Charter Hall Office REIT : Unitholders Letter - Consortium Update

Charter Hall Office Management Limited

ABN 75 006 765 206

AFS Licence No. 247075

Responsible entity of

Charter Hall Office REIT

Level 11, 333 George Street

Sydney NSW 2000

GPO Box 2704

Sydney NSW 2001

Friday, 20 January 2012
Dear Unitholder,

Direct [phone]

Australia 1300 365 585

International [phone]

Registry 1300 303 063

Fax [phone] charterhall.com.au

As Independent Chairman of Charter Hall Office Management Limited (CHOML), the responsible entity of Charter Hall Office REIT (CQO), I am writing to inform you about a significant development regarding your investment in CQO.

SUMMARY

• CHOML has entered into a binding Agreement with the Consortium under which they will acquire all CQO units, except certain of those held by the members of the Consortium and their associates, subject to the satisfaction of a number of conditions including unitholder approval

• The Consortium comprises Reco Ambrosia Pte Ltd (an affiliate of Government of Singapore Investment Corporation Pte Ltd), the Public Sector Pension Investment Board of Canada and a member of the Charter Hall Group

• Under this Proposal unitholders will receive $2.49 per unit in respect of the Australian assets

• Regardless of whether the proposal is implemented, CQO unitholders will receive one or more payments out of, or referrable to, the net proceeds from the sale of CQO's portfolio of assets located in the US, estimated to be $1.141 per unit assuming that certain claims and liabilities provided for under the Agreement do not crystallise, other than those already provided for

• These two separate estimated amounts total $3.63 per unit1

• The Independent Director Committee unanimously recommends the Proposal and intend to vote their CQO units in favour of the Proposal, in each case subject to a superior proposal not being made and to the Independent Expert finding the Proposal to be in the best interests of CQO unitholders

• The Proposal is intended to be implemented by way of trust scheme, and is subject to unitholder approval at a unitholder meeting scheduled to be held on or around 15 March 2012

• An explanatory memorandum, including an Independent Expert's Report, is expected to be mailed to unitholders mid-February 2012, which will describe the terms of the Proposal, payments to be made to CQO unitholders in connection with it and give details of the CQO unitholder meeting to approve the proposal

• No immediate action is required, however please read this letter carefully

1 Assumes all US asset sales close, net proceeds are US$575 million after costs, there are no warranty claims and funds are repatriated at AUD:USD 1.03. This amount may vary with movements in the exchange rate

The Proposal

On 3 January 2012, CHOML announced it had entered into a binding Scheme Implementation Agreement (Agreement) with the Consortium in relation to a proposed trust scheme under which they will acquire all the units in CQO except certain of those held by the members of the Consortium or their associates, subject to a number of conditions, including unitholder approval (Proposal). The Consortium comprises Reco Ambrosia Pte Ltd (an affiliate of Government of Singapore Investment Corporation Pte Ltd), the Public Sector Pension Investment Board of Canada and a member of the Charter Hall Group.
Under the Proposal, CQO unitholders other than the Consortium members and their associates 2 (Eligible Unitholders) will receive $2.49 per CQO unit in respect of the Australian assets which, subject to the Proposal being approved by unitholders, is currently expected to be paid on 30 March 2012 (Implementation Date).
In addition, CQO unitholders will receive one or more distributions of net proceeds from the sale of CQO's US assets plus any accrued earnings from the US assets from 1 January 2012 (collectively, US Sale Proceeds) prior to the Implementation Date, subject to certain amounts being withheld to meet contingent liabilities predominantly related to CQO's offshore subsidiaries (Scheme Contingent Consideration).

The Independent Director Committee unanimously recommends the Proposal

The members of the CHOML Independent Director Committee (IDC) have unanimously recommended the Proposal and intend to vote their CQO units in favour of the Proposal, subject to a superior proposal not being made and the Independent Expert finding the Proposal to be in the best interests of Eligible Unitholders.
The original proposal, which was first received in August 2011, was priced at $0.10 per unit less than the current Proposal, and was referenced in my Chairman's letter in the 2011 CQO Annual Report. After this initial approach, the IDC explored a range of alternative strategic options to maximise CQO unitholder value. These options included seeking alternative proposals from a broad spectrum of potential acquirers for all CQO's Australian assets as well as options to wind-up CQO. After considering these options and through negotiations with the Consortium, the IDC was able to improve the original offer price which was at a 9.1% discount to net tangible assets3 (NTA). The current bid is now at an improved 4.2% discount to
NTA3.
Following this process, the IDC concluded that the Consortium's Proposal offers the most compelling and certain value proposition currently available to Eligible Unitholders. Further details of the reasons for the IDC's recommendation of the Proposal will be provided in the explanatory memorandum.

