CENTURIA OFFICE REIT — Proxy Solicitation & Information Statement 2015

May 10, 2015

Centuria Metropolitan REIT

Notice of Meetings and Explanatory Memorandum

To be held on Friday, 5 June 2015 at 5.00pm AEST at: Centuria Capital Ltd Level 39, 100 Miller Street, North Sydney, NSW

This Notice of Meetings and Explanatory Memorandum is issued by Centuria Property Funds Limited ABN 11 086 553 639 AFSL no. 231149 (CPFL) as Responsible Entity of Centuria Metropolitan REIT No.1 (ARSN 124 364 718) and Centuria Metropolitan REIT No.2 (ARSN 124 364 656), collectively referred to as "CMA" or "the Fund".

THIS IS AN IMPORTANT DOCUMENT

Please read the information in this document carefully. If you are in any doubt as to what you should do, you should consult your financial, taxation or other professional adviser(s). If you have any queries about the Meetings, please call Centuria on 02 8923 8923 or if you have any queries regarding CMA please call Dylan Tomkins at Centuria Investor Relations on 02 8923 8929.

The Independent Expert has concluded that the Proposal is fair and reasonable for those Investors who are not associated with CPFL.

Table of Contents

Section		Page
	Letter from the Chairman of Centuria
	Property Funds Limited	13
	Key dates, key dates and what to do next	14
	Important Notices	15
1:	Details and evaluation of the Proposal	18
2:	Overview of the Property	11
3:	Financial Information	12
4:	Glossary	14
	Independant Expert Report	16
	Independant Valuer's Report	37
	Notice of Meeting	44

Letter from the Chairman of Centuria Property Funds Limited (11 May 2015)

Dear Investor

Centuria Metropolitan REIT – Notice of Meetings

On behalf of the Board of Directors of Centuria Property Funds Limited (CPFL), the Responsible Entity of Centuria Metropolitan REIT No. 1 (ARSN 124 364 718) and Centuria Metropolitan REIT No. 2 (ARSN 124 364 656) (CMA), it is my pleasure to invite you to meetings of CMA's Investors to be held at 5.00pm (AEST) on Friday, 5 June 2015 at Centuria Capital Limited, Level 39, 100 Miller Street, North Sydney (Meetings).

The Meetings are being convened in connection with a proposal for CMA to acquire a property at levels 5-9, 131-139 Grenfell Street, Adelaide, SA (Property) from Centuria Property Funds Limited in its capacity as the Responsible Entity of Centuria 131-139 Grenfell Street Fund (ARSN 160 600 895) (Vendor) (Proposal).

The Independent Expert has concluded that the Proposal is fair and reasonable for those Investors who are not associated with CPFL.

Details of the Proposal

Details of the Resolution and the Proposal are provided in the Notice of Meetings and Explanatory Memorandum accompanying this letter.

YOUR VOTE IS IMPORTANT

Investors must pass the Resolution proposed at the Meetings to enable CPFL to acquire the Property.

This Notice of Meetings and Explanatory Memorandum contains important information in relation to the Proposal, including information about the Property and a discussion of the benefits and risks of the Proposal.

Please read the Notice of Meetings and the Explanatory Memorandum carefully in its entirety before making your decision and voting (whether in person, by corporate representative or by proxy) at the Meetings.

If you have any queries about the Meetings, please call Centuria on 02 8923 8923 or if you have any queries regarding CMA please call Dylan Tomkins at Centuria Investor Relations on 02 8923 8929.

Yours sincerely,

Peter Done Chairman Centuria Property Funds Limited

Location of Meetings and what you need to do

LOCATION OF MEETINGS

Centuria Capital Limited, Level 39, 100 Miller Street North Sydney, 5.00pm on Friday, 5 June 2015.

WHAT YOU NEED TO DO

Step 1: Read the Notice of Meetings and Explanatory Memorandum

This Explanatory Memorandum is intended to provide Investors with information about the proposed Resolution contained in the Notice of Meetings.

You should read this Explanatory Memorandum in full before making any decision in relation to the Resolution.

Please refer to the Glossary in section 4 for the meaning of any defined terms in this Explanatory Memorandum.

Step 2: Vote on the Resolution

The Meetings will be held on Friday, 5 June 2015 at 5.00pm in Centuria Capital Limited Head Office Boardroom, Level 39, 100 Miller Street North Sydney.

You can vote on the Resolution by attending the Meetings and voting in person (or for a body corporate, by a corporate representative voting for you) or by completing and returning the enclosed Proxy Form.

Proxy Forms must be received by the Registry by 5.00pm Wednesday, 3 June 2015. For details on how to complete and lodge the Proxy Forms, please refer to the instructions on the Proxy Forms.

Important Notices

Introduction

Centuria Property Funds Limited (CPFL) is pleased to invite all Investors in CMA to the Investor meetings (Meetings), to be held at 5.00pm on Friday, 5 June 2015.

The purpose of each of the Meetings is to give all Investors an opportunity to vote on the Proposal. This booklet contains details of the proposed Resolution, the Proposal and instructions on how to vote.

What is this document?

This document sets out the Notice of Meetings and Explanatory Memorandum (Explanatory Memorandum) for Centuria Metropolitan REIT No.1 (ARSN 124 364 718) (Stapled Fund No. 1) and Centuria Metropolitan REIT No. 2 (ARSN 124 364 656) (Stapled Fund No. 2), together referred to as Centuria Metropolitan REIT or CMA.

This Explanatory Memorandum provides Investors with information about the Proposal and the Resolution that is being put to Investors. To properly understand the Proposal and the Resolution, this Explanatory Memorandum must be read in its entirety.

Responsible Entity

CPFL is the Responsible Entity of Stapled Fund No. 1 and Stapled Fund No. 2. Each of Stapled Fund No. 1 and Stapled Fund No. 2 is a managed investment scheme registered under Chapter 5C of the Corporations Act and is listed on the ASX. Unless the context otherwise requires in this Explanatory Memorandum, a reference to CPFL is a reference to it in its capacity as Responsible Entity of each of Stapled Fund No. 1 and Stapled Fund No. 2.

No investment advice

This Explanatory Memorandum has been prepared without reference to the investment objectives, financial and taxation situation or particular needs of any Investor or any other person. The information and recommendations in this Explanatory Memorandum do not constitute, and should not be taken as, financial product advice. CPFL encourages you to seek independent financial and taxation advice before making any investment decision and any decision as to whether or not to vote in favour of the Resolution as relevant to you.

This Explanatory Memorandum is important and requires your immediate attention. It should be read in its entirety before making a decision on how to vote on the Resolution.

In particular, it is important that you consider the disadvantages and potential risks of the Proposal as set out in this Explanatory Memorandum.

If you are in doubt as to what you should do, you should consult a licensed professional adviser.

Forward-looking statements

Some of the statements appearing in this Explanatory Memorandum, including the forecast Distribution Yield for CMA for FY16, may be in the nature of forward-looking statements. Forwardlooking statements or statements of intent in relation to future events in this Explanatory Memorandum should not be taken to be a forecast or prediction that those events will occur. Forward-looking statements generally may be identified by the use of forward-looking words such as 'believe', 'aim', 'expect', 'anticipate', 'intending', 'foreseeing', 'likely', 'should', 'planned', 'may', 'estimate', 'potential', or other similar words.

Similarly, statements that describe the objectives, plans, goals or expectations of CPFL are or may be forward-looking statements. You should be aware that such statements are only predictions and are subject to inherent risks and uncertainties. Those risks and uncertainties include factors and risks specific to the industry in which CMA operates, as well as general economic conditions, prevailing exchange rates and interest rates and conditions in the financial markets. Actual events or results may differ materially from the events or results expressed or implied in any forward-looking statement and deviations are both normal and to be expected. None of CPFL, its officers, or any person named in this Explanatory Memorandum or involved in the preparation of this Explanatory Memorandum makes any representation or warranty (either express or implied) as to the accuracy or likelihood of fulfilment of any forward-looking statement, or any events or results expressed or implied in any forward-looking statement. Accordingly, you should not place undue reliance on those statements.

This Explanatory Memorandum also contains forward-looking statements based on the current

Important Notices (continued)

expectations of CPFL and its directors about future events, including the forma forecast Distribution Yield for FY16. The prospective information is, however, subject to risks, uncertainties and assumptions that could cause actual results to differ materially from the expectations described in such prospective information. Factors which may affect future financial performance include those risks identified in Section 1.5, the assumptions set out in section 3 not proving correct and other matters not currently known to, or considered by, CPFL. Investors should note that the historical financial performance of CMA is no assurance or indicator of future financial performance of CMA (whether or not the Proposal proceeds). CPFL does not guarantee any particular rate of return or the performance of, CMA nor does it guarantee the repayment of capital or any particular tax treatment in respect of any investment.

The forward-looking statements in this Explanatory Memorandum reflect views held only at the date of this Explanatory Memorandum. Subject to any continuing obligations under the Corporations Act, CPFL and its officers disclaim any obligation or undertaking to distribute after the date of this Explanatory Memorandum any updates or revisions to any forward-looking statements to reflect any change in expectations in relation to them or any change in events, conditions or circumstances on which any such statement is based.

Responsibility statement

The information contained in this Explanatory Memorandum concerning CMA and the intentions, views and opinions of CPFL and its directors has been prepared by CPFL and is its responsibility alone.

Foreign jurisdictions

The release, publication or distribution of this Explanatory Memorandum in jurisdictions other than Australia may be restricted by law or regulation in such other jurisdictions and persons outside Australia who come into possession of this Explanatory Memorandum should seek advice on and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of applicable laws or regulations. This Explanatory Memorandum has been prepared in accordance with laws of the Commonwealth

of Australia and the information contained in this Explanatory Memorandum may not be the same as that which would have been disclosed if this Explanatory Memorandum had been prepared in accordance with the laws and regulations outside Australia.

Charts, maps and diagrams

Any diagrams, charts, maps, graphs and tables appearing in this Explanatory Memorandum are illustrative only and may not be drawn to scale. Unless stated otherwise, all data contained in diagrams, charts, maps, graphs and tables is based on information available as at 5 May 2015.

Timetable and dates

All times and dates referred to in this Explanatory Memorandum are times and dates in Australian Eastern Standard Time (AEST), being the time in Sydney, Australia, unless otherwise indicated. All times and dates relating to the implementation of the Proposal referred to in this Explanatory Memorandum may change.

Privacy

CPFL may collect personal information in the process of implementing the Proposal. The type of information that it may collect about you includes your name, contact details and information on your Stapled Security holding in CMA and the names of persons appointed by you to act as a proxy, attorney or corporate representative at the Meetings as relevant to you. The collection of some of this information is required or authorised by the Corporations Act.

The primary purpose of the collection of personal information is to assist CPFL to conduct the Meetings to enable it to implement the Proposal. Without this information, CPFL may be hindered in its ability to issue this Explanatory Memorandum and implement the Proposal. Personal Information of the type described above may be disclosed to the Registry, third party service providers (including print and mail service providers and parties otherwise involved in the conduct of the Meetings), authorised securities brokers, professional advisers, related bodies corporate of CPFL, regulatory authorities, and also where disclosure is otherwise required or allowed by law.

Investors who are individuals and the other individuals in respect of whom personal information is collected as outlined above have certain rights to access the personal information collected in relation to them. If you would like to obtain details of information about you held by CPFL, please call Centuria on 02 8923 8923 or if you have any queries regarding CMA please call Dylan Tomkins at Centuria Investor Relations on 02 8923 8929.

