Abacus Storage Fund. Prospectus and Product Disclosure Statement

Transcription

1 Abacus Storage Fund Prospectus and Product Disclosure Statement Issued by Abacus Storage Funds Management Limited ACN AFSL and Abacus Storage Operations Limited ACN

2 IMPORTANT INFORMATION This Offer Document is a prospectus and product disclosure statement. It is dated 24 December 2008 and is issued by Abacus Storage Funds Management Limited ACN AFSL and Abacus Storage Operations Limited ACN Contact details for the issuers are set out in the corporate directory on the inside back cover. The Trust is registered with ASIC as a managed investment scheme ARSN A copy of this Offer Document was lodged with ASIC on 24 December ASIC takes no responsibility for the contents of this Offer Document. This Offer is open from 31 December 2008 unless ASIC determines otherwise. No application will be accepted under this Offer Document before this date. No Stapled Securities will be issued on the basis of this Offer Document later than 13 months from the date of this document. Unless otherwise permitted by applicable law, the Offer described in this Offer Document is only available to residents of Australia. This Offer Document does not constitute an offer in any place in which, or to any person to whom, it would be unlawful to make such an offer. Anyone who comes into possession of this Offer Document should seek advice on, and observe any restrictions on, accepting an offer or distributing the Offer Document. Any failure to comply with those restrictions may constitute a violation of applicable securities law. Unless stated otherwise, all figures are expressed in Australian dollars. Capital and investment returns are not guaranteed Investors should be aware that an investment in the Fund is illiquid and subject to risk. Stapled Securities in the Fund are not quoted on any stock market. The value of the Fund s assets, its forecast financial performance and distributions are not guaranteed by Abacus Storage Funds Management Limited, Abacus Storage Operations Limited, Abacus Property Group or anyone else. Prospective financial information included in this Offer Document is based on assumptions about future events and market conditions and consequently is subject to significant uncertainty. Actual results are likely to vary from the forecasts and any variation may be materially positive or negative. Past performance is not a reliable indicator of future performance. CONTENTS 1 Fund Overview / 13 2 The Offer / 25 3 The Fund s Portfolio of Self Storage Facilities / 27 4 The Self Storage Industry / 32 5 The Operator Storage King / 35 6 The Responsible Entity / 37 7 Fees and Other Costs / 38 8 Financial Information / 44 9 Taxation Information / Investment Risks / Additional Information / Glossary / How to Apply / 77 Updating this Offer Document The information in this Offer Document is current as at the date of this document. It is subject to change from time to time. Where new information is not materially adverse information (ie it is not information required to be included in a supplementary offer document), it may be updated through Abacus Property Group s website or when reporting to you. You may access updated information by viewing the Fund page on the Abacus Property Group website at or you can contact Abacus. A paper copy of any updated information will be made available without charge on request. Master Trust/ Wrap Accounts If you invest in the Fund through an investment or reporting service such as a master trust, wrap account, investor directed portfolio service or nominee or custody service, you are an indirect investor in the Fund. The operator of the service that invests for you will be recorded as the Securityholder in the Fund. The service operator will have all the rights and benefits of a Securityholder. For example, the service operator will receive distributions and any statements or reports from the Fund and may provide instructions concerning additional investments, withdrawals and the payment of distributions. Investors should be aware that different fees and charges, arrangements for the application and transfer of Stapled Securities, distribution calculation and timing may apply to wholesale investors, including investment or reporting services. Your rights are governed by your agreement with your service operator. Any queries or instructions relating to your investment should be directed to your service operator. Other information This Offer Document contains important information but it does not take into account your investment objectives, financial situation or particular needs. Accordingly, before you invest, you should read this Offer Document carefully in its entirety and consider whether an investment in the Fund is appropriate to your objectives, financial situation and needs. Prospective investors should refer to Section 10 of this Offer Document and consider the risks associated with an investment in the Fund. You are encouraged to obtain independent legal, tax and financial advice. Abacus has not authorised any person to give any information or make any representation in connection with this Offer that is not contained in this Offer Document. No such information or representation may be relied on as having been authorised by Abacus in connection with this Offer. In this Offer Document, Abacus, we, us or our refers to Abacus Storage Funds Management Limited. A list of other defined terms used throughout this Offer Document appears in the glossary. KEY DATES Priority Entitlement closing date 27/02/09 General offer opening date 02/03/09 ABACUS STORAGE FUND

3 Abacus Storage Fund offers investors the opportunity to participate in the Australasian self storage sector ABACUS STORAGE FUND 1

4 Since its launch in November 2005, Abacus Storage Fund has grown from 16 self storage facilities to 41 self storage facilities......and today the Fund s portfolio is valued at $317 million $Asset value Dec 08 Acquisition of a further 11 facilities for $83m $215m $205m $174m $170m Jul 06 Acquisition of a further 14 assets for $68m Dec 06 Fund closes with 75m securities issued and over 1,300 investors June 07 $20m valuation uplift June 08 23% EBITDA growth and $15m valuation uplift $93m Aug 05 Initial acquisition of 16 assets for $93m Nov 05 Fund launch 2 ABACUS STORAGE FUND The growth in asset values to $317 million include capital expenditure and foreign exchange movements