Proposal conditions and indicative timetable

The Proposal is scheduled to be implemented by the end of March 2012, however, it is conditional on a number of matters set out in the Agreement, including CQO unitholder approval, the completion of the US asset sale process, the Independent Expert concluding that the transaction is in the best interests of unitholders, receipt of certain regulatory approvals and no material adverse changes occurring in respect

2 Public Sector Pension Investment Board of Canada will participate in the trust scheme in respect of its holding of 5,218,676

CQO units

3 NTA refers to the pro forma estimated NTA for the Australian business of $2.60 included in CQO's ASX announcement dated

5 December 2011

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of CQO4. The Agreement includes provisions customary for a transaction of this nature, including exclusivity arrangements and provisions for payment of a break fee of $11 million to the Consortium in certain circumstances.
Although all US asset sales are on schedule and are expected to have settled prior to the end of March
2012, there is a risk that settlement of one or more sales may be delayed 5.
It is expected that CQO unitholders will receive an explanatory memorandum in mid-February which will include a more detailed explanation of the Proposal, including the manner in which any Scheme Contingent Consideration would be paid, along with a copy of the Independent Expert's Report. A meeting of CQO unitholders is scheduled to be held on or around 15 March 2012 to consider the Proposal, with implementation scheduled to occur on 30 March 2012.
For the proposal to be implemented, Eligible Unitholders representing at least 75% of the CQO units voted at the unitholder meeting (in person or by proxy) must be in favour of the Proposal.
An indicative timetable for the Proposal is set out as Annexure A to this letter.

Summary of payments to CQO unitholders

Eligible Unitholders will receive a number of cash payments in connection with the US asset sale process and the Proposal. In summary, you should receive:
A. $2.49 per CQO unit, comprising a cash payment of approximately $1.83 per unit from the Consortium and a special distribution of approximately $0.66 per CQO unit from CHOML (to be majority funded via a new CQO debt facility at the expense of the Consortium), paid on the Implementation Date. This is currently estimated to be 30 March 2012;
B. one or more special distributions of the proportion of US Sales Proceeds due to CQO unitholders, declared prior to the Implementation Date, expected to be no less than $0.98 6 per unit; and
C. payments of Scheme Contingent Consideration expected to be up to $0.16 per unit, payable to Scheme Unitholders, which may be reduced by the amount of certain claims, liabilities and expenses in accordance with the terms of the Agreement. The first payment of Scheme Contingent Consideration (if any) is scheduled to be made six months after the Implementation Date.
The sum of the payments outlined in points B and C are estimated to total $1.146 per unit assuming that no actual claims or liabilities crystallise under the implementation of the Agreement, other than those already provided for.

4 Full details are provided in the Scheme Implementation Agreement available at www.charterhall.com.au/cqo

5 The closing of the sale of each US property (or CQO's interest in each property) is subject to customary closing conditions, some of which are beyond CQO's control, including receipt of lender consents and other third party consents

6 Assumes all US asset sales close, net proceeds are US$575 million after costs, there are no warranty claims and funds are repatriated at AUD:USD 1.03. This amount may vary with movements in the exchange rate

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Distribution and valuations for the half year ending 31 December 2011

We are pleased to confirm that on or about 23 February 2012, you will receive a distribution for the half year ending 31 December 2011 of 11.0 cents per unit providing you were holders prior to the ex- distribution date of 22 December 2011. This distribution includes 7.2 cents per unit from CQO's Australian operations and 3.8 cents per unit from CQO's US operations.
We confirm all the Australian assets were re-valued at 31 December 2011 which reflected a 0.1% increase in value from the 30 June book value, as announced to the market on 3 January 2012.

What do you need to do? There is no requirement for you to take any immediate action in relation to this Proposal. The Explanatory Memorandum providing further information is expected to be sent to unitholders mid-February.

Should you wish to discuss any of the matters raised in this letter please speak with your financial adviser, visit www.charterhall.com.au/cqo or contact our investor information line on 1300 303 063 (or if calling from overseas [phone]).
Yours sincerely,
Roger Davis
Independent Chairman of Charter Hall Office Management Limited
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Annexure A - indicative Proposal timetable

Event	Date
Despatch Explanatory Memorandum	Tuesday, 14 February 2012
Unitholder Meeting	On or around Thursday, 15 March 2012
Effective Date	Friday, 16 March 2012
Record Date	Friday, 23 March 2012
Implementation Date	Friday, 30 March 2012

Note: The Agreement provides mechanisms where the scheme could be delayed from 30 March 2012 up to and including 31 May

2012, including as a result of a delay in the US Sale Process. CQO unitholders will be liable for any increased debt costs to the Consortium as a result of this delay, however will receive the benefit of accrued distributions from 1 April 2012. If the Scheme is not finalised by 31 May 2012, the Scheme may be terminated, unless agreed to be extended.

US sale proceeds

In determining the net sale proceeds from the sale of the US portfolio and the pro-rata special distribution to unitholders, it is assumed that the conditions for closing are met for the entire US portfolio, thereby achieving closing of the sale of all properties.

To the extent that conditions to closing are not satisfied for certain properties or all properties this may materially impact the proceeds received by CQO and the amount of proceeds available for the pro-rata special distribution to unitholders. In addition, various other factors may vary the quantum of the net sales proceeds and the size of the pro-rata special distribution to unitholders, including movements in working capital, timing of properties sold, debt transfer or termination costs. Because satisfaction of these assumptions is not within the control of CHOML, CHOML is not in a position to give, and does not give, any assurance as to the

quantum or timing of receipt of net sale proceeds.

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