Investors who appoint an individual as their proxy, corporate representative or attorney to vote at the Meetings should ensure that they inform such an individual of the matters outlined above.

Financial amounts

All financial amounts in this Explanatory Memorandum are expressed in Australian currency unless otherwise stated.

All financial and operational information set out in this Explanatory Memorandum is current as at the date of this Explanatory Memorandum, unless otherwise stated.

Defined terms

Capitalised terms used in this Explanatory Memorandum are defined in the Glossary at section 4 of this Explanatory Memorandum.

Date

This Explanatory Memorandum is dated 11 May 2015

1.1 Why is Investors' approval being sought?

ASX Listing Rule 10.1 provides that before a listed entity such as CMA acquires a substantial asset from a related party it must obtain the approval of Investors.

Centuria Property Funds Limited is both the purchaser (in its capacity as the Responsible Entity of CMA) and the Vendor (in its capacity as the Responsible Entity of Centuria 131-139 Grenfell Street Fund (ARSN 160 600 895) of the Property.

The purchase price of the Property, of \$20 million, represents approximately 9% of the equity interests of CMA1 . The Property is therefore a "substantial asset" under ASX Listing Rule 10.2 as the purchase price is 5% or more of the equity interests of CMA.

Therefore, as the Proposal involves CPFL acquiring a substantial asset from a related party, CMA must obtain the approval of Investors for the purposes of ASX Listing Rule 10.1.

1.2 What is the Proposal?

On 28 April 2015, CPFL and Centuria Property Funds Limited in its capacity as the Responsible Entity of the 131-139 Grenfell Street Fund (ARSN 160 600 895) (Vendor) entered into a conditional contract for sale of the property at levels 5-9 at 131-139 Grenfell Street, Adelaide together with ten car spaces and associated foyer (the Property), under which CPFL agreed to buy, and the Vendor agreed to sell, the Property for an agreed price of \$20 million. The contract for sale is subject to various conditions, including obtaining the approval of Investors, which is being sought at the Meetings, and obtaining the approval of members of the Vendor Fund. A separate meeting is being convened on 10 June 2015 of members of the Vendor Fund at which their approval is being sought to the proposed sale of the Property to CPFL. The contract for sale is based on the standard terms of the Law Society of South Australia and has no unusual or onerous terms.

The acquisition of the Property, if approved by Investors at the Meetings, will be funded by borrowings under the Debt Facility.

1.3 Background and rationale Consistent with Board's growth strategy

The Board's strategy and objective for CMA continues to be (as was stated in the Listing PDS): to provide Investors with income returns via quarterly Distributions and the potential for capital growth through active management activities which include property repositioning, leasing, and further investments in both office and industrial properties that are consistent with CMA's investment criteria. The Board considers that the proposed acquisition of the Property, along with the acquisition of the Other Properties, is consistent with this strategy and objective.

The Property sale process

The Property was initially marketed by the Vendor's agents, Jones Lang LaSalle and CBRE, via an Expression Of Interest that closed on 28 November 2013. At that point in time there was insufficient interest to conclude a sale. Since that date, the Vendor has been actively marketing the Property to potential third party purchasers. Despite a number of potential third party purchasers showing interest in the Property, for various reasons none of them acquired the Property. CPFL has made an offer to the Vendor to acquire the Property for a purchase price of \$20 million, which is the amount at which the Property has been independently valued as at 31 March 2015. In the course of their discussions and negotiations concerning the Property, each of CPFL and the Vendor have been separately represented by property agents, and each has separately appointed legal representatives.

Funding of the Proposal

The Proposal will be funded by drawing down on CMA's existing Debt Facility, to cover the purchase price of \$20 million and other costs of acquiring the Property (such as stamp duty).

¹ Pro forma equity interests of CMA: based on CMA equity interests as at 31 December 2014, adjusted to reflect the valuation increase at 3 Carlingford Road of \$4.5 million and the CMA Entitlement Offer of \$100 million less transaction

Acquisition of the Other Properties and the CMA Entitlement Offer

In addition to the Proposal, CPFL proposes to acquire three additional new properties from third party vendors: 54 Marcus Clarke Street Canberra, ACT, 60 Marcus Clarke Street Canberra, ACT and 35 Robina Town Centre Drive, Robina QLD, for a total purchase price of \$109.3 million (Other Properties).

The acquisition of the Other Properties will be funded by a mixture of existing cash, debt drawn under CMA's Debt Facility and a fully underwritten equity raising. The equity raising, which was announced to the ASX, along with the Proposal and the proposed acquisition of the Other Properties, on 29 April 2015, is an accelerated non-renounceable entitlement offer, under which all eligible Investors have been offered the opportunity to acquire additional Stapled Securities in CMA pro rata to their existing holdings at a ratio of 2 for 3, at an issue price of \$2.10 (CMA Entitlement Offer). CPFL is expected to raise \$100 million under the CMA Entitlement Offer.

The CMA Entitlement Offer and the acquisition of the Other Properties even if the Proposal is not approved by Investors at the Meetings.

The Vendor

As noted above, the Vendor is Centuria Property Funds Limited, in its capacity as the responsible entity of Centuria 131-139 Grenfell Street Fund (ARSN 160 600 895).

1.4 Advantages of the Proposal The advantages of the Proposal for CMA include:

• 1. The Proposal is for the acquisition of a quality commercial property which will enhance the existing portfolio and create a broader platform for future income and capital growth, as follows:
• The Property is in an excellent location, within walking distance to Rundle Mall and overlooks the amenity provided by Hindmarsh Square;
• The Property is 100% occupied by the South Australian Government (Minister for Infrastructure) until November 2019 (4.7 year weighted average lease expiry 2 creating income certainty over the medium term; and
• The Property increases tenant diversification.
• 2. Solid financial metrics, with the Property being acquired on a 9.9% initial yield3 :
• The Proposal, in conjunction with the CMA Entitlement Offer and the acquisition of the Other Properties,is expected to be 3.5% accretive to CMA's distributable earnings in FY16.4
• 3. The Independent Expert has concluded in the Independent Expert's Report that, in its opinion, the Proposal is fair and reasonable for those Investors who are not associated with CPFL.

2 As at 31 March 2015.

As at 1 July 2015 excluding any acquisition costs. 4 Forward-looking statements are by their very nature subject to uncertainties and contingencies, many of which are outside the control off CPFL. Please refer to section 3 for key assumptions and key risks.

1. Details and evaluation of the Proposal

1.5 Disadvantages of the Proposal The disadvantages of the Proposal for CMA include:

• 1. Single tenant risk: There is a risk that if the South Australian Government ceases to be a tenant, CMA may not be able to find a replacement tenant on lease terms that are at least as favourable as the current terms.
• 2. Transaction costs of approximately \$130,000 will be incurred by CMA as a result of the Proposal. However, these costs would be payable by CMA irrespective of whether the Property was purchased from a related entity or a third party.

1.6 What will happen if the Proposal proceeds?

If the Proposal is approved by Investors, and all remaining conditions to implementation of the Proposal are satisfied or otherwise waived, it is expected that that the Proposal will be implemented on or around 15 June 2015.

See Section 3 of this Explanatory Memorandum for details of the impact on CMA's forecast Distribution Yield if the Proposal proceeds and the Property is acquired by CMA as well as the impact on the forecast Distribution Yield of the CMA Entitlement Offer and the acquisition of the Other Properties.

1.7 What will happen if the Proposal does not proceed?

If the Resolution is not passed at the Meetings, the Proposal will not proceed and CPFL will not acquire the Property.

The Proposal is not conditional on the CMA Entitlement Offer and the acquisition of the Other Properties. Therefore, CPFL intends to proceed with undertaking the CMA Entitlement Offer and acquiring the Other Properties regardless of whether or not the Proposal proceeds.

If the Proposal does not proceed, then CPFL intends to reduce the amount of additional debt that it seeks to borrow under the Debt Facility and CMA's pro forma gearing on completion of the acquisition of the Other Properties would reduce to approximately 19%. This would mean that the Fund would maintain the debt capacity

See Section 3 of this Explanatory Memorandum for details of the impact on CMA's forecast Distribution Yield for FY16 if the Proposal does not proceed and the Property is not acquired by CMA.5

1.8 Opinion of Independent Expert

In accordance with ASX Listing Rule 10.10.2, the Directors engaged Deloitte Corporate Finance Pty Limited (Independent Expert) to review the Proposal and provide an independent expert's report in relation to the Proposal.

The Independent Expert has concluded in the Independent Expert's Report that, in its opinion, the Proposal is fair and reasonable for those Investors who are not associated with CPFL.

A copy of the Independent Expert's Report is set out in Annexure A to this Explanatory Memorandum.

1.9 Summary of Independent Property Valuation

Savills Valuations Pty Ltd (Independent Valuer) provided an independent valuation report on the Property. A summary of the independent valuation report is set out in Annexure B to this Explanatory Memorandum.

5 Forward-looking statements are by their very nature subject to uncertainties and contingencies, many of which are outside the control of CPFL. Please refer to section 3 for key assumptions and key risks.

2. Overview of the Property

PROPERTY DETAILS: 131-139 GRENFELL STREET(1), ADELAIDE, SA

Property Information
Property type	Office
Purchase price	\$20.0m
Independent valuation	\$20.0m
Net operating income	\$2.0m
Capitalisation rate	9.1%
Initial yield	9.9%2
Site area (sqm)	1,253
NLA (sqm)	4,052
Occupancy (by NLA)	100.0%
WALE (by NLA)	4.7
Building constructed	2009
Latest refurbishment	n.a.

• Built in 2009, the property is located in the core of the Adelaide CBD
• The building is strata titled with the Fund acquiring levels 5 – 9 comprising of 4,052 sqm of high quality office space together with 10 secure car parks and a dedicated commercial lobby
• Within walking distance to Rundle Mall, Rundle Street and overlooking the amenity provided by Hindmarsh Square, the property is ideally located for both private sector and government tenants
• The property is fully leased to the South Australian Government (Minister for Infrastructure) on a 10 year lease (4.7 years remaining) with a further 5 year option
• Asset strategy: Benefit from lease to South Australian Government with 4.7 years remaining and 4% fixed rent reviews. Mediumterm options include renewing the South Australian Government lease or introducing new tenant(s).

Lease expiry profile (by NLA)

Summary of major tenants

Tenant	Review type	NLA (sqm)	Expiry	Gross Income	% of gross Income	Option
Minister for Infrastructure	4.00% fixed	4,052	Nov-19	\$2.3	100w%	1 x 5 years

(1) Levels 5 – 9.

(2) As at 1 July 2015 excluding any acquisition costs.

3. Financial Information 6

CPFL is forecasting a Distribution for the quarter ending June 2015 of 4.16 cents per Stapled Security. If the Proposal and the acquisition of the Other Properties proceed, there will be no impact to this forecast as a result of the CMA Entitlement Offer and these four property acquisitions.

CPFL is forecasting a 3.5% increase to distributable earnings in FY16.

In the event that the acquisition of the Property is not approved by Investors, FY16 forecast distributable earnings would fall by approximately 5% to 17.1 cents per Stapled Security.