5 Abacus Storage Fund is now one of the largest participants in the Australasian self storage sector THE FUND S PROPERTIES COMPRISE: 2 392,916m of land 2 197,577m of net lettable storage area Townsville Brisbane Sydney Ballarat Melbourne Canberra Hamilton Auckland Christchurch Dunedin ABACUS STORAGE FUND 3

6 The strong performance of Abacus Storage Fund has been achieved through our partnership with Storage King, Australasia s largest licensor and manager of self storage facilities MANAGER The Fund has appointed Storage King to manage all of its self storage facilities. Of the 41 facilities 38 trade under the Storage King brand NETWORK Storage King oversees a licensed network of 115 self storage facilities in Australia and New Zealand, with a 10 year track record in the sector PARTNER The Fund is Storage King s largest licensee 4 ABACUS STORAGE FUND

7 Abacus Storage Fund has provided its investors with an annualised total return of approximately 15%* This performance has been driven by growth in profits at the store level, brought about through: Growth in average occupancy from 80% in 2005 to 87% in 2008 Annualised growth in average rental rates of approximately 7% per annum Strict cost control with average operating margins in excess of 60% 2 The development of 9,140m of additional net lettable storage area * Annualised total return is based on an original investment of $1.00 per Stapled Security in November 2005, quarterly distributions and an adjusted net asset value at 30 September 2008 of $1.21. Past performance should not be taken as an indicator of future performance. Please refer to the Risks Section in this Offer Document to review the potential risks to forecast performance. ABACUS STORAGE FUND 5

8 6 ABACUS STORAGE FUND

9 Dear Investor, It gives us great pleasure to provide you with the opportunity to subscribe for new equity in Abacus Storage Fund The Fund was launched in November 2005 to provide investors with the opportunity to participate in the emerging self storage sector. Since this time it has grown to become one of the leaders of the Australasian self storage industry, with 41 facilities valued at over $300 million. The Fund was closed to new equity in December 2006 and since then Abacus Property Group has been aggregating a portfolio of self storage assets that comprise: five self storage facilities in Townsville, Queensland; two self storage facilities in the Brisbane suburbs of Salisbury and Rocklea; one self storage facility in Hamilton, New Zealand; and an 86% interest in U Stow It Holdings Ltd, an unlisted public company that owns 3 large self storage facilities in Canberra along with a small number of ancillary commercial properties. The Fund acquired this portfolio of assets in December 2008 for $82.5 million, funded with $50.5 million of bank debt and a $37.0 million facility from Abacus Finance. This Offer Document has been issued to raise the $37.0 million required to repay this facility. We are very grateful to the founding investors in the Fund who supported our decision to enter this sector three years ago and we are pleased that we have been able to reward them with regular distribution payments and continued capital growth over the intervening period. We have structured this new Offer to provide our founding investors with a priority entitlement to the new securities being issued. We will also be pleased to welcome new investors to the Fund. The Offer is described in detail on the following pages of this Offer Document. We provide a comprehensive overview of the Fund, the performance of its existing 30 assets, details on the new assets acquired and financial forecasts through to June Given the current economic climate, we encourage you to read the Offer Document in detail, particularly the risks section, and, if after doing so you are interested in investing in the Fund, to seek the advice of your financial adviser before proceeding. Yours faithfully JOHN THAME Chairman, Abacus Storage Funds Management Limited FRANK WOLF Chairman, Abacus Storage Operations Limited ABACUS STORAGE FUND 7

10 Summary of the Offer KEY FEATURE SUMMARY FOR FURTHER DETAILS FUND OVERVIEW The Abacus Storage Fund was established in November 2005 to accumulate self storage properties throughout Australia and New Zealand to provide a reliable and attractive income to investors with potential for capital growth. As at 30 June 2008 the Fund had grown to 30 properties valued at more than $215 million and the Fund had become one of the three largest participants in the Australasian self storage sector. To continue its growth and to consolidate its position as an industry leader, the Fund has acquired a portfolio of additional self storage assets for $82.5 million that brings the total number of self storage facilities owned by the Fund to 41 and gross assets in excess of $330 million THE OFFER MINIMUM INVESTMENT MANAGEMENT OF THE FUND AND ITS ASSETS THE FUND S PROPERTY PORTFOLIO This Offer Document has been issued to provide investors with the opportunity to subscribe for 31.3 million New Stapled Securities in the Abacus Storage Fund at $1.18 per Stapled Security, to raise $37.0 million of new equity. The new equity is being raised to repay a $37.0 million bridging finance facility provided to the Fund by Abacus Property Group, which enabled the Fund to acquire the Additional Assets in December The Offer opens on 31 December 2008 and comprises a Priority Entitlement for Existing Securityholders in the Fund and a General Offer for New Investors wishing to participate in the Fund. Priority Entitlement The Fund s Existing Securityholders will have a Priority Entitlement to subscribe for one New Stapled Security for every existing Stapled Securities held, provided they apply before 27 February Existing Securityholders may take up all, part or none of their Priority Entitlement. General Offer New Investors will be able to subscribe for any New Stapled Securities not taken up by Existing Securityholders at the same price of $1.18 per Stapled Security. The general offer opens on 2 March The Offer price of $1.18 may change during the life of this Offer Document, as required by the Constitution of the Trust, if the net asset value of the Fund changes. There is no minimum investment for Existing Securityholders participating in the Priority Entitlement. The minimum investment in the Fund for New Investors participating in the General Offer is $10,000 and above that in multiples of $1,000. Abacus Storage Funds Management Limited is the Responsible Entity of the Trust and manager of the Company. Day to day management of the Fund s self storage facilities has been outsourced to Storage King Pty Limited. The Fund acquired in December 2008 the following self storage assets from Abacus Property Group: five self storage facilities in Townsville, Queensland; two self storage facilities in suburban Brisbane, Queensland; one self storage facility in Hamilton, New Zealand; and an 86% controlling interest in the unlisted public company, U Stow It Holdings Limited, which owns three large self storage facilities in Kambah, Belconnen and Fyshwick, ACT. The acquisition of these Additional Assets provides the Fund with the ownership of a portfolio of 41 self storage facilities located across the eastern seaboard of Australia and New Zealand which trade at an average occupancy of 86% ABACUS STORAGE FUND

