INTERNALISATION AGREEMENT The Independent Directors of Property - PowerPoint PPT Presentation

INTERNALISATION AGREEMENT • The Independent Directors of Property for Industry Limited (“PFI”) are pleased to announce that they have reached a conditional agreement with PFIM Limited (“PFIM”) to internalise the management of PFI • Key features of the internalisation include: • A payment of $42.0 million (implying a net cost for internalisation of $30.3 million, post tax deductibility and before transaction costs) to PFIM as consideration for the termination of the PFI management contract and the acquisition by PFI of the business and certain assets of PFIM; • Greg Reidy, Simon Woodhams and Craig Peirce will continue to act as Managing Director, General Manager and Chief Financial Officer respectively, under independent service contracts with PFI; and • The offer of employment by PFI to other employees of McDougall Reidy & Co Limited (to whom PFIM currently subcontracts its management function), who will continue to provide the same services currently provided to PFI PROPERTY FOR INDUSTRY ������������������������� ������������������������� ������������������������� ������������������������� 1

KEY BENEFITS OF THE INTERNALISATION • The internalisation agreement results in the following key benefits for PFI shareholders: • Ensures the full continuity of PFI’s proven strategy • Safeguards the retention of the current management team who have significant experience and a deep understanding of the industrial property sector • Provides continued alignment between senior management and PFI shareholders as senior management remuneration will be linked to shareholder returns as well as providing incentives for internalised costs to be below 0.3% of total tangible assets (expected to be one of the lowest expense ratios in the New Zealand listed property sector) • Expected to be earnings per share accretive (on a pro forma FY16 basis), leading to a material net present value gain for shareholders PFI Chairman, Peter Masfen: “ The internalisation agreement has been the result of a proactive and collaborative approach by the Board and PFIM, and will ensure the full continuity of PFI’s successful business model and strategy, with the same people, the same processes and the same focus on delivering strong, stable shareholder returns .” PROPERTY FOR INDUSTRY ������������������������� ������������������������� ������������������������� ������������������������� 2

DELOITTE REPORT TO THE BOARD • PFI’s Independent Directors commissioned Deloitte to examine the valuation matters associated with the internalisation agreement • Deloitte has concluded that the internalisation is expected to be earnings per share accretive and accordingly is expected to provide a material net present value gain to shareholders (i.e. the present value of forecast cost savings exceeds the purchase price) • In addition, Deloitte has concluded that the purchase price is fair and consistent with comparable transactions, taking into account: • The very limited rights of termination in the existing management contract; • The general expansion in valuation multiples in recent years; and • The value benefits for shareholders from the transaction PROPERTY FOR INDUSTRY ������������������������� ������������������������� ������������������������� ������������������������� 3

OTHER CONSIDERATIONS • The cost of internalisation is expected to be deductible for tax purposes • An application for a binding ruling has been made to the IRD, and the internalisation agreement is conditional on the receipt of this binding ruling • The cost of internalisation will be funded by an expansion of PFI’s bank facilities • A $50 million Institutional Credit facility has been established with ANZ. The facility expires on 31 July 2018 and ranks alongside PFI’s existing syndicated bank loan facility • Expected to result in PFI having FY16 pro forma drawn debt of $364.7 million (gearing ratio of 33.7% 1 ) • Further information on PFI including its 2016 Annual Report, and on PFIM, is available at www.propertyforindustry.co.nz 1. Total debt / total property assets PROPERTY FOR INDUSTRY ������������������������� ������������������������� ������������������������� ������������������������� 4

PROCESS OVERVIEW • The internalisation agreement is conditional on approval by PFI shareholders • A Notice of Special Meeting is expected to be sent to PFI shareholders in early June • Northington Partners have been appointed to prepare an Independent Appraisal Report on the merits of the internalisation agreement • A copy of this report will be sent to shareholders with the Notice of Special Meeting • The Special Meeting of shareholders is expected to be held in late June and, subject to receiving shareholder approval and a binding ruling from the IRD, settlement of the internalisation is expected to occur on 30 June 2017 • The Independent Directors unanimously support the internalisation and believe that it is in the best interests of PFI shareholders PROPERTY FOR INDUSTRY ������������������������� ������������������������� ������������������������� ������������������������� 5

DISCLAIMER The information included in this presentation is provided as at 3 April 2017. Neither Property for Industry Limited (PFI) nor PFIM Limited (PFIM), the manager of PFI, guarantee the repayment of capital or the performance referred to in this presentation. Past performance is not a reliable indicator of future performance. The presentation includes a number of forward looking statements. Forward looking statements, by their nature, involve inherent risks and uncertainties. Many of those risks and uncertainties are matters which are beyond PFI’s and PFIM’s control and could cause actual results to differ from those predicted. Variations could either be materially positive or materially negative. While every care has been taken in the preparation of this presentation, PFI and PFIM makes no representation or warranty as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. This presentation has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this presentation, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This presentation is solely for the use of the party to whom it is provided. PROPERTY FOR INDUSTRY ������������������������� ������������������������� ������������������������� ������������������������� 6