Lease expiry profile (by NLA)

• The acquisitions are accretive to distributable earnings from settlement
• FY16 forecast distributable earnings equate to a yield of 8.5% on the issue price for the New Stapled Securities
• FY16 forecast distributions equate to a yield of 8.1% on the issue price for the New Stapled Securities
• New Stapled Securities will rank equally with existing Stapled Securities and will be fully entitled to the forecast June 2015 quarterly distribution of 4.16 cents per Stapled Security
• The Fund's pro forma NTA as at 31 March 2015 is \$1.93
• Pro forma gearing of approximately 25% remains at the low end of CMA's target range of 25 – 35%

Key Financial metrics	PDS (1)	Pro forma (2)
FY16 forecast distributable earnings (cents per Stapled Security)	17.3	17.9
FY16 forecast distributions (cents per Stapled Security)	17.0	17.0
NTA per Stapled Security	\$1.91	\$1.93 (3)
Market capitalisation	\$143m (4)	\$255m (5)
Key debt metrics	PDS	Pro forma
Debt facility limit	\$ 55m	\$95m
Drawn debt(6)	\$ 48m	\$82m
Headroom	\$7m	\$13m
Gearing	25%	25%
Proportion of debt hedged	100%	c.60%(7)

• (1) Restated forecast of 17.3 cents per Stapled Security as outlined on slide 4.
• (2) If Stapled Securityholders vote against the Grenfell Street acquisition, the Fund forecasts distributable earnings to be approximately 16.7 cents, distributions to be approximately 16.2 cents and gearing would reduce to approximately 19%.
• (3) Pro forma as at 31 March 2015. NTA excluding the Acquisitions and CMA Entitlement Offer as at 31 March 2015 is \$1.97.
• (4) Based on the price of Stapled Securities as at close on 28 April 2015 of \$2.17 the market capitalisation of the Fund was \$155 million.
• (5) Based on the price of Stapled Securities as at close on 28 April 2015 of \$2.17 for existing Stapled Securities and the \$2.10 issue price for New Stapled Securities.
• (6) CPFL has obtained a credit and pricing approved terms sheet from National Australia Bank Limited to increase the facility limit of the Fund's existing debt facility by approximately \$40 million.
• (7) c.60% represents the proportion of debt hedged if no new interest rate swaps are entered into. The Fund intends to enter into appropriate interest rate swaps post settlement of the Acquisitions.

6 Forward-looking statements are by their very nature subject to uncertainties and contingencies, many of which are outside the control of CPFL. Please refer to the key assumptions and key risks set out in this section 3.

Assumptions

The forecast information provided in this Section 3 and elsewhere in this Explanatory Memorandum is based on a number of assumptions. These are set out below.

Key best estimate general assumptions:

• the CMA Entitlement Offer completes and the Acquisitions settle by 30 June 2015;
• CPI of 2.75% from 30 June 2015 to 30 June 2016;
• no acquisitions or disposals of investment properties over FY16 (Forecast Period);
• no material contract disputes or litigation over the Forecast Period;
• no material change in the competitive operating environment during the Forecast Period;
• no significant change to the legislative regime and regulatory environment in the jurisdictions in which the Fund operates during the Forecast Period;
• no significant change to the Fund's capital structure over the Forecast Period;
• no material change in credit markets;
• all existing leases are enforceable and are performed in accordance with their terms;
• no material changes to applicable Australian Accounting Standards, other than mandatory professional reporting requirements and the Corporations Act during the Forecast Period;
• no material changes to Australian income tax legislation; and
• no movement in the fair value of investment properties or other financial assets which includes any mark to market movements in relation to any new interest rate swaps entered into by the Fund. CPFL does not believe these movements can be reliably forecast.

Gross property income and direct property expenses

Gross property income, direct property expenses and outgoings have been forecast on a property by property basis based on existing leases and assumptions for future occupancy rates, tenant retention and market rentals.

Gross property income is post all rent free or abatement incentives offered to tenants, other than existing incentives adjusted for upon settlement.

Where incentives are given, CPFL forecasts that incentives apply to all tenants (new or existing) and that incentives are split between abatements (15-85%) and the reimbursement of fitout costs (25-75%).

Reletting and vacancy

Letting up periods, retention rates, lease incentives and leasing commissions have been forecast on a property by property basis. Key assumptions for office tenants include:

• Renewal probability: 50 75%
• Letting up periods: 9 12 months
• Lease incentives: 20 30%
• Leasing commissions: 6.5 24.4% (5 year term)

Capital expenditure

Capital expenditure forecasts are based on reports provided by independent consultants, with additional allowances made where considered appropriate by CPFL.

Rental guarantee

The Vendor of 60 Marcus Clarke Street, Canberra has provided the Fund with a rental guarantee in respect of 1,331 square metres of space and 12 car parks. The rental guarantee is from settlement to 31 January 2016. The Fund's letting up assumption on this asset is consistent with letting up periods across the portfolio. The rental guarantee is assumed to cover part of the letting up period.

CPFL's fee

As Responsible Entity of the Fund, CPFL is entitled to a management fee of 0.55% of the Gross Asset Value of the Fund. CPFL's management fee as Responsible Entity will be calculated and paid monthly by the Fund.

Finance costs

The Fund's borrowings under its debt facilities are expected to incur an average interest rate of 4.0% for FY16.

Transaction costs

Transaction costs include stamp duty, property due diligence and other costs such as offer management costs and advisor fees.

4. Glossary

AEST	Australian Eastern Standard Time
ASIC	Australian Securities & Investments Commission
ASX	ASX Limited (ABN 98 008 624 691) and, where the context requires, the financial market that it operates (i.e., the Australian Securities Exchange)
Acquisitions	The acquisitions of the Property and the Other Properties by CPFL.
Board	The Directors of CPFL acting as a board
Centuria	Centuria Capital Limited ABN 22 095 454 336
Corporations Act	The Corporations Act 2001 (Cth)
CPFL	Centuria Property Funds Limited ABN 11 086 553 639 AFSL no. 231149 in its capacity as Responsible Entity of each of Stapled Fund No. 1 and Stapled Fund No. 2 (unless the context otherwise requires)
Debt Facility	The existing cash advance facility of \$95 million between CPFL and National Australia Bank Limited, as described in section 3
Directors	The Directors of CPFL
Distribution	The amount of income of CMA payable to Investors in accordance with the constitutions of CMA
Distribution Yield	The rate of return derived by dividing the Distribution per Stapled Security by the issue price of new Stapled Securities under the CMA Entitlement Offer
Explanatory Memorandum	This document which sets out the notice of meetings and explanatory memorandum for Centuria Metropolitan REIT
FY16	The financial year ending on 30 June 2016
Independent Expert	Deloitte Corporate Finance Pty Limited ABN 19 003 833 127 AFSL 241 457
Independent Valuer	Savills Valuations Pty Ltd ABN 73 151 048 056
Investor	A person who is recorded in the Register as the holder of one or more Stapled Securities
Listing PDS	The product disclosure statement issued by CPFL for CMA dated 11 November 2014
Meetings	Meetings of the Fund's Investors to be held at 5.00pm (AEST) on 5 June 2015 at Centuria Capital Limited, Level 39, 100 Miller Street North Sydney
New Stapled Securities	The new Stapled Securities to be issued under the CMA Entitlement Offer
Other Properties	54 Marcus Clarke Street Canberra, ACT, 60 Marcus Clarke Street Canberra, ACT and 35 Robina Town Centre Drive, Robina QLD

Property	The property at levels 5-9, 131-139 Grenfell Street, Adelaide, South Australia together with ten car spaces and associated foyer
Proposal	The proposal for CMA to acquire the Property from the Vendor for \$20 million
Proxy Forms	The form which accompanies this Explanatory Memorandum which provides for Investors to give voting instructions and appoint proxies for the Meetings
Register	The register of Investors maintained by CPFL
Registry	Computershare Investor Services Pty Limited
Responsible Entity	The company named in ASIC's record of the scheme's registration as the responsible entity of a registered scheme
Resolution	The resolution being put to Investors at the Meetings and as described in this Explanatory Memorandum
Stapled Fund No. 1	Centuria Metropolitan REIT No. 1 (ARSN 124 364 718)
Stapled Fund No. 2	Centuria Metropolitan REIT No. 2 (ARSN 124 364 656)
Stapled Security	One unit in Stapled Fund No. 1 stapled to one unit in Stapled Fund No. 2
Vendor	Centuria Property Funds Limited in its capacity as the Responsible Entity of the Vendor Fund
Vendor Fund	Centuria 131-139 Grenfell Street Fund (ARSN 160 600 895)

Centuria Metropolitan REIT

Independent expert's report and Financial Services Guide May 2015

Conclusion

In our opinion, the Proposal is fair and reasonable to Non-Associated Securityholders.

Financial Services Guide

What is a Financial Services Guide?

This Financial Services Guide (FSG) provides important information to assist you in deciding whether to use our services. This FSG includes details of how we are remunerated and deal with complaints.

Where you have engaged us, we act on your behalf when providing financial services. Where you have not engaged us, we act on behalf of our client when providing these financial services, and are required to give you an FSG because you have received a report or other financial services from us. The person who provides the advice is an Authorised Representative (AR) of Deloitte Corporate Finance Pty Limited (Deloitte Corporate Finance), which authorises the AR to distribute this FSG. Their AR number is included in the report which accompanies this FSG.

What financial services are we licensed to provide?

We are authorised to provide financial product advice and to arrange for another person to deal in financial products in relation to securities, interests in managed investment schemes, government debentures, stocks or bonds to retail and wholesale clients. We are also authorised to provide personal and general financial product advice and deal by arranging in derivatives and regulated emissions units to wholesale clients, and general financial product advice relating to derivatives to retail clients.

Our general financial product advice

Where we have issued a report, our report contains only general advice. This advice does not take into account your personal objectives, financial situation or needs. You should consider whether our advice is appropriate for you, having regard to your own personal objectives, financial situation or needs.

If our advice is provided to you in connection with the acquisition of a financial product you should read the relevant offer document carefully before making any decision about whether to acquire that product.

How are we and all employees remunerated?

We will receive a fee of approximately \$30,000 exclusive of GST in relation to the preparation of this report. This fee is not contingent upon the success or otherwise of the proposed transaction between Centuria Metropolitan REIT and Centuria 131-139 Grenfell Street Fund (the Proposal).

1 February 2013

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Independent Expert's Report

Deloitte Corporate Finance Pty Limited ACN 003 833 127 AFSL 241457

Riverside Centre Level 25 123 Eagle Street Brisbane QLD 4000 GPO Box 1463 Brisbane QLD 4001 Australia

Tel: +61 7 3308 7000 Fax: +61 7 3308 7001 www.deloitte.com.au

The Directors Centuria Property Funds Limited as Responsible Entity for Centuria Metropolitan REIT Suite 39.01, Level 39 100 Miller Street North Sydney NSW 2060

4 May 2015

Dear Directors

Independent expert's report

Introduction

Centuria Metropolitan REIT (CMA) is a stapled entity listed on the Australian Securities Exchange (ASX) comprising two registered managed investment schemes, Centuria Metropolitan REIT No. 1 (ARSN 124 364 718) and Centuria Metropolitan REIT No. 2 (ARSN 124 364 656). The Responsible Entity (RE) of CMA is Centuria Property Funds Limited (CPFL), a wholly owned subsidiary of Centuria Capital Limited (Centuria).