11 SUMMARY OF THE OFFER KEY FEATURE SUMMARY FOR FURTHER DETAILS THE FUND S CAPITAL STRUCTURE The capital structure of the Fund, based on the pro-forma balance sheet as at 1 October 2008, assuming completion of the Offer, can be summarised as follows: Gross asset value $334.2m Bank debt $(181.6)m Other working capital $(19.4)m Net assets $133.2m Outside equity interests $(5.3)m Securityholder equity $127.9m Stapled Securities on issue 108,398,000 Net asset value per Stapled Security $1.18 Gearing 56% 8.5 There is no bank debt maturing in the 2009 or 2010 financial years. 1.7 FORECAST DISTRIBUTIONS The Fund is forecasting to pay the following distributions to Securityholders: YEAR ENDING 30 JUNE 2009 YEAR ENDING 30 JUNE 2010 Cash income distribution 8.50cps 8.75cps Franking credit component 0.85cps Annualised pre-tax distribution yield on $1.18 issue price 7.2% 8.1% Tax deferred component 87% 77% Distributions are paid quarterly and Securityholders have the option to reinvest their distributions in the Fund through the Distribution Reinvestment Plan. Abacus and Storage King will continue to reduce their management fees by approximately 50% over the Forecast Period to 30 June 2010 to support distributions to Securityholders. In addition Abacus will provide additional income support of $1.2 million in FY2009 and $0.6 million in FY2010 to support forecast distributions and 7.4 FEES AND OTHER COSTS Fees and other costs are set out in Section 7. 7 FUND TERM AND EXIT STRATEGY INTERIM LIQUIDITY RISKS RELATED PARTY TRANSACTIONS Abacus will hold a meeting of Securityholders in 2010 to discuss a Liquidity Event but a Liquidity Event may still be 3 to 5 years from the date of this Offer Document given the current market conditions and the need to build sufficient scale. The Fund is not a liquid fund. Prior to crystallising a Liquidity Event for Securityholders, there is a Liquidity Facility provided by AFML, pursuant to which AFML, or its nominee, may acquire up to 1.25% of the Fund s issued Stapled Securities each quarter. This Liquidity Facility is currently closed until part of the equity pursuant to this Offer has been raised and Abacus Property Group s relevant interest in the Fund is reduced to below 19.9%. There are risks associated with an investment in the Fund and neither Abacus, Abacus Storage Operations Limited, Abacus Property Group, Storage King or anyone else guarantees that the forecast returns will be achieved. The Additional Assets were acquired from Abacus Property Group in December 2008 at independent valuations. Property sales between related parties are supported by independent valuations and approved by the Board of Abacus Property Group ABACUS STORAGE FUND 9

12 SUMMARY OF THE OFFER ASIC Disclosure Principles The Australian Securities and Investments Commission has developed eight disclosure principles in relation to investments in unlisted property schemes to help investors understand and assess these types of schemes. An unlisted property scheme is a managed investment scheme that has or is likely to have at least 50% of its non-cash assets invested in real property and/or in unlisted property schemes. The eight disclosure principles are set out below, showing the key information specific to the Fund and where further information is contained within this Offer Document. Unless otherwise stated in this Offer Document, Abacus meets the disclosure principles. DISCLOSURE PRINCIPLE KEY DISCLOSURE PRINCIPLE INFORMATION FUND SPECIFIC DISCLOSURE PRINCIPLE INFORMATION FOR FURTHER DETAILS GEARING RATIO Indicates the extent to which the Fund's assets are funded by external liabilities. This disclosure principle requires responsible entities to disclose a gearing ratio for property schemes based on the following formula: Gearing ratio = total interest bearing liabilities divided by total assets. ASIC expects that if schemes have material off balance sheet financing, responsible entities should disclose the following gearing ratios: a look through ratio that takes into account such financing; a ratio based on liabilities disclosed in a scheme s financial statements. The Fund's reported and look through gearing ratio is 56%. The Fund has no off balance sheet financing. Gearing is reported based on the pro forma balance sheet that assumes that the Abacus Working Capital Facility is repaid through the issue of Stapled Securities pursuant to this Offer Document. 1.6, 1.7, 8.5 and 10.2 INTEREST COVER Indicates the Fund s ability to meet interest payments from earnings. This disclosure principle requires responsible entities to disclose a scheme s interest cover, including any hedged interest, calculated using the following formula based on the latest financial statements: Interest cover = EBITDA* unrealised gains plus unrealised losses divided by interest expense. * EBITDA = earnings before interest, tax, depreciation and amortisation. The Fund s interest cover is 1.6 times. Interest cover is reported based on the pro forma assumption that the Abacus Working Capital Facility is repaid through the issue of Stapled Securities pursuant to this Offer Document. 1.6 and 1.7 SCHEME BORROWING Provides information on the Fund s borrowing maturity and credit facility expiry and any associated risks. This disclosure principle requires responsible entities to disclose a scheme s borrowed funds (whether on or off balance sheet). The following details should be disclosed under this principle: maturity profile for borrowings; aggregate amounts owing; undrawn amounts for credit facilities; any prospects of refinancing for borrowings and credit facilities due to mature within 12 months. The Fund has bank debt of $181.6 million. The Fund also has access to the Abacus Working Capital Facility with $37.0 million drawn and a further $18 million available to fund capital expenditure and repay or support bank debt if required. None of the borrowings are due to expire in the Forecast Period. 1.6, 1.7 and ABACUS STORAGE FUND

