 (ARSN 124 364 718) and Centuria Metropolitan REIT No. 2 (ARSN 124 364 656) (together Centuria Metropolitan REIT)

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Re-engagement

After the announcement of the half-yearly results of CMA and CUA, CPFL has re-engaged in merger discussions with CPF2L and has proposed the Merger based on the financial positions of CMA and CUA as disclosed in their half-yearly accounts.

On 3 March 2017 CPFL, in its capacity as responsible entity for CMA, announced on the ASX Company Announcements Platform that it had entered into a Scheme Implementation Agreement ( SIA ) with CPF2L as responsible entity for CUA to undertake the Merger on an "NTA-for-NTA" merger of equals transaction between CMA and CUA via a trust scheme.

Merger consideration

If CUA unitholders approve the Merger and it is implemented (and the Simplification Proposal is implemented), CUA unitholders will receive for each CUA unit held total consideration comprised of the following ( Merger Consideration ):

• 0.88 CMA units; and

• $0.23 cash payment.

The Merger Consideration has been determined based on the relative pro forma net tangible asset backing per security of CMA and CUA as at 31 December 2016 and represents a merger of equals. The implied value of the Merger Consideration (based on CMA’s pro forma net tangible asset backing as at 31 December 2016 of $2.32 per CMA security) is equivalent to the pro forma net tangible asset backing per CUA unit of $2.27.

Strategic rationale

The Merger is consistent with CMA’s strategy to invest in metropolitan office markets in Australia and combines two highly complementary property portfolios to provide CMA Securityholders with an enhanced investment proposition relative to CMA on a standalone basis including:

• Material increase in scale with CMA's investment property portfolio increasing 54% to over $602 million[1] ;

• Generation of accretion to CMA’s FY17 distributable earnings per security;

• Enhanced portfolio and tenant diversification;

• Cost efficient acquisition structure minimises net tangible asset dilution compared to acquiring assets in the direct market; and

• Improved trading liquidity and increased market capitalisation with the potential for ASX / S&P 300 index inclusion.

CPFL has established an independent Board committee ( IBC ), comprising independent directors Mr Matthew Hardy and Mr Darren Collins, to consider the merits of the Merger.

Merged entity profile

CMA considers that it and CUA are highly complementary investment entities - in its view, both recognise the positive characteristics particular to metropolitan office markets and have similar investment strategies with a conservative approach to gearing. Furthermore, both funds are managed by professional executives with deep experience in adding value through the property cycle.

The merged entity will have:

• An investment property portfolio of over $602 million (versus CMA standalone assets of $391.5m, as at 31 December 2016)[2] ; and

• An estimated pro forma market capitalisation of $417 million[3] (versus CMA standalone market capitalisation of $277 million)[4] .

Mr Matthew Hardy, Independent Director of CPFL and CMA independent board committee chairman said: “The merger of CMA and CUA provides a highly attractive value proposition for CMA Securityholders. This transaction is accretive to CMA's FY17 distributable earnings and will create one of the largest ASX listed REITS focused on metropolitan office assets in Australia”.

“We also believe the Merger has significant benefits for CUA unitholders as it significantly increases their exposure to a quality portfolio of office assets, decreases the ongoing management fee, enhances the balance sheet and increases scale and liquidity.”

1 As at 31 December 2016 with pro forma adjustments to reflect the sale of 14 Mars Road announced on 21 December 2016 2 As at 31 December 2016 with pro forma adjustments to reflect the sale of 14 Mars Road announced on 21 December 2016 3 Merged entity value based on the total anticipated CMA securities on issue upon completion of the Merger, if successful, multiplied by the closing price of CMA securities of $2.34 on 2 March 2017 (being the last trading day prior to the date of announcement of the Merger)

4 CUA standalone value based on the closing price of CUA units of $2.34 on 2 March 2017 (being the last trading day prior to the date of announcement of the Merger)

Centuria Metropolitan REIT Centuria Property Funds Limited ("CPFL") (ABN 11 086 553 639 AFSL 231149) as Responsible Entity of Centuria Metropolitan REIT No. 1 (ARSN 124 364 718) and Centuria Metropolitan REIT No. 2 (ARSN 124 364 656) (together Centuria Metropolitan REIT)

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Ongoing management of the merged entity & alignment of interests

CPF2L has agreed, if the Merger is successful, to reduce the ongoing annual base management fees paid in respect of CUA assets from 0.60% to 0.55% of gross asset value to be in line with the fee currently being charged for CMA.

On successful implementation of the Merger, Centuria Capital Group will continue to have a substantial holding in the merged entity demonstrating a strong alignment of interest with the merged entity’s investors.

Independent Directors representing CUA

CPF2L has established an independent Board committee ( CUA IBC ) to consider the merits of the Merger on behalf of CUA unitholders. The CUA IBC believes that the Merger has merit, offers a number of potential benefits to CUA unitholders and it is in the best interest of CUA's unitholders that the Merger be put forward for CUA unitholders' consideration.

The SIA is subject to a number of condition precedents ( CPs ) including satisfactory due diligence and an independent expert finding the Merger Proposal is in the best interests of CUA's unitholders. Subject to the satisfaction of the CPs regarding satisfactory due diligence and an independent expert finding the Merger is in the best interests of CUA's unitholders the CUA IBC intends to recommend that CUA’s unitholders vote in favour of the Merger in the absence of a superior proposal.

Indicative timetable

The expected key dates in relation to the Merger are outlined below.

Dispatch of the notice of meeting and explanatory memorandum in relationto the Merger	12 April 2017
CUA unitholder meeting to approve the Merger	9 May 2017
Effective Date if Merger approved	10 May 2017
Record Date if Merger approved	17 May 2017
Implementation date - on which the Merger Consideration is paid	24 May 2017

If you need any further information please contact the Simplification Proposal Information Line on 1300 651 367 (callers in Australia) or +61 3 9415 4282 (callers outside Australia) between 8.30 am and 5.00 pm (Sydney time) on Business Days.

Your vote on the Simplification Proposal is important and we encourage you to vote.

Yours sincerely,

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Peter Done Chairman Centuria Property Funds Limited as responsible entity of the Centuria Metropolitan REIT

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