Centuria 131-139 Grenfell Street Fund (ARSN 160 600 895) (the Vendor), is an unlisted registered managed investment scheme of which CPFL is also the RE. The Vendor currently holds a single asset, being levels 5 to 9 at 131 - 139 Grenfell Street, Adelaide together with ten car spaces and associated foyer (the Property).

On 28 April 2015, CPFL in its capacity as the RE of CMA and in its capacity as the RE of the Vendor entered into a conditional contract for sale of the Property by the Vendor to CMA (the Proposal). The purchase price for the Property has been agreed at \$20 million and the proposed sale of the Property is conditional on the approval of the Proposal by securityholders of both CMA (the Securityholders) and the Vendor.

The Proposal is expected to be completed by the end of June 2015.

Purpose of the report

Chapter 10 of the Listing Rules of the ASX (the Listing Rules) requires, when a listed entity such as CMA proposes to acquire a substantial asset from, or dispose of a substantial asset to, a related party of the listed entity the preparation of a report by an independent expert stating whether the proposed transaction is fair and reasonable to the members of the entity not associated with the proposed transaction. In addition, the directors may request the preparation of a report by an independent expert, when a transaction with a related party requires member approval under Chapter 2E of the Corporations Act 2001 (Cth) (Corporations Act).

We understand that the Property qualifies as a substantial asset1 and that, as CPFL is the responsible entity of both CMA and the Vendor, the Vendor is a related party of CMA. Accordingly, the directors of CPFL in its capacity as the RE of CMA (the Directors) have requested that Deloitte Corporate Finance Pty Limited (Deloitte Corporate Finance) provide an independent expert's report advising whether, in our opinion, the Proposal is fair and reasonable to the non-associated Securityholders of CMA2 in order to assist them in their decision to vote for or against the Proposal (the Purpose).

Member of Deloitte Touche Tohmatsu Limited

¹ Refer to Section 1.1 of the Explanatory Memorandum for further details on the classification of a 'substantial asset' according to the Listing Rules

² Members of CMA who are not associated with the Vendor (Non-Associated Securityholders)

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/au/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms.

This report is to be included in the Explanatory Memorandum accompanying the notice of meetings prepared in respect of the Proposal (together the Explanatory Memorandum) which will be sent to Securityholders, and has been prepared for the exclusive purpose of assisting Non-Associated Securityholders in their consideration of the Proposal.

Neither Deloitte Corporate Finance, Deloitte Touche Tohmatsu, nor any member or employee thereof, undertakes responsibility to any person, other than the Non-Associated Securityholders and CPFL as the RE of CMA, in respect of this report, including any errors or omissions however caused.

Basis of evaluation

Guidance

We have prepared this report having regard to Chapter 10 of the Listing Rules and Australian Securities and Investments Commission (ASIC) Regulatory Guide 111 in relation to the content of expert's reports, ASIC Regulatory Guide 112 in respect of the independence of experts and ASIC Regulatory Guide 76 in relation to related party transactions.

ASIC Regulatory Guide 111

This regulatory guide provides guidance in relation to the content of independent expert's reports prepared for a range of transactions.

Generally, ASIC expects an expert who is asked to analyse a related party transaction to express an opinion on whether the transaction is 'fair and reasonable' from the perspective of non-associated members. This analysis is specifically required where the report is also intended to accompany meeting materials for member approval of an asset acquisition or disposal under Listing Rule 10.1.

ASIC Regulatory Guide 111 states that where an expert assesses whether a related party transaction is 'fair and reasonable', there should be a separate assessment of whether the transaction is 'fair' and 'reasonable', as in a control transaction.

Under ASIC Regulatory Guide 111 an offer is:

• fair, when the value of the financial benefit being offered by the entity to the related party is equal to or less than the value of the assets being acquired
• reasonable, if it is fair, or, despite not being fair, after considering other significant factors, members should vote for the proposal.

To assess whether the Proposal is fair and reasonable to Non-Associated Securityholders, we have adopted the tests of whether the Proposal is either fair and reasonable, not fair but reasonable, or neither fair nor reasonable, as set out in ASIC Regulatory Guide 111.

Fairness

The Property has been valued at fair market value, which we have defined as the amount at which the asset would be expected to change hands between a knowledgeable and willing but not anxious buyer and a knowledgeable and willing but not anxious seller, neither of whom is under any compulsion to buy or sell. Special purchasers may be willing to pay higher prices to reduce or eliminate competition, to ensure a source of material supply or sales, or to achieve cost savings or other synergies arising on business combinations, which could only be enjoyed by the special purchaser. The valuation of the Property has not been premised on the existence of a special purchaser.

We have considered the fairness of the Proposal by comparing the value of the Property with the value of the consideration to be paid by CMA to the Vendor.

Reasonablness

ASIC Regulatory Guide 111 considers an offer to be reasonable if either:

• the offer is fair
• despite not being fair, but considering other significant factors, members should vote for the proposal.

To assess the reasonableness of the Proposal we considered the following significant factors in addition to determining whether the Proposal is fair:

the impact of the Proposal on CMA's financial position and performance

Deloitte: Centuria Metropolitan REIT – Independent expert's report and Financial Services Guide

• the funding required to undertake the Proposal, and source thereof
• the compatibility of the Proposal with the investment mandate and current portfolio of CMA
• alternatives to the Proposal which offer Securityholders similar returns.

Summary and conclusion

In our opinion the Proposal is fair and reasonable to Non-Associated Securityholders. In arriving at this opinion, we have had regard to the following factors.

The Proposal is fair

According to ASIC Regulatory Guide 111, in order to assess whether the Proposal is fair, the independent expert is required to compare the fair market value of the Property with the fair market value of the consideration offered by CMA pursuant to the Proposal. The Proposal is fair if the value of the consideration being offered by CMA to the Vendor is equal to or less than the value of the Property.

Set out in the table below is a comparison of our assessment of the fair market value of the Property with the consideration offered by CMA.

Table 1

Note

	\$'millions
Estimated fair market value of the Property (Section 4.0)	20.0
Estimated fair market value of consideration offered by CMA (Section 1.0)	20.0

Source: Deloitte Corporate Finance analysis

1: All amounts stated in this report are in AUD or \$ unless otherwise stated and may be subject to rounding

The consideration offered by CMA is equal to the estimate of the fair market value of the Property. Accordingly it is our opinion that the Proposal is fair.

The Proposal is reasonable

In accordance with ASIC Regulatory Guide 111 an offer is reasonable if it is fair.

On this basis, in our opinion the Proposal is reasonable. We also considered other significant factors which were noted above, in forming our opinion on the reasonableness of the Proposal.

Opinion

In our opinion, the Proposal is fair and reasonable to Non-Associated Securityholders. An individual Securityholder's decision in relation to the Proposal may be influenced by his or her particular circumstances. If in doubt the Securityholders should consult an independent adviser, who should have regard to their individual circumstances.

This opinion should be read in conjunction with our detailed report which sets out our scope and findings.

Yours faithfully

Rachel Foley-Lewis Robin Polson

Authorised RepresentativeAuthorised Representative

Glossary

Reference	Definition
AR	Authorised Representative
ASIC	Australian Securities and Investments Commission
ASX	Australian Securities Exchange
AUD	Australian dollars
CBD	Central Business District
Centuria	Centuria Capital Limited
CMA	Centuria Metropolitan REIT, the stapled entity listed on the ASX comprising Centuria Metropolitan REIT No. 1 (ARSN 124 364 718) and Centuria Metropolitan REIT No. 2 ( ARSN 124 364 656)
Corporations Act	Corporations Act 2001
CPFL	Centuria Property Funds Limited
Deloitte Corporate Finance	Deloitte Corporate Finance Pty Limited
Directors	Directors of CFPL in its capacity as the RE for CMA
Explanatory Memorandum	Explanatory Memorandum and notice of meetings prepared in respect of the Proposal
FOS	Financial Ombudsman Services
FSG	Financial Services Guide
GDP	Gross Domestic Product
Listing Rules	Listing Rules of the Australian Securities Exchange
NABERS	National Australian Built Environment Rating System
NLA	Net Lettable Area
Non-Associated Securityholders	Members of CMA not associated with the Vendor
Property, the	Levels 5 – 9 of 131-139 Grenfell Street, Adelaide together with ten car spaces and associated foyer
Proposal, the	Proposed acquisition of the Property by Centuria Metropolitan REIT from the Vendor
Purpose, the	To assist the non-associated Securityholders of CMA in their decision to vote for or against the Proposal
RE	Responsible Entity
Securityholders	Existing holders of CMA stapled securities
Sqm	Square metres
Vendor	Centuria 131-139 Grenfell Street Fund (ARSN 160 600 895)
WALE	Weighted average lease expiry

Contents

1	Overview of the Proposal	6
2	Profile of the Property	7
3	Commerical property industry	10
4	Valuation of the Property	16
	Appendix A: Context to the Report	18

1 Overview of the Proposal

1.1 Summary

On 28 April 2015, CPFL in its capacity as the RE of CMA and in its capacity as the RE of the Vendor entered into a conditional contract for sale of the Property. The purchase price of the Property has been agreed at \$20 million, and will be fully debt funded by CMA, if the Proposal is approved.

1.2 Key conditions of the Proposal

The Proposal is still subject to various conditions, the most significant being approval by Securityholders and the securityholders of the Vendor, which will be sought at separate securityholder meetings.

For further details on the Proposal, refer to Section 1.2 of the Explanatory Memorandum.

1.3 Intentions of CMA if the Proposal proceeds

The strategy and objective of CMA is to provide investors with income returns via quarterly distributions and the potential for capital growth through active management. Once the Proposal is implemented, the Directors of CMA will continue to undertake activities which align with this strategy and objective of CMA.

Independent Expert's Report

Page 7

2 Profile of the Property

This section describes the Centuria entities and assets relevant to the Proposal.

2.1 Asset ownership structure

The figure below sets out a simplified ownership structure of the Centuria group as it relates to the Property and the Proposal.

Figure 1: Simplified ownership structure of the Centuria group

Source: Deloitte Corporate Finance analysis

A brief description of each of the above entities and the Property is set out below.

CPFL

CPFL is the RE of the Vendor and the RE of CMA. CPFL is also responsible for funds management and raising capital for the Centuria group's investment products. CPFL is 100% owned by Centuria.

CMA

CMA is a stapled entity comprising Centuria Metropolitan REIT No. 1 (ARSN 124 364 718) and Centuria Metropolitan REIT No. 2 (ARSN 124 364 656), being two registered managed investment schemes. CMA listed on the ASX on 10 December 2014. The operations of CMA primarily relate to property investment and management. As at 31 March 2015, CMA held an investment property portfolio valued at \$187.4 million, which comprised of five office properties and three industrial properties with a total net lettable area of 69,844 square metres (sqm).

The investment objective of CMA is to gain exposure to quality, well diversified office and industrial properties located in metropolitan markets across Australia.

Key factors pertaining to the property portfolio of CMA are set out below.