13 SUMMARY OF THE OFFER DISCLOSURE PRINCIPLE KEY DISCLOSURE PRINCIPLE INFORMATION FUND SPECIFIC DISCLOSURE PRINCIPLE INFORMATION FOR FURTHER DETAILS PORTFOLIO DIVERSIFICATION Addresses the Fund s investment practices and portfolio risk. This disclosure principle requires responsible entities to disclose the current composition of a scheme s direct property investments portfolio: geographic location; for non-development properties, by sector; recent valuations for each significant property; the occupancy rate of the portfolio; the portfolio lease expiry. The Fund has a portfolio of 41 self storage assets and five commercial properties independently valued at over $317 million and located across the eastern states of Australia and New Zealand. The weighted average lease expiry of the Fund is not applicable because most users of the Fund s self storage facilities pay on a month to month basis. The Fund has limited property development exposure other than the expansion of some of the facilities where demand exists. 3 and 4.2 VALUATION POLICY Addresses key aspects of the Fund s valuation policy for real property assets. This disclosure principle requires responsible entities to disclose the details on valuation of direct property investments, including: The Fund s properties are valued annually by independent valuers, for the purposes of the accounts. 1.5 and 3.3 how often they obtain valuations for direct investments in real property; whether valuations are in accordance with relevant industry standards. RELATED PARTY TRANSACTIONS Provides information on the Fund s approach to related party transactions. This disclosure principle requires responsible entities who enter into transactions with related parties to disclose their approach to these transactions by including details of: investments in and loans, guarantees and fees to any related party; their policy on related party transactions; how the processes and arrangements are monitored to ensure their policy is followed. Abacus Property Group has a relevant interest of 19.9% in the Fund s issued Stapled Securities. The Fund has acquired the Additional Assets from Abacus Property Group, initially financed by the Abacus Working Capital Facility. Abacus has a policy to ensure that the terms of any related party transactions are at arm s length. Abacus compliance framework requires appropriate review of all controls applying to a fund at least annually. 1.5, 1.6 and 1.14 DISTRIBUTION PRACTICES Addresses the Fund s distribution practices and provides information on the sources of the distributions. This disclosure principle requires responsible entities that make or forecast making distributions to members to disclose: Distributions are paid quarterly based on distributable income of the Fund and through income support provided by Abacus. 1.8, 7.3, 7.4, 7.5, 8.3 and 10.2 the source of current distributions and of forecast distributions; if the current or forecast distributions are not sourced solely from realised income, the reasons for making the distributions from other sources; if distributions are sourced other than from realised income, whether this is sustainable over the next 12 months WITHDRAWAL RIGHTS Provides information on the Fund s withdrawal practices. This disclosure principle requires responsible entities to clearly disclose the following details if investors are given the right to withdraw: The Fund is not a liquid fund. Securityholders may elect to sell their Stapled Securities under the Liquidity Facility. 1.13, 10.2 and 11.3 any significant factors or limitations that may affect the ability of investors to withdraw; an explanation of how investors can exercise their withdrawal rights; if withdrawals are to be funded from a liquidity facility, the material terms of the facility. ABACUS STORAGE FUND 11

14 SUMMARY OF THE OFFER Steps to Invest 1. Read this document in full including the disclaimer on the inside front cover. 2. Consider the Offer in light of your particular investment objectives and circumstances, paying particular attention to the risk factors. 3. Consult your financial, tax or other professional adviser to decide if this investment is appropriate for you. 4. Note there is no cooling-off period in relation to applications. 5. Complete the application form and, for New Investors, anti-money laundering (AML) forms. Complete the direct debit authority or make a cheque payable to Abacus Storage Fund and cross it not negotiable. Further details on how to complete the application form and meet the anti money laundering requirements are set out in Section Mail your application form, AML form and cheque or direct debit authority to: Abacus Storage Fund Registries Limited GPO Box 3993 Sydney NSW 2001 Abacus is required under the Anti-Money Laundering and Counter- Terrorism Financing Act 2006 to obtain additional information about the identity of New Investors and to verify that information by inspecting appropriate documents or by you providing certified copies of the documents. 12 ABACUS STORAGE FUND

