Australian Unity Office Fund : Update on non-binding indicative proposal to acquire AOF

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ASX Announcement - Australian Unity Office Fund

3 June 2022

Update on non-binding indicative proposal to acquire

Australian Unity Office Fund

Australian Unity Investment Real Estate Limited (AUIREL) as responsible entity of Australian Unity Office Fund (ASX: AOF) notes its announcement dated 30 May 2022 (30 May Announcement) in relation to receipt of a non-binding, indicative proposal from Aliro Group, on behalf of the Aliro Group Office Value Fund (AGOVF) (collectively, Aliro) to acquire all the issued units in AOF for $2.45 cash per AOF unit (Offer Price), by way of a trust scheme (Proposal).

An independent board committee (IBC) comprising the independent directors of AUIREL (Mr Peter Day, Mr Don Marples and Ms Eve Crestani) has been established by AUIREL to consider the Proposal.

Value of the Proposal

The Offer Price represents:

• an 11.9% premium to AOF's closing price of $2.19 on 27 May 2022 being the trading day prior to disclosure of receipt of the Proposal; and
• a 9.0% premium to AOF's volume weighted average price of $2.25 from the release of AOF's market update on 4 May 2022 disclosing the updated valuation of 2-10 Valentine Avenue, Parramatta.

Additionally, as AUIREL noted in its 30 May Announcement, the following distributions to AOF unitholders would be permitted without any reduction to the Offer Price:

• for the period ending 30 June 2022 up to 3.80 cents per AOF unit (in-line with AOF's FY22 distribution guidance);
• for the period ending 30 September 2022 up to 1.50 cents per AOF unit; and
• for each month (or on a pro-rata basis for part months) after 30 September 2022 until the trust scheme is effective, 0.50 cents per AOF unit.

The Offer Price would be reduced by the amount of any other distributions announced or paid.

Conditions of the Proposal

The Proposal is subject to the following conditions:

• completion of confirmatory due diligence to the satisfaction of Aliro;
• approval of final terms by Aliro and AGOVF;
• execution of a scheme implementation agreement containing customary conditions including certain deal protection terms (no shop, no talk, no due diligence and a break fee);
• Foreign Investment Review Board approval; and
• the unanimous recommendation by AUIREL as responsible entity of AOF.

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ASX Announcement - Australian Unity Office Fund

Major unitholder support of the Proposal

The Proposal was accompanied by a statement of support from AOF's largest unitholder, Hume Partners Pty Ltd (Hume). Hume has provided Aliro with a voting intention statement whereby Hume has stated that it intends to vote its 19.97% holding in AOF in favour of the Proposal, in the absence of a superior proposal.

The IBC notes the substantial shareholder notice lodged by Aliro on 31 May 2022 disclosing Aliro's relevant interest in AOF of 19.97% and attaching the letter from Hume setting out Hume's voting intention statement.

Background to the Proposal

On 17 January 2022, AUIREL outlined its continued focus on initiatives to maximise value for unitholders, with the focus on three strategies:

1. The delivery of asset refurbishments and repositioning opportunities, while maintaining strong occupancy from multi-tenanted assets;
2. Divesting some or all assets and returning capital to unitholders; and
3. Considering a portfolio sale via a corporate transaction.

In regular market updates since January 2022, AUIREL has disclosed how it engaged with a number of parties, provided information under confidentiality agreements regarding AOF and its assets, and outlined its intention to investigate the sale of some or all of AOF's properties in an on-market campaign, with AUIREL's objective being to maximise value for unitholders.

Position of the IBC

The IBC considers that, based on the Offer Price of $2.45 per AOF unit plus permitted distributions up to the date the trust scheme is effective (as outlined above), it is in the interests of AOF unitholders for AUIREL to engage further with Aliro.

Exclusive Due Diligence

AUIREL has entered into a confidentiality agreement and exclusivity deed with Aliro providing Aliro with a period of exclusive due diligence for up to eight weeks, in order to complete its due diligence and put forward a binding proposal. The exclusivity deed is annexed to this announcement.

Intention to recommend the Proposal

Subject to entry into a binding Scheme Implementation Agreement with Aliro, the IBC currently intends to unanimously recommend that AOF unitholders vote in favour of the Proposal, subject to an Independent Expert's opinion that the Proposal is in the best interests of AOF unitholders, and in the absence of a superior proposal.

Documentation in relation to the Proposal will then be provided to AOF unitholders with a meeting of AOF unitholders to consider and vote on the Proposal to follow.

No action is required by AOF unitholders at this time

No action is required by AOF unitholders at this time, and AUIREL will keep AOF unitholders fully informed as required.

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This Deed is made on

Parties

1. Australian Unity Investment Real Estate Limited (ACN 606 414 368) of Level 15, 271 Spring Street, Melbourne Victoria 3000 as responsible entity of Australian Unity Office Fund (ARSN 113 369 627) (Target).
2. Aliro Group Pty Limited (ACN 618 584 106) of Level 38, Gateway, 1 Macquarie Place, Sydney NSW 2000 (Bidder).

Recitals

1. In order to facilitate Bidder conducting due diligence and further consideration of a Transaction, Target has agreed to grant a period of exclusivity to Bidder on the terms and conditions of this deed.

It is agreed as follows.

Operative Provisions

1 Definitions

In this deed:

AOF means the Australian Unity Office Fund (ARSN 113 369 627).

Approach Letter means the Bidder non-binding indicative offer letter dated 27 May 2022.

Approved Purpose means the evaluation, negotiation, entry into and implementation of the Proposal.

Associate has the meaning set out in section 12 of the Corporations Act. AUIREL has the meaning give in clause 8.1(a).

Bidder Client means any investment fund, entity, vehicle, capital partner or managed account which is managed and/or advised by the Bidder, or any entity referred to in paragraphs (a) to (c) of definition of Related Entity.

Business Day means a day that is not a Saturday, Sunday or public holiday or bank holiday in Sydney, Australia.

Competing Proposal means any proposal (including marketing of properties), agreement, arrangement or transaction which, if entered into or completed, would result in a Third Party (either alone or together with any Associate):

1. directly or indirectly acquiring a relevant interest in, or having a right to acquire, a legal, beneficial or economic interest in, or control of, 20% or more of the securities in any member of the Target Group;
2. acquiring Control of Target;
3. directly or indirectly acquiring or becoming the holder of, or otherwise acquiring or having a right to acquire, a legal, beneficial or economic interest in, or control of, all or substantially all of the Target's business or assets or the business or assets of the Target Group;
4. directly or indirectly acquiring or becoming the holder of, or otherwise acquiring or having a right to acquire, a legal, beneficial or economic interest in, or control of, any one or more of the properties within the Target Group portfolio including 30 Pirie Street Adelaide,