Table 2: CMA portfolio indicators as at 31 March 2015

Sector	Value of portfolio by sector (\$'millions)	Weighted average capitalisation rate (%)	WALE (years)1,2	Occupancy (%)	NLA (Sqm)2
Industrial
14 Mars Road, Lane Cove, NSW	18.5	9.3%	6.8	100.0%	10,601
149 Kerry Road, Archerfield, QLD	22.2	8.0%	9.8	100.0%	13,774
13 Ferndell Street, Granville, NSW	16.4	8.3%	5.0	100.0%	15,302
Total	57.1				39,677
Weighted average3		8.4%	7.2	100.0%
Office
9 Help Street, Chatswood, NSW	43	8.5%	1.9	94.5%	9,401
555 Coronation Drive, Brisbane,
QLD	33.8	8.8%	3.5	100.0%	5,591
1 Richmond Road, Keswick, SA	25.2	10.0%	3.8	100.0%	8,135
3 Carlingford Road, Epping, NSW	21.0	9.5%	2.8	98.3%	4,702
44 Hampden Road, Artarmon, NSW	7.3	9.0%	2.4	100.0%	2,339
Total	130.3				30,168
Weighted average3		9.2%	2.9	98.0%
Total	187.4				69,844
Weighted average3		8.8%	5.3	99.1%

Source: Centuria Investor Presentation, 29 April 2015

Notes:

1. Weighted by net lettable area

2. WALE = Weighted average lease expiry, NLA = Net Lettable Area

CMA is predominantly exposed to the commercial office property market, which accounted for 68.7% (\$125.8 million) of its portfolio value as at 23 September 2014. These properties are located on the fringe of Central Business District (CBD) areas or suburban business district markets such as Chatswood. The property portfolio of CMA is geographically diversified, with property assets in New South Wales accounting for 32.1% (by value), followed by Queensland (30.6%) and Victoria (23.5%), as set out in the figure below.

Figure 2: Geographic diversification by value of CMA properties

Source: CMA Investor Presentation, 29 April 2015 Note:

1. Property values as at 31 March 2015

Page 9

It is CMA's objective to hold a conservative level of debt in its capital structure with target gearing of 25% to 35%. The gearing of CMA was 26.1% as at 31 December 2014. Refer to Section 1.7 of the Explanatory Memorandum for the pro-forma gearing after the Proposal.

2.2 Overview of the Property

The Property, which is proposed to be acquired pursuant to the Proposal is located at 131-139 Grenfell Street, on the eastern fringe of the Adelaide CBD and was constructed in 2009. It consists of office accommodation on levels 5 – 9, ten car spaces and associated foyer held across five certificates of title.

The Property is contained within a larger building which also has ground floor retail, ten levels of residential apartments and further car parking, which are not the subject of the Proposal.

The Property is detailed below.

Table 3: Property details

Property Description
Location	131-139 Grenfell Street, Adelaide South Australia
Sector	Commercial
Grade	Grade-A office
Tenant	South Australian Government
Market value (\$)	\$20.0 million as at 31 March 2015
Book value (\$)	\$19.5 million
WALE (years)	4.7 years
Operating income (\$)	\$2.175 million
Initial yield (%)	9.9% (for levels 5 to 9)
Net lettable area	1,253 sqm office, ten car spaces and associated foyer
Age of premises	6 years (2009). No refurbishments have been performed to date

Source: Savills and Deloitte Corporate Finance analysis

The Property is currently fully leased to the South Australian Government (Minister for Infrastructure) on a 10 year lease (4.7 years remaining) with a further 5 year option extension. The lease has fixed rental increases of 4.0% each year.

3 Commerical property industry

Introduction

In this section, we present an overview of the following:

• the Australian commercial property market
• trends and expectations in the Adelaide commercial property markets (the location of the Property).

3.1 Australian commercial property market

Overview

The Australian commercial property market primarily refers to office space leasing and office building leasing. According to the Property Council of Australia, commercial property assets can be classified into the categories outlined below:

• Premium a landmark office building located in a major CBD office market with expansive views and prestigious finishes. Offering a 5 star or greater National Australian Built Environment Rating System (NABERS) energy rating, there will be a full management and operational onsite team offering concierge services. A Premium building has an NLA greater than 30,000 sqm in Sydney and Melbourne CBDs with a floor plate greater than 1,200 sqm, or an NLA greater than 20,000 sqm in other CBDs with floor plates greater than 1,000 sqm.
• Grade A a high quality office building with a 5 star or greater NABERS energy rating and a full management and operational onsite team with concierge services for buildings with an NLA above 30,000 sqm. With high quality finishes, a Grade A building has an NLA area greater than 10,000 sqm in Sydney and Melbourne CBDs with a floor plate greater than 900 sqm, or an NLA greater than 5,000 sqm in other Australian CBDs with floor plates greater than 800 sqm
• Grade B quality space with a good standard of finish and maintenance, a 4 star NABERS energy rating or greater and remote building management services with daily site attendance. Grade B buildings have an NLA greater than 5,000 sqm in Sydney, Melbourne, Brisbane and Perth CBDs, or greater than 2,500 sqm in other CBDs
• Grade C adequate quality office space
• Grade D poor quality space with minimal technical services.

The major business sectors occupying office space, and the segmentation of office space, in Australia are outlined in the figures below. The largest business sector occupying office space in Australia is Government (23.1%), followed by finance and insurance (22.1%) and real estate agencies, transport and other (20.7%).

Independent Expert's Report

Figure 4: Segmentation of office space in Australia (by \$

Page 11

Figure 3: Major business sectors occupying office space in Australia (by \$ value)

value)

1. The total estimated value of occupied office property in Australia, as at April 2015, is \$23.9 billion.

CBD office space represents the majority of the commercial property space by value (68.6% or \$16.4 billion). This is in part because fringe markets lack the geographic advantages that are available to CBD office space. CBD property can be further broken down into primary (Premium and Grade-A) and secondary property (Grade-B and below). As economic conditions improve, the demand for secondary space declines as demand shifts toward higher quality office space, referred to as a 'flight to quality.'

Commercial property market indicators

Over the past five years, the Australian commercial property industry has recovered from the effects of the global financial crisis where tenant demand slowed, vacancy rates rose and rental values declined.

During this time, there have been limited prime grade office options (i.e. low supply) reducing the need for rental incentives which led to a moderate rise in gross effective rents. There has also been continued strong investor demand for assets of this quality with strong lease covenants.

Yields are another important market indicator for participants in the commercial property market. While there are various methods for calculating yields, in its simplest form a yield is calculated based on the net passing income divided by the asset value.

Market participants also refer to the vacancy rate of a property.

Key drivers of the commercial property market

The primary demand determinant for commercial property in Australia is growth in white-collar employment. As noted above commercial property in Australia is largely occupied by the Government and financial services sectors, which predominantly employ white collar workers (as set out in Figure 3); therefore as these businesses expand their labour forces, office space requirements typically increase. This strengthens the demand for office space, and therefore often increases rental returns and market values (assuming no change in supply.).

White collar employment is directly influenced by corporate profits and underlying economic growth. Heightened economic activity generally improves corporate profits and workforce expansion plans. As shown in the figure below, real Gross Domestic Product (GDP) in Australia has grown over the past five years. Corporate profitability in Australia is however volatile in comparison to GDP, especially given Australia's reliance on natural resources.

The figure below illustrates historical real GDP and Australian corporate profits.

Figure 5: Real GDP and Australian corporate profits

Source: Reserve Bank of Australia, Australian Bureau of Statistics, Deloitte Corporate Finance analysis

Whilst it is difficult to forecast corporate profits, GDP is expected to grow at 2.4% in 2015 and at a long term rate of 2.8%3 . Increased demand for Australian exports is expected to be a contributing factor to Australia's GDP growth, driven largely by the resources sector. As a result, this increase may not necessarily result in a corresponding increase in white collar employment. Further to this, non-dwelling construction investment is projected to contract in 2015 to 2018, indicating that overall growth in GDP will not flow directly to increased leasing demand in Australian commercial property.

Key supply side factors influencing the Australian commercial property market are outlined below:

• vacancy levels tenant demand has slowly grown since the global financial crisis during 2008 and 2011, stabilising vacancy rates and rental values
• availability of funding a shortage of available capital, as banks imposed more stringent lending policies since the global financial crisis, has resulted in lower growth as investment in additional properties is limited
• interest rates low interest rates encourage greater investment in property, hence increasing supply of property assets, as investors shift their funds from cash into property construction and development
• rental rates increased rental rates generally lead to an increase in the supply of commercial property as the return to investors becomes more attractive
• costs of construction fluctuating costs of construction, including materials and labour, will influence the level of commercial property construction, and therefore overall supply.

³ Deloitte Access Economics, Business Outlook, December 2014

Page 13

3.2 Adelaide commercial property market

Market trends

As at January 2015, there was stock of 1.37 million sqm of commercial property in Adelaide, the majority of which related to Grade-B property and below (secondary property). Current Adelaide CBD commercial market indicators are outlined in the table below.

Table 4: Adelaide CBD Office market indicators, Quarter 1 2015

	Rental - Net Face (\$/sq m)		Outgoings - Total (\$/sq m)		Typical Lease Term (years)		Yield - Market (% Net Face Rental)
	Low	High	Low	High	Low	High	Low	High
Premium	350	440	100	120	7	10	7.50	8.00
Grade-A	320	375	80	110	7	10	8.00	8.50
Grade-B	210	300	70	90	4	7	8.75	9.75

Source: Savills Research

The current vacancy rate for commercial property in Adelaide is approximately 13.5%, which is above the 25 year average of 12.1% and a marginal decrease of 0.3% since July 20144 . The Adelaide CBD experienced a significant increase in new supply of office space during January 2009 to July 2010 and July 2012 to July 2013 in response to the record low vacancy rates of 3.1% in January 2009⁵ .

The level of construction in the Adelaide CBD office market remains soft with only one new building to complete this year. There were a number of refurbishments in the Adelaide CBD in 2014, resulting in an increase in lettable area, improved amenities and buoyed leasing activities (as a result of tenant relocation/renegotiation). These refurbishments have had limited impact on the overall Adelaide vacancy rates as a consequence of tenants leasing previously occupied or improved premises. There has also been a 'flight to quality' with strong positive absorption of prime grade space in 2014, whilst the secondary market experienced negative absorption.

The South Australian unemployment rate has fallen to 6.4% in the first quarter of 2015 but remains above the national average of 6.1%. The two industries contributing to the elevated unemployment figure are manufacturing and public administration, the latter is a significant occupier of office space. With job vacancies continuing to decline, growth in retail trade and small business confidence below their national counterparts, and slow housing construction, macroeconomic factors will continue to weigh on investors' perception of the Adelaide commercial property market.

Higher than average vacancy rates, combined with sluggish growth in white collar employment has resulted in well below average net absorption for Adelaide (currently a negative net absorption). The Adelaide office market is forecast to improve during 2015, with positive net absorption through new pre-committed supply. Some of this can be attributed to tenants leasing a reduced work space as they encourage employees to work from unconventional workspaces such as informal meeting spaces, "hot desk" or work from home.

Investment activity in existing commercial buildings appears strong in Adelaide with just under \$700 million of assets changing hands6 during in 2014 compared to \$313.4 million in 2013.

⁴ Knight Frank, Adelaide Office Market Overview, April 2015

⁵ Knight Frank, Australian CBD Office Market Overview, January 2009

⁶ Colliers International Market Research, CBD Office,. First Half 2015

The figure below depicts historical investment activity in Adelaide.

Figure 6: Investment activity in Adelaide commercial property

Source: Colliers Edge, Deloitte Corporate Finance analysis

Adelaide is quite a liquid market despite the relatively small size of the prime property market in the State. Over the 10 years to December 2013, average yearly transaction volumes have represented 8.5% of the total capital value in the Adelaide market. This was the second highest in Australia's six major CBD areas, behind Brisbane7 .