15 SECTION 1 / Fund Overview 1.1 FUND BACKGROUND The Fund was launched in November 2005 with a portfolio of 16 self storage assets located in Australia and New Zealand, comprising more than 100,000 square metres of land and approximately 70,000 square metres of net lettable area that was occupied to approximately 80%. Shortly after the launch of the Fund, an additional 14 self storage assets were acquired, bringing the portfolio total to 30 facilities and making the Fund one of the largest industry participants in Australasia. By December 2006, $75 million of Securityholder equity had been raised to fund the initial portfolio of 30 self storage assets and the Fund was closed to new investment. The Fund s portfolio comprised assets that offered the potential for value enhancement through growth in occupancy, growth in rental rate, cost containment and the potential for capacity expansion through underutilised site coverage and surplus land. By 30 June 2007 the Fund had increased its total land holding to 242,000 square metres, increased net lettable storage area to approximately 130,000 square metres and increased average occupancy to 89%, all of which drove significant revenue and profit growth for the year. During the year ended 30 June 2008, the Fund continued to enhance operating revenue and profit as average rental rates were increased at the more mature facilities (ie occupied to 90% plus) and additional lettable area was developed at suitable sites. Although no new self storage assets were acquired during the year, overall self storage capacity increased by more than 8,000 square metres through the expansion of five existing self storage assets, which will assist in feeding the next phase of growth in the medium term. On a comparable store basis revenue across the portfolio increased by approximately 17% in 2008 which, given the predominantly fixed cost structure of a self storage business, resulted in a lift in store operating profit of 22%. Store profit margin increased from approximately 63% to 66% in that period. As a result of the strong level of operating performance achieved, asset values have also appreciated. This is evident in the most recent round of independent valuations, where a net revaluation uplift of $15 million was reported, despite some softening in capitalisation rates. The underlying growth in operating performance has driven net asset value per Stapled Security to $1.35 at 30 June However, as described in Section 2.3, the fair value of the Fund s interest rate swaps has declined in the period since 30 June 2008 as the Reserve Bank has reduced official interest rates, which has seen the adjusted net asset value per Stapled Security fall to $1.21 at 30 September Over the period since its launch in November 2005 until 30 September 2008, the Fund has provided its Securityholders with a total return of approximately 15% per annum, comprising a distribution yield of approximately 8% and capital growth of approximately 7% per annum (based on the original $1.00 investment and the adjusted net asset value of $1.21). The acquisition of the Additional Assets in December 2008 provides the Fund with the next stage of its growth, as the new assets all offer the potential for growth in occupancy, rate or net lettable area. The Fund now owns 41 self storage assets and 5 commercial properties across Australia and New Zealand, with gross assets of over $330 million, total land holdings of approximately 393,000 square metres, net lettable storage area of approximately 197,000 square metres and average occupancy of 86% on the expanded portfolio. Over the life of the Fund, the investment return is expected to comprise: tax deferred distributions from the Trust; dividends from the Company; franking credits on taxed Australian income; distributions of any realised capital gains; capital growth in the value of the underlying property portfolio; and increase in the value of the business. 1.2 ACTIVE MANAGEMENT Abacus is focused on maximising the value of the Fund s assets by working with Storage King to optimise store performance and, where possible, expanding the size of individual facilities. This has proven a successful model at a number of facilities over recent years, as illustrated in the following examples. ABACUS STORAGE FUND 13

16 SECTION 1 / FUND OVERVIEW Cleveland, Queensland Located in the Bayside residential suburb of Cleveland, 23 kilometres south east of the Brisbane CBD, this purpose-built facility was acquired in August 2005 for $3.0 million. At acquisition, the facility provided approximately 3,100 sqm of lettable area at 93% occupancy, which was maintained with significant growth in average rental rate in the period since. To take advantage of the strong demand for self storage space in the Cleveland area, a neighbouring site of 7,286 sqm was purchased in July 2007 for $2.3 million and construction of two new multi level storage buildings comprising 4,200 sqm of additional net lettable area was completed in July 2008 at a cost of $2.7 million. Current occupancy is relatively low following the recent expansion of the facility. In June 2008 the combined facility was revalued at $13.1 million, resulting in a net profit of $4.6 million on the $8.5 million total cost of the project. As a result of the increased size of the facility and the relatively fi xed cost structure of a self storage business, gross operating margin has increased. Acacia Ridge, Queensland Located approximately 14 kilometres south of the Brisbane CBD in a primarily industrial suburb, this purpose built facility was acquired in August 2005 for $6.1 million. At acquisition the facility provided a net lettable area of approximately 4,475 sqm and was 77% occupied. In addition, surplus land of approximately 2,300 sqm was used for open storage and provided potential for future expansion. Under Storage King s management, occupancy quickly grew to 90% plus and rental rate growth soon followed. The decision was then made to develop the surplus land and plans for the staged development of 3 additional self storage buildings have been approved. The first additional building, which provides approximately 1,200 sqm of additional net lettable storage area, was completed in June 2008 at a cost of $0.9 million, which has increased the overall facility net lettable area to approximately 6,100 sqm (including open/ warehousing storage areas). In June 2008 the combined facility was revalued at $11.0 million, resulting in a net profit of $3.7 million on the $7.3 million total cost of the project. The additional two storage facilities that have been approved for future construction when demand warrants provide further capital growth potential for this facility. DATE OF OFFER AT PURCHASE DOCUMENT Land area 4,107 sqm 11,393 sqm Net lettable area 3,093 sqm 7,351 sqm Occupancy 93% 49% Average rental yield $188 $215 Cost $3.0m $8.5m Value $13.1m DATE OF OFFER AT PURCHASE DOCUMENT Land area 10,040 sqm 10,040 sqm Net lettable area 4,475 sqm 6,173 sqm Occupancy 77% 76% Average rental yield $165 $204 Cost $6.1m $7.3m Value $11.0m 14 ABACUS STORAGE FUND

17 SECTION 1 / FUND OVERVIEW Thomastown, Victoria This purpose built facility is located in an established and developing industrial/showroom precinct in the Melbourne industrial suburb of Thomastown. The Metropolitan Ring Road runs along the property s northern boundary, providing excellent exposure for, and access to, the business. The facility was purchased in August 2005 for $3.35 million, at which time it comprised two buildings with net lettable area of 1,916 sqm, occupied to 82%. Since acquisition, the facility traded at occupancies consistently above 90% and so the Fund constructed a third storage building that was completed in November 2006 which delivered approximately 1,140 sqm of additional net lettable area at a cost of circa $1.0 million. Strong demand saw the third building reach high occupancy in a relatively short period, leading to the development of the fourth and final storage building at the property. This work was completed in June 2008 and delivered approximately 900 sqm of additional net lettable area at a cost of approximately $0.5 million. Since acquisition, the facility s net lettable area has increased from 1,916 sqm to 3,961 sqm and despite the facility doubling in size, strong occupancy levels have been maintained and a considerable lift in average rental rates has also been achieved. In June 2008 the combined facility was revalued at $6.4m, resulting in a net profit of $1.5 million on the $4.9 million total cost of the project. Blacktown, New South Wales Located 34 kilometres west of the Sydney CBD and 10 kilometres west of Parramatta, this property is part of an established industrial precinct with easy access to the M4 motorway and the Great Western Highway. The modern facility comprises seven storage buildings and a two storey administration building including an office and residence. The facility was acquired in September 2005 for $8.0 million and had net lettable area of 6,292 sqm. At acquisition the facility was occupied to 86% and after the Fund acquired the asset, occupancy was maintained consistently above 90% and average rental rate at the site was increased. Capital expenditure was incurred of $0.5 million. While there was insufficient surplus land at the site to capitalise on the strong operating performance by expanding the facility horizontally, Abacus and Storage King obtained development consent to build an additional 500 sqm of net lettable area over the top of the existing storage buildings. This project was completed in June 2008 at a cost of approximately $0.7 million. In June 2008 the combined facility was revalued at $13.0 million, resulting in a net profit of $3.1 million on the $9.9 million total cost of the project DATE OF OFFER AT PURCHASE DOCUMENT Land area 5,084 sqm 5,084 sqm Net lettable area 1,916 sqm 3,961 sqm Occupancy 82% 87% Average rental yield $186 $225 Cost $3.35m $4.9m Value $6.4m DATE OF OFFER AT PURCHASE DOCUMENT Land area 10,740 sqm 10,740 sqm Net lettable area 6,292 sqm 6,811 sqm Occupancy 86% 92% Average rental yield $183 $226 Cost $8.0m $9.9m Value $13.0m ABACUS STORAGE FUND 15

18 SECTION 1 / FUND OVERVIEW 1.3 FUND STRUCTURE The Fund comprises the Abacus Storage Property Trust (Trust) and Abacus Storage Operations Limited (Company). Fund Securityholders own Stapled Securities, which comprise one unit in the Trust stapled to one share in the Company. The Trust is a managed investment scheme registered with ASIC (ARSN ) and owns the majority of the Fund s real property assets. The Company owns the self storage businesses that operate at each property, leasing the majority of properties from the Trust and entering into licensing and management agreements with Storage King in respect of the day to day management of the business. Abacus acts as Responsible Entity of the Trust and manages the Company. 1.4 THE SELF STORAGE INDUSTRY The self storage industry in Australia emerged in the late 1970s as a number of Australian businesses adopted the concept as it had been developed in America. The industry has grown over the past thirty years. The self storage industry in New Zealand began in the 1990s. The Fund is the second largest owner of both self storage properties and self storage businesses in Australasia behind Kennards Self Storage. Competitors of the Fund in the industry comprise: Two other national operators Kennards Self Storage and National Storage; A number of large state based private businesses that own multiple sites; and A large number of single site owners, some of which operate institutional grade assets, but the majority of which operate smaller sites that are not suited to institutional ownership. There is limited new supply in the sector due to unfavourable land/development economics, and in its first three years the Fund has chosen not to develop any new facilities. The Fund s preferred growth strategy is to acquire existing facilities from retiring owners and to then grow these businesses organically. The demand for self storage is driven by a number of factors including: a shift to apartment living with a resulting reduction in household storage space; an ageing population residing in smaller homes; house renovations; desire by individuals, business and government to utilise space more efficiently; and increased customer awareness of the self storage industry. SIMPLIFIED STRUCTURE CHART Abacus Storage Fund Abacus Storage Property Trust Stapled security Abacus Storage Operations Limited Freehold title Storage Facilities Lease Storage Business Management agreement Storage King 16 ABACUS STORAGE FUND