The prime grade Adelaide CBD office market accounted for just 3% of the market value of Australia's prime grade CBD stock, as at November 20148 . However, Adelaide accounts for a significantly larger percentage (19%) of Australia's prime grade CBD stock within the \$50 million to \$100 million price bracket. This is the bracket that is most actively traded in CBD office markets, primarily by institutional investors. As a consequence, whilst the construction and leasing activity in Adelaide has been soft, total investment activity has been stronger.

Institutional investors accounted for 79% of commercial property purchases in Adelaide during 2014, down from 85% in 2013. Private investors and fund managers account for the residual investment activity. Since prime grade Adelaide CBD property accounts for a smaller percentage of Australian prime property market, fund managers are generally underweight in Adelaide office real estate.

According to Jones Lang Lasalle, Adelaide has outperformed all other capital city prime CBD office markets, on a risk adjusted basis, over the 15 years to June 2014. These high yields reflect investors pricing greater risk into the Adelaide market compared with the larger eastern seaboard markets and the expectation of slower capital growth.

The Adelaide CBD office market still offers higher yield assets when compared to other CBD office markets. Current prime grade yields at 8.1% are approximately 170 basis points higher than the Sydney CBD (6.4%) and around 130 basis points higher than the Melbourne CBD (6.8%)⁹ .

Market expectations

For the Adelaide CBD, total vacancy rates are expected to peak at 15.5% in 2015 compared to current total market rates of 13.5%, with no significant improvement expected to occur until 201710. With vacancy and incentives on the rise in Adelaide, CBD tenants will be able to take advantage of favourable occupier conditions and transition to higher quality space. This will flow through to rental rates and negatively impact lower quality properties. This flight to quality is particularly evident in the C and D grade office market with vacancy rates estimated to rise to 17.7% and prime vacancies of 12.0%.

⁷ Jones Lang Lasalle: Adelaide CBD office market –The investment proposition, November 2014

⁸ Jones Lang Lasalle: Adelaide CBD office market –The investment proposition, November 2014

⁹ Savills Adelaide, CBD Office,. April 2015

¹⁰ CBRE, Australian Office Market view, Q1 2015

Independent Expert's Report

It is anticipated that current property yields in the Adelaide market will remain steady, despite rising vacancy rates, as investors continue to seek higher yielding investments, such as property, driven by the low interest rate environment.

4 Valuation of the Property

4.1 Overview

CPFL in its capacity as the RE of CMA engaged independent property valuers, Savills, to estimate the current market value of the Property, as at 31 March 2015 for the purpose of the Proposal, financial reporting and first mortgage security purposes. An extract of the Savills report is included in Annexure B of the Explanatory Memorandum.

Whilst we did not directly control the scope of the valuation undertaken by Savills, we consider the terms of Savills's engagement to be consistent with the requirements of ASIC Regulatory Guide 112 in relation to the independence of experts and the use of specialists. We have obtained the written consent of Savills to refer to the independent property valuation report in the independent expert's report. On this basis, we have had regard to the independent property valuation in our assessment of the fair market value of the Property.

For the purpose of our opinion, fair market value is defined as the amount at which the Property would change hands between a knowledgeable willing buyer and a knowledgeable willing seller, neither being under a compulsion to buy or sell. We have not considered special value in this assessment. We consider the market value approach adopted by Savills is consistent with our definition of fair market value.

Having regard to the policy intent of ASIC Regulatory Guide 111 in relation to the content of independent expert's reports, when assessing the fair market value of the Property we have not had regard to any entity specific or structural issues such as excess gearing which may temporarily impair an entity's ability to realise full fair market value for its assets. Instead, we have assumed an orderly market for the Property.

4.2 Independent valuation of the Property

The market value of the Property, as determined Savills as at 31 March 2015, is set out in Table 5 below.

Table 5: Market value derived by Savills as at 31 March 2015

	Valuation \$'millions
Valuation of the Property (using the capitalisation approach)	20.3
Valuation of the Property (using the discounted cash flow approach)	19.8
Adopted valuation of the Property	20.0

Source: Savills Property Valuation dated 31 March 2015

Valuation of the Property

Savills considered two valuation approaches, the capitalisation approach and the discounted cash flow approach, to arrive at their opinion of the market value for the Property.

The key assumptions utilised in the Savills valuation are summarised below:

Capitalisation approach

• the estimated total income (both on a contract rental basis and a face market rental basis) has been adjusted to reflect anticipated leasing costs and rental incentives. Savills has assumed a fully leased gross market income amount of \$2.2 million per annum, outgoings of approximately \$400,000, incentives of 20.0% and leasing costs at 12.0% of the first year's gross rent on all new lease agreements and 7.5% on renewal of existing leases
• the fully leased net income was capitalised into perpetuity at a yield of 9.0% (using the midpoint of the selected range of 8.75% to 9.25%), which Savills considers to reflect the nature, location and tenancy profile of the Property

Page 17

Discounted cash flow approach

• estimated future cash flows attributable to the Property over a ten year period, with an appropriate terminal value, reflecting key growth rate and vacant space assumptions in addition to the gross market income and outgoings assumptions noted above
• Savills has made a provision for a letting up period of nine months throughout the cash flow period (which is equivalent to three months loss of rent once an assumed tenant retention rate of 66.7% is taken into account). Savills has also applied appropriate lease incentives, agent fees and leasing costs in its assessment of the further cash flows of the Property
• Savills applied capital adjustments to the value for annual sinking fund contributions and capital upgrade allowances on expiry. The total capital adjustments included by Savills in its valuation of the Property over the cash flow period was approximately \$1.0 million
• Savills has discounted the cash flows attributable to the Property at a discount rate of 10.25% with a terminal yield of 9.25%.

Analysis of the independent valuation of the Property

We have undertaken an analysis of the independent valuation of the Property. Based on our analysis, we have concluded that:

• the external property valuer, Savills, is independent with respect to CMA, the Vendor and CPFL, as RE for both CMA and the Vendor
• there were no restrictions on the scope provided to Savills
• the Savills valuation report was prepared by professionals who have sufficient qualifications and competence to provide an informed opinion of the market value of assets of this nature
• the valuation methods used in the property valuation are not inappropriate and appear to have been correctly applied to estimate the market value of the Property
• the assumptions and valuation metrics used do not appear unreasonable or inappropriate for the purpose of estimating the market value of the Property
• nothing has come to our attention that may cause us to make an adjustment for valuation movements since 31 March 2015.

Appendix A: Context to the Report

Individual circumstances

We have evaluated the Proposal for Non-Associated Securityholders as a whole and have not considered the effect of the Proposal on the particular circumstances of individual investors. Due to their particular circumstances, individual investors may place a different emphasis on various aspects of the Proposal from the one adopted in this report. Accordingly, individuals may reach different conclusions to ours on whether the Proposal is fair and reasonable. If in doubt investors should consult an independent adviser, who should have regard to their individual circumstances.

Limitations, qualifications, declarations and consents

The report has been prepared at the request of the Directors and is to be included in the Explanatory Memorandum to be given to Securityholders to assist in their evaluation of the Proposal. Accordingly, it has been prepared only for the benefit of the Directors and those persons entitled to receive the Explanatory Memorandum in respect of their assessment of the Proposal outlined in the report and should not be used for any other purpose. Neither Deloitte Corporate Finance, nor Deloitte Touche Tohmatsu, nor any member or employee thereof, undertakes responsibility to any person, other than the Non-Associated Securityholders and CPFL in its capacity as RE for CMA, in respect of this report, including for any errors or omissions however caused. Further, recipients of this report should be aware that it has been prepared without taking account of their individual objectives, financial situation or needs. Accordingly, each recipient should consider these factors before acting on the Proposal. This engagement has been conducted in accordance with professional standard APES 225 Valuation Services issued by the Accounting Professional and Ethical Standards Board Limited.

The report represents solely the expression by Deloitte Corporate Finance of its opinion as to whether the Proposal is fair and reasonable. Deloitte Corporate Finance consents to this report being included in the Explanatory Memorandum.

Deloitte Corporate Finance relied on the property valuation report prepared by Savills. Deloitte Corporate Finance has received consent from Savills for reliance in the preparation of this report.

Statements and opinions contained in this report are given in good faith but, in the preparation of this report, Deloitte Corporate Finance has relied upon the completeness of the information provided by CPFL and its officers, employees, agents or advisors which Deloitte Corporate Finance believes, on reasonable grounds, to be reliable, complete and not misleading. Deloitte Corporate Finance does not imply, nor should it be construed, that it has carried out any form of audit or verification on the information and records supplied to us. Drafts of our report were issued to CPFL management for confirmation of factual accuracy.

In recognition that Deloitte Corporate Finance may rely on information provided by CPFL in its capacity as RE for CMA and its officers, employees, agents or advisors, CPFL has agreed that it will not make any claim against Deloitte Corporate Finance to recover any loss or damage which CPFL or CMA may suffer as a result of that reliance and that it will indemnify Deloitte Corporate Finance against any liability that arises out of either Deloitte Corporate Finance's reliance on the information provided by CPFL or CMA and their officers, employees, agents or advisors or the failure by CFPL or CMA and their officers, employees, agents or advisors to provide Deloitte Corporate Finance with any material information relating to the Proposal.

Deloitte Corporate Finance holds the appropriate Australian Financial Services licence to issue this report and is owned by the Australian Partnership Deloitte Touche Tohmatsu. The employees of Deloitte Corporate Finance principally involved in the preparation of this report were Rachel Foley-Lewis, Authorised Representative, B.Com., CA, F.Fin and Robin Polson, Authorised Representative, B.Comm, G. Dip. App Fin, FINSIA. Each has many years' experience in the provision of corporate financial advice, including specific advice on valuations, mergers and acquisitions, as well as the preparation of expert reports.

Consent to being named in disclosure document

Deloitte Corporate Finance Pty Limited (ACN 003 833 127) of Level 25, 123 Eagle Street, Brisbane QLD 4000 acknowledges that:

CPFL in its capacity as the RE of CMA proposes to issue a disclosure document in respect of the Proposal referred to as the Explanatory Memorandum

• the Explanatory Memorandum will be issued in hard copy and be available in electronic format
• it has previously received a copy of the draft Explanatory Memorandum for review
• it is named in the Explanatory Memorandum as the 'independent expert' and the Explanatory Memorandum includes its independent expert's report in Annexure A of the Explanatory Memorandum.

On the basis that the Explanatory Memorandum is consistent in all material respects with the draft Explanatory Memorandum received, Deloitte Corporate Finance Pty Limited consents to it being named in the Explanatory Memorandum in the form and context in which it is so named, to the inclusion of its independent expert's report in Annexure A of the Explanatory Memorandum and to all references to its independent expert's report in the form and context in which they are included, whether the Explanatory Memorandum is issued in hard copy or electronic format or both.

Deloitte Corporate Finance Pty Limited has not authorised or caused the issue of the Explanatory Memorandum and takes no responsibility for any part of the Explanatory Memorandum, other than any references to its name and the independent expert's report as included in Annexure A.

Sources of information

In preparing this report we have had access to the following principal sources of information:

• audited financial statements for CMA for the year ended 31 December 2014 and the Product Disclosure Statement dated 14 December 2014
• independent valuation of 131-139 Grenfell Street, prepared by Savills
• other company information including industry reports, prior valuations and other financial models
• IBISWorld Pty Limited company and industry reports
• other publicly available information on the commercial property industry.