19 SECTION 1 / FUND OVERVIEW The business mix at a self storage facility typically comprises about 60-70% residential users and 30 40% small business/corporate users. After a number of years operating in a favourable economic environment, the Fund is now entering an economic environment where the outlook for growth is more subdued. While it is not possible to predict or forecast the likely impact of this new environment on the performance of the Fund s self storage facilities, there will be some customers who withdraw from the Fund s self storage facilities to lower their cost of living. On the other hand, past experience from both the Australian and American markets is that, in difficult economic climates, there tends to be demand from customers that are in financial distress, who are either downsizing their accommodation or relocating to source new employment. The combination of these factors has to date seen demand levels for self storage remain reasonably resilient across the portfolio this year, despite the general decline in consumer sentiment over the same period. There is also some uncertainty as to the outlook for capitalisation rates for property values and potentially self storage assets. The Fund s current weighted average capitalisation rate is 8.66%. To the extent that softening of capitalisation rates occurs in the sector, the impact on the Fund s property values may be limited given the expected growth in earnings through rate and occupancy growth at the facility level and the continued strong management from Storage King. Further, the softening of capitalisation rates is most likely to have a greater impact on unbranded, smaller facilities than the institutional grade facilities owned by the Fund, which trade under a strong national brand in Storage King, and benefit from the management expertise and economies of scale that Storage King provides. 1.5 ACQUISITION OF THE ADDITIONAL ASSETS The Fund acquired the Additional Assets in December 2008 from Abacus Property Group. The Additional Assets acquired included: five self storage facilities in Townsville which, at current occupancy of 75%, offer potential for further growth in this Queensland regional town; two self storage facilities in suburban Brisbane, both of which have expansion potential; one self storage facility in Hamilton, New Zealand which, at 79% occupancy, offers future growth potential; and an 86% controlling interest in the unlisted public company, U Stow It Holdings Limited. U Stow It holds the pre-eminent self storage portfolio in the ACT, with self storage facilities at Kambah, Belconnen and Fyshwick that are large, high occupancy, high margin businesses with potential for further expansion, plus five ancillary commercial properties. The Fund intends to acquire the remaining 14% of U Stow It as soon as possible. Abacus Property Group acquired these assets in its own right over the past 15 months. The Fund did not acquire the assets directly because some of the facilities needed to be brought under Storage King s management and systems and the earnings stabilised. In addition the Fund was closed at the time and did not have access to the required equity and the acquisition of U Stow It involved a complex regulated takeover bid. In December 2008,the Fund acquired the Additional Assets from Abacus Property Group for $82.5 million based on independent valuations of the assets. The Townsville, Brisbane and Hamilton assets were valued in August 2008 by DTZ at $43.1 million and the 86% controlling stake in U Stow It Holdings Limited was valued by PKFCA in December 2008 at $39.3 million based on a controlling shareholding of less than 90%. The PKFCA valuation is based on the U Stow It balance sheet at 30 June 2008 that includes the underlying properties valued by CBRE at $55.0 million in June 2008 (applicable as at that date), bank debt of $9.9 million and other liabilities. The total cost to the Fund of these acquisitions and capital raising is $87.5 million including stamp duty, capital raising fees, professional fees and working capital. The acquisition of the Additional Assets is expected to benefit the Fund through: Increasing the Fund s gross assets by 48% to $334 million and number of assets by 37% to 41 self storage facilities. Increasing the Fund s geographic presence in Queensland and ACT. Acquiring a portfolio of assets that, due to the varying maturity profiles, offers good potential for occupancy and rate growth, a strategy which has proved successful with the Fund s Existing Assets. Abacus is entitled to an acquisition fee on the Additional Assets of approximately $1.2 million. Abacus has agreed to waive this fee. ABACUS STORAGE FUND 17

20 SECTION 1 / FUND OVERVIEW Townsville Brisbane Canberra Hamilton Additional storage assets BRISBANE, QUEENSLAND 148 Evans Road Salisbury Located on the north east corner of Industries Road, this highly visible site comprises a refurbished, high clearance converted warehouse over 2 levels, and approximately 1,600 sqm of vacant land with approval for further facility expansion. BRISBANE, QUEENSLAND 985 Fairfield Road Yeerongpilly This long established facility occupies a highly visible location on a major arterial road close to other major roadways, established commercial and industrial estates and older established residential developments. The facility comprises two internal levels of storage. TOWNSVILLE, QUEENSLAND 1 Regiment Court Condon The property comprises an established self storage facility occupying a visible corner site in a central location. The facility is purpose built and comprises 5 main buildings. TOWNSVILLE, QUEENSLAND Bayswater Road Currajong The facility comprises 3 main buildings on the site, which has access directly off Bayswater road and secondary access to Reardon street. TOWNSVILLE, QUEENSLAND 8 Ingham Road, West End This long established facility occupies a visible site in close proximity to the Townsville CBD. The site contains 6 main buildings and surplus land for further development. 18 ABACUS STORAGE FUND

21 SECTION 1 / FUND OVERVIEW TOWNSVILLE, QUEENSLAND D Arcy Drive Idalia The recently established purpose built facility, comprises 5 main buildings, and is located in close proximity to a major arterial intersection on the south eastern corner of the Townsville suburban area. TOWNSVILLE, QUEENSLAND 4-8 Catalyst Court Mount St John Located to the west of the Townsville CBD, the established facility contains 19 buildings which have been developed over time. HAMILTON, NEW ZEALAND 31 Ruakura Road Hamilton The property comprises a purpose built storage facility, located on a main arterial route on the northern side of the Hamilton CBD, adjacent to the University and other educational facilities. CANBERRA, ACT 86 Nettlefold St Belconnen Purpose built storage facility currently comprising 12 single level detached storage blocks and 1 two level storage building, with a new block currently under construction. Adjoining the storage component are three fully leased commercial tenancies with direct access onto Nettlefold street. CANBERRA, ACT 25 Ipswich St Fyshwick This purpose built storage facility has excellent main frontage to Ipswich Street, comprises 10 buildings for storage accommodation, two of which were recently completed, and one additional building with ground floor office and two caretakers units on the upper level. CANBERRA, ACT Jenke Circuit Kambah Purpose built facility fronting Jenke Circuit running parallel to Drakeford drive, a major roadway connecting the Tuggeranong Town Centre to the CBD of Civic. The existing facility comprises 6 detached storage buildings, with a single level office and two residences. Additional land was purchased in July 2007 opposite the existing operation, which will provide expansionary potential for the facility subject to relevant approvals. ABACUS STORAGE FUND 19

22 SECTION 1 / FUND OVERVIEW 1.6 FUNDING THE ACQUISITION OF THE ADDITIONAL ASSETS The Funding of the Additional Assets and the costs of the Offer are as follows: SOURCES AND APPLICATION OF FUNDS $ M Abacus Working Capital Facility/Proceeds of Offer 37.0 Proceeds from bank debt 50.5 Total sources of funds 87.5 Acquisition of Additional Assets 82.5 Stamp duty 2.1 Capital raising fees 1.4 Other costs associated with the Offer 0.9 Net working capital acquired 0.6 Total applications of funds 87.5 The Abacus Working Capital Facility Abacus Finance has provided the Fund with a bridging facility of $37.0 million under Tranche A of the Abacus Working Capital Facility to purchase the Additional Properties. As equity is raised pursuant to this Offer, it will be applied to the repayment of the bridging facility. The Abacus Working Capital Facility has a maximum limit of $55.0 million, split into two components: Tranche A: $37.0 million for a maximum period of 10 years to enable the Fund to finance the acquisition of the Additional Assets pending the completion of the equity raising the subject of this Offer; and Tranche B: $18.0 million line of credit that is available to the Fund until 30 June 2010 to meet any short-term capital requirements, such as capital expenditure and reduction of gearing. The facility limit will reduce to $10 million when the Fund acquires 100% of the shares in U Stow It. At the date of this Offer Document $37.0 million of Tranche A of the Abacus Working Capital Facility has been drawn but no amounts have been drawn against Tranche B. The proceeds from the Offer will be used to repay Tranche A of the Abacus Working Capital Facility. Additional bank debt or equity over-subscriptions will be used to repay any amount drawn on Tranche B of the Abacus Working Capital Facility. If Abacus does not receive sufficient applications to repay the Abacus Working Capital Facility in full by the close of the Offer, Abacus will continue to make available to the Fund the Abacus Working Capital Facility until the repayment date or convert the balance owing under the facility to Stapled Securities at the then current issue price. The rate of interest that Abacus Finance charges on the Abacus Working Capital Facility is the same as the cash distribution yield that Securityholders receive on the Stapled Securities. The rate of interest will therefore change if there is a change in the distribution paid to Securityholders or a change in the issue price of Stapled Securities. Accordingly, the yield to investors will not be affected if the Abacus Working Capital Facility is not repaid in full, although there may be an impact on the net asset value of the Fund and reported net profit. The Abacus Working Capital Facility has the same capital growth entitlements as investor equity if it is not repaid through the subscription of Stapled Securities. In addition, the Abacus Working Capital Facility is subordinated to bank debt and ranks proportionately with Securityholders on any return of capital. The Abacus Working Capital Facility may be terminated in certain circumstances, including if Abacus ceases to be Responsible Entity of the Fund. A summary of the terms of the Abacus Working Capital Facility is set out in Section CAPITAL STRUCTURE The pro-forma capital structure of the Fund at 1 October 2008 is summarised below. It assumes that the Additional Assets were acquired at that date, that the $37.0 million in equity is fully subscribed and the Abacus bridging finance is repaid in full. Gross asset value $334.2m Bank debt $(181.6)m Other working capital 1 $(19.4)m Net assets 2 $133.2m Less outside equity interests 3 $(5.3)m Securityholder equity $127.9m Stapled Securities on issue 108,398,000 Net Asset Value per Stapled Security 4 $1.18 Gearing 2 56% 1 The main elements of other working capital liabilities are a deferred tax liability relating to the property assets within U Stow It, and the interest rate swap liability. The deferred tax liability is expected to be extinguished upon 100% acquisition of U Stow It. 2 The Fund s pro forma balance sheet assumes that as at 1 October 2008 the Fund is fully subscribed with New Stapled Securities to repay Tranche A of the Abacus Working Capital Facility. 3 Outside equity interests represent the 14% of U Stow It not presently owned by the Fund. Note that 100% of U Stow It gross assets and 100% of its gross liabilities are included in the table above. 4 Net asset value per Stapled Security is calculated by dividing Securityholder equity by the number of Stapled Securities on issue. 20 ABACUS STORAGE FUND