In addition, we have had discussions and correspondence with certain directors and executives, including Mr Nicholas Collishaw, CEO – Listed Property Funds in relation to the above information and to current operations and prospects.

28 April 2015

Savills Valuations Pty Ltd ABN 73 151 048 056 acjohnston@savills.com.au 61 8 8237 5041

Level 2, 50 Hindmarsh Square Adelaide SA 5000 T: +61 (0) 8 8237 5000 F: 61 8 8237 5099 savills.com.au

The Directors, Centuria Property Funds Limited Centuria Property Funds Limited Suite 39.01, Level 39 100 Miller Street NORTH SYDNEY NSW 2060

Ref: 505987AJ

Dear Sir or Madam

Re: Summary of Valuation Report for:- Levels 5-9 and associated stratum, 131-139 Grenfell Street, Adelaide, SA

We refer to your instructions requesting a Market Valuation of the abovementioned property in a letter dated 31 March 2015, on behalf of Centuria Property Funds Limited as the Responsible Entity of the Centuria Metropolitan REIT, to provide the current market value of the subject premises as at 31 March 2015 for financial reporting purposes and first mortgage security purposes. We have prepared a comprehensive full valuation report for Centuria Property Funds Limited as The Responsible Entity of the Centuria Metropolitan REIT (Ref: 505987AJ). The following is a summary of that report which has been prepared for inclusion in a Notice of Meetings and Explanatory Memorandum ("Explanatory Memorandum").

Our assessment of value is undertaken in accordance with the Australian Property Institute's adopted definition of Market Value as defined by the International Valuation Standards Council as follows:

"Market value is the estimated amount for which an asset or liability should exchange on the date of valuation between a willing buyer and a willing seller in an arm's length transaction, after proper marketing, wherein the parties had each acted knowledgeably, prudently and without compulsion."

Property Overview

The property is located on the south western corner of Grenfell Street and Hindmarsh Square within the traditional core of the Adelaide CBD.

The subject comprises Levels 5-9 of the 19 level Conservatory on Hindmarsh mixed use development which was constructed circa 2009. The subject holding consists of five Community titles providing 4,051.50m2 of modern A grade commercial office accommodation together with 10 car spaces. The balance of the building consists of retail accommodation at ground level, car parking to Levels 1-4 and residential apartments within Levels 10-19. The subject accommodation has a 4.5 star NABERS Energy Rating.

Independent Valuer's Report

Tenancy Overview

The subject is leased to the Minister for Infrastructure (Government of South Australia) on a 10 year lease commencing 1 December 2009. We summarise the overall lease structure as follows:

Minister for Infrastructure (Department for Manufacturing, Innovation, Trade, Resources and Energy)
Demised Premises:	inclusive.	The whole of the land comprised in Certificates of Title Volume 6038 Folios 697-701
Commencement:	1 December 2009
Expiry:	30 November 2019
Lease Term:	10 years
Rights of Renewal:		One (1) right of renewal of five (5) years
Rental:	Component	Commencing Rent	Rate/m2	Passing Rent	Rate/m2
		p.a. net	Rate/pcm	p.a. net	Rate/pcm
	Levels 5-9	\$1,863,690	\$460/m²	\$2,267,464	\$560/m²
	Car Parking (10 spaces)	\$42,000	\$350/space	\$51,100	\$426/space
		\$1,905,690		\$2,318,564
Rent Reviews:	Fixed annual 4.0% increases during the lease term (and renewal term if applicable). Market review upon lease renewal.
Outgoings:	Semi-gross lease with the Lessee responsible for utilities and cleaning together with increases in statutories over a base year of 2009/2010.
GST:	Lessee to pay GST in addition to rental and outgoings.

The passing office rent reflects a rate of \$564/m² gross which is considered to be above market based on the evidence contained within our report and we have adopted a rate of \$525/m2 gross. Similarly the car park rent shows \$5,110 per space per annum and \$426 per space per calendar month which appears to be slightly above market parameters and we have adopted \$400 per month as market for the car park accommodation.

A summary of passing and adopted market rents is provided below:

Level / Suite	Use	NLA (sqm)	Gross Passing Rent (p.a.)	Gross Passing Rent (\$/m² p.a.)	Market Rent (\$/m² p.a.)	Market Rent (\$ pa)
Levels 5-9	Office	4,051.50	\$2,285,834	\$564	\$525	\$2,127,038
Car parks	Car parks	10 spaces	\$51,100	\$426/pcm	\$400/pcm	\$48,000
		4,051.50m²	\$2,336,934			\$2,175,038

Valuation Methodology

We have arrived at our Market Value assessment after considering recent sales of comparable properties and having regard to the subject property's investment attributes. Full details of all property and market assumptions in relation to our valuation are contained in our Full Valuation Report (Ref: 505987AJ) held by Centuria Property Funds Limited. We have used both the capitalisation and discounted cash flow methods in arriving at our assessment of Market Value with the adopted analysis and valuation being outlined as follows:

Capitalisation Approach

We have also adopted the capitalisation approach (market yield) in determining the current market value of the subject property.

Our valuation calculations are attached as an annexure to this report; however we summarise these calculations below:

	Market Yield Calculations
	Office Income		\$2,127,038
	Parking Income		\$48,000
	Estimated Annual Gross Market Income		\$2,175,038
Less
	Outgoings (Jun 2015 - \$100.23/m²)		(\$406,080)
	Estimated Annual Net Income		\$1,768,958
	Capitalised at 9.00%			\$19,655,083
	Capital Value Adjustments
	Present Value of Rental Reversions		\$620,330
	Assessed Capital Value			\$20,275,414
Sensitivity Table Value		8.75% \$20,836,988	9.00% \$20,275,414	9.25% \$19,744,195
(1)	Estimated Market Gross Income				\$2,175,038
	For the purpose of this valuation we have adopted potential current gross market
	income of \$2,175,038 (after having had regard to the detailed comments
	contained within the Market Commentary section of this report).
	The market rental profile has been assessed on a face rental basis, where we
	have assumed a current market incentive of 20.00%.
(2)	Less Outgoings
	We have then deducted building outgoings of \$406,080 after having regard to				(\$406,080)
	our analysis and comments contained within the Outgoings section of this report.
(3)	Net Market Income				\$1,768,958
	This produces a sustainable net market income of \$1,768,958 which we have
	capitalised at yields ranging from 8.75% to 9.25%.

Independent Valuer's Report

(4) Add Present Value of Rental Reversions \$620,330

This figure calculates the PV of the profit rent from each individual tenancy relative to our adopted market rental profile.

Upon making the above adjustments, we derive a value range for the property of \$19,744,195 to \$20,836,988, based on yields of 9.25% to 8.75%.

Discounted Cash Flow

A discounted cash flow analysis has been prepared taking into account the ability of the property to generate income over a 10 year period based on certain assumptions. Provision is made for leasing up periods upon the expiry of the various leases throughout the 10 year time horizon.

Each year's net operating income during the period is discounted to arrive at the present value of expected future cash flows. The property's anticipated sale value at the end of the period (i.e. its terminal or reversionary value) is also discounted to its present value and added to the discounted income stream to arrive at the total present market value of the property.

The DCF relates to the next period of 10 years during which time stable market conditions with an increasing rate of rental growth can be anticipated.

(1) Rental Projections and Assumptions

Key growth rate and vacant space assumptions of our cash flow analysis are summarised in the table below:

	Office	CPI	Outgoings		Lease Expiry Allowances
Year	Growth	Growth	Growth	Incentive	Letting Up*
Year 1	2.38%	2.38%	2.38%	20.00%	9 months
Year 2	2.70%	2.70%	2.70%	20.00%	9 months
Year 3	3.48%	2.48%	2.48%	15.00%	9 months
Year 4	3.36%	2.36%	2.36%	15.00%	9 months
Year 5	3.38%	2.38%	2.38%	15.00%	9 months
Year 6	3.49%	2.49%	2.49%	15.00%	9 months
Year 7	3.40%	2.40%	2.40%	15.00%	9 months
Year 8	3.53%	2.53%	2.53%	15.00%	9 months
Year 9	3.39%	2.39%	2.39%	15.00%	9 months
Year 10	3.42%	2.42%	2.42%	15.00%	9 months
Avg. Compound	3.25%	2.45%	2.45%

*We have applied a 66.7% retention factor to the letting up allowance.

(2) Refurbishment Allowance/Ongoing Capital Expenditure

For the purpose of this valuation we have utilised a mix of annual sinking fund contributions and capital upgrade allowances on expiry. These amounts are as follows:

		Capital Expenditure (to year end)
Year 1 (Mar-16)	\$40,955	Year 6 (Mar-21)	\$46,269
Year 2 (Mar-17)	\$41,990	Year 7 (Mar-22)	\$47,402
Year 3 (Mar-18)	\$43,081	Year 8 (Mar-23)	\$48,568
Year 4 (Mar-19)	\$44,126	Year 9 (Mar-24)	\$49,766
Year 5 (Mar-20)	\$611,462	Year 10 (Mar-25)	\$50,962

The capital expenditure included in our Discounted Cash Flow Analysis consists of a combination of annual sinking fund contributions equivalent to \$10.00/m² in year 1 and escalated by 2.45% p.a. and capital upgrade allowances on expiry equivalent to \$125.00/m² in year 1 and escalated by 2.45% p.a.

Total capital expenditure over the ten years equates to \$1,024,582 (\$253/m²), whilst total expenditure over the cashflow period, incorporating Terminal Value allowances equates to \$1,024,582 (\$253/m²).

(3) Lease Expiry/Incentive Allowances & Agents Fees

We have made provision for a letting up period of 9 months throughout our cash flow, which is the equivalent of 3 months loss of rent, once our assumed 66.7% tenant retention rate is taken into account.

We have further deducted an incentive of 15.00%, based upon an assumed lease term of 7 years. This incentive has been paid as a rent free allowance of between 13 months and 17 months.

We have also provided for agent's fees and leasing costs equivalent to 12.00% of the first years gross passing income for new leases and 7.50% for lease renewals.

(4) Terminal Value

In order to assess the terminal value, we have escalated the current gross market rents by the relevant growth rates (as shown above). We have then capitalised the net market rent of \$2,473,098 at a terminal yield of 9.25% and deducted appropriate lease expiry allowances and incentives (where applicable).

The adopted terminal yield assumes market conditions commensurate to those being experienced as at the date of valuation, whilst acknowledging that the property will be 10 years older but well maintained.

We have then assumed that the property is sold at the beginning of Year 11, based on a terminal value of \$26,674,511, and we have then deducted associated selling costs equivalent to \$200,059 (0.75%) to arrive at a net realisable amount of \$26,474,452.

Independent Valuer's Report

(5) Discount Rates

Discount rates tend to be influenced by many factors including the returns available from alternative investments, long term bond rates, current property yields, expected CPI, rental growth and the perceived risk of illiquidity associated with the property.

Having regard to the sales evidence, current market conditions, the above factors and the various assumptions used in our cash flow, we believe a discount rate in the order of 10.25% to be appropriate.

(6) DCF Valuation Results

We have undertaken a DCF sensitivity analysis which produces the following range of values based upon variances to discount rates and terminal yield rates:

10 Year Discounted Cash Flow Matrix

			Terminal Yield
		9.00%	9.25%	9.50%
	10.00%	\$20,424,609	\$20,140,646	\$19,871,630
Discount Rate	10.25%	\$20,087,001	\$19,809,418	\$19,546,444
	10.50%	\$19,756,900	\$19,485,538	\$19,228,459

(7) Qualifications

We draw your attention to the fact that this analysis is based on projections considered in the light of available data, however, market conditions will change over time influenced by internal and external factors against which a review of assumptions may be warranted. For this reason, we stress that reliance of such projections must be made with full acceptance of their limited reliability and with due consideration of the commercial risks related to such forecasts.

In particular we stress the DCF exercise appended hereto has been undertaken for the sole purpose of assisting in the determination of the current market value of the property and we make no guarantees or warranty as to the accuracy of the future rental income stream projections in so far as they relate to market rental movements.

Reconciliation of Values

We have produced a value range of \$19,750,000 to \$20,850,000 under the static capitalisation approach and a value of \$19,800,000 under the DCF approach.

Based upon the above results we have adopted a value of \$20,000,000. On analysis the adopted value reflects an initial yield of 9.65%, an equated market yield of 9.13%, an IRR of 10.10% and a rate of \$4,936/m² of Lettable Area, all of which appear reasonable having regards to the comments contained within the market commentary section of the full report (Ref: 505987AJ).

Liability Disclaimer

Savills has prepared this letter and the full valuation based upon information made available to us at the date of valuation. We believe that this information is accurate and complete, however we have not independently verified all such information. Savills is not providing advice about a financial product, nor the suitability of the investment set out in the Explanatory Memorandum. Such an opinion can only be provided by a person who holds an Australian Financial Services Licence. Savills does not, nor do the Valuers, hold an Australian Financial Services Licence and is not operating under such a licence in providing its opinion as to the value of the property detailed in this report.

Savills has prepared this summary for inclusion in the Explanatory Memorandum and has only been involved in the preparation of this summary and the valuation referred to therein. Savills specifically disclaim liability to any person in the event of any omission from, or false or misleading statements included in, the Explanatory Memorandum, other than in respect of the Valuation and this summary.

This letter has been countersigned to verify the letter is issued by this Company. Any reliance upon this letter should therefore be based upon the actual possession or sighting of an original document duly signed and countersigned in the before-mentioned manner.

This Valuation is current at the date of valuation only. The value assessed herein may change significantly and unexpectedly over a relatively short period of time (including as a result of general market movements or factors specific to the particular property). Liability for losses arising from such subsequent changes in value are excluded as is liability where the valuation is relied upon after the date of the valuation.

We have assessed the market value of the property in accordance with the Market Value definition contained within this letter summary and our full valuation report. In the event that, having regard to current economic conditions, a sale was to occur in circumstances not reflecting that Market Value definition, the price realised may be at a substantial discount to the Market Value assessed.

Pecuniary Interest

We hereby certify that the Valuers and valuation firm does not have any direct, indirect or financial interest in the property or clients described herein that would conflict with the proper valuation of the property.

Savills Valuations Pty Ltd liability is limited by a scheme approved under Professional Standards Legislation.

Yours faithfully

Savills Valuations Pty Ltd

Alastair Johnston AAPI Certified Practising Valuer

Tim Trnovsky

Associate Director Valuation and Consultancy Division

The Associate Director signatory verifies that this report is genuine, and issued by, and endorsed by Savills Valuations Pty Ltd. However the opinion expressed in this report has been arrived at by the prime signatory.

Notice of Meetings of Investors

Centuria Metropolitan REIT Comprising

Centuria Metropolitan REIT No. 1 (ARSN 124 364 718) and Centuria Metropolitan REIT No. 2 (ARSN 124 364 656)

Centuria Property Funds Limited (CPFL), in its capacity as Responsible Entity of each of Centuria Metropolitan REIT No. 1 (ARSN 124 364 718) (Stapled Fund No. 1) and Centuria Metropolitan REIT No. 2 (ARSN 124 364 656) (Stapled Fund No.2), comprising the entity known as Centuria Metropolitan REIT (CMA), gives notice that meetings of the Investors of the Stapled Fund No. 1 and Stapled Fund No. 2 (Meetings) will be held as follows:

Time: 5.00pm Date: Friday, 5 June 2015 Place: Centuria Capital Limited Location: Level 39, 100 Miller Street, North Sydney, NSW

The business of the Meetings will consist of the following:

Resolution: Approval of the Proposal	To consider, and if thought fit, to pass the following resolution as an ordinary resolution of the members of Centuria Metropolitan REIT No. 1 and as an ordinary resolution of the members of Centuria Metropolitan REIT No. 2 (Resolution):
	"That, for the purposes of ASX Listing Rule 10.1 and for all other purposes, approval is given for the acquisition of the property at levels 5-9, 131-139 Grenfell Street, Adelaide together with ten car spaces and associated foyer as described in the Explanatory Statement accompanying this notice of meetings."
Independent Expert's Report	The attached report from Deloitte Corporate Finance Pty Limited (the Independent Expert) has concluded that the proposed acquisition is fair and reasonable for those holders of CMA's securities not associated with Centuria Property Funds Limited.
	The report can be also accessed at www.centuria.com.au/listed-property.
Voting exclusion statement	CPFL will disregard any votes cast on the Resolution by Centuria Property Funds Limited and any of its associates.
	However, CPFL need not disregard a vote if:
	• it is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions of the Proxy Form; or • it is cast by the chairman of the meeting as proxy for a person who is entitled to vote, in accordance with the direction on the Proxy Form to vote as the proxy sees fit.

Quorum	The quorum for a meeting of members of Stapled Fund No. 1 or Stapled Fund No. 2 is two holders of Stapled Securities at all times during the meeting present personally, or by representative or proxy, holding at least 10% by value of the Stapled Securities on issue in Stapled Fund No. 1 or Stapled Fund No. 2 at 5.00pm Wednesday, 3 June 2015.
Entitlement to vote	The Board of CPFL has determined that Investors registered as holders of Stapled Securities in Centuria Metropolitan REIT No. 1 (ARSN 124 364 718) and Centuria Metropolitan REIT No. 2 (ARSN 124 364 656) as at 5.00pm (AEST) on Wednesday, 3 June 2015 will be entitled to attend and vote at the Meetings (subject to any applicable voting exclusion).
Votes to be disregarded	Under section 253E of the Corporations Act, the responsible entity of a registered scheme and its associates are not entitled to vote their interest on a resolution at a meeting of the scheme's members if they have an interest in the resolution or matter other than as a member. The responsible entity and its associates may vote as proxies if their appointments specify the way they are to vote and they vote that way. In any case CPFL and its associates will not be entitled to vote on the Resolution by virtue of the voting exclusion noted above.
Majority required	As the Resolution is an ordinary resolution, it will be passed if more than 50% of the votes cast by Investors entitled to vote on the Resolution are in favour.
Jointly held Stapled Securities	If a unit in Stapled Fund No. 1 is held jointly and more than one Investor votes in respect of that interest, only the vote of the Stapled Fund No. 1 Investor whose name appears first in the register of Stapled Fund No. 1 members counts. Similarly, if a unit in Stapled Fund No. 2 is held jointly and more than one Stapled Fund No. 2 Investor votes in respect of that interest, only the vote of the Stapled Fund No. 2 Investor whose name appears first in the register of Stapled Fund No. 2 members counts.
Voting procedure	Voting on the Resolution will be on a show of hands, whereby each Investor present, in person or by proxy, will have one vote on a show of hands. However, if a poll is validly demanded, each Investor present in person, by proxy or by corporate representative will have one vote for each dollar value of the value of the total interests they have in Stapled Fund No. 1 and Stapled Fund No. 2 (as applicable). An Investor entitled to two or more votes does not have to exercise its votes in the same way and does not have to cast all its votes.

Notice of Meetings of Investors

Voting	You can ensure your vote is cast, in one of two ways:
	• attending the Meetings and voting in person, or, if you are a corporate Investor, by a corporate representative voting for you; or • appointing a proxy to attend and vote for you, using the enclosed Proxy Form and lodging your Proxy Form under the procedures described under "Proxy Forms" below.
Proxies	If an Investor is unable to attend the Meetings, the Investor may appoint a person (either an individual or body corporate) or the chairman of the Meetings to act as its proxy at the Meetings by completing the Proxy Form accompanying the Notice of Meetings.
	The Chairman intends to vote all undirected proxies in favour of the Resolution.
	If an Investor appoints a body corporate as its proxy, the proxy will need to appoint an individual to act as its representative at the Meetings and send the authority to the Registry by 5.00pm on Wednesday, 3 June 2015 or give it by hand when registering as a corporate representative.
	If an Investor appoints two proxies, the Investor may specify the proportion or number of votes each proxy holder is entitled to exercise. Where two proxies are appointed and the appointment does not specify the proportion or number of the Investor votes, each proxy may exercise half of the votes.
	A proxy need not be an Investor.
	Unless the proxy is required by law to vote, the proxy may decide whether or not to vote on any particular item of business. If the appointment of a proxy directs the proxy to vote on an item of business in a particular way, the proxy may only vote on that item as directed. Any undirected proxies on the Resolution may be voted by the appointed proxy as they choose, subject to the voting exclusions set out above.

Proxy Forms	The Proxy Form which accompanies this Notice of Meetings includes instruction on how to vote and appoint a proxy.
	To ensure that all Investors can exercise their right to vote on the Resolution, a Proxy Form is enclosed together with a reply paid envelope. Proxy Forms should be completed and returned by no later than 5.00pm (AEST) on Wednesday, 3 June 2015.
	The Proxy Form can be lodged as follows:
	• by mail using the reply paid envelope and posting it to: Computershare Investor Services Pty Limited, GPO Box 242 Melbourne, Victoria 3001 Australia
	• by faxing it to: (within Australia) 1800 783 447 (outside Australia) +61 3 9473 2555
	• online at: www.investorvote.com.au
	Power of Attorney: to sign under Power of Attorney, you must lodge the Power of Attorney with the Registry. If you have not previously lodged this document for notation, please attach a certified photocopy of the Power of Attorney to your Proxy Form when you return it.
	Companies: where the company has a sole Director who is also the sole Company Secretary, the Proxy Form must be signed by that person. If the company (pursuant to section 204A of the Corporations Act 2001) does not have a Company Secretary, a Sole Director can also sign alone. Otherwise the Proxy Form must be signed by a Director jointly with either another Director or a Company Secretary. Please indicate the office held by signing in the appropriate place.
Corporate representatives:	A corporate Investor wishing to appoint a person to act as its representative at the Meetings must provide that person with an authority executed in accordance with the Corporations Act authorising him or her to act as the company's representative. The authority must be sent to the Registry by 5.00pm (AEST) on Wednesday, 3 June 2015 or given by hand at the Meetings when registering as a corporate representative.
	A form of "Certificate of Appointment of Corporate Representative" may be obtained from the Registry.
	A corporate Investor may appoint a proxy.
Registration	Registration will commence at 4.30pm (AEST) Friday, 5 June 2015 on the day of the Meetings with the Meetings scheduled to begin at 5.00pm (AEST) on Friday, 5 June 2015. For ease of registration, please bring your Proxy Form to the Meetings (as lodged prior to the Meetings).

Individual or Securityholder 1	Securityholder 2		Securityholder 3
Sole Director and Sole Company Secretary	Director		Director/Company Secretary
Contact Name		Contact Daytime Telephone	Date