Letter to RNY Shareholders

We understand that you are a fellow unitholder of the RNY Property Trust (RNY). Aurora Funds Management Limited (Aurora) currently holds 19.9% of the units of the RNY Property Trust (RNY) and has requisitioned a meeting of the unitholders of RNY to consider a change in its responsible entity from RNY Australia Management Limited (RAML) to Aurora.

We thought it as important that we communicate with you as a fellow unitholder in relation to why Aurora took this step. Aurora has previous tried to engage constructively with RNY about Aurora’s concerns, including by putting forward a potential recapitalisation proposal aimed at delivering unit holder value. As those attempts were unsuccessful, Aurora carefully considered all its options to enhance and protect the value of its investment in RNY, and concluded that the best way to achieve this is to change the management of RNY.

We believe changing the management of RNY is in the best interests of investors for these reasons:
 RAML has overseen a 97% – 99% reduction in unit holder value since listing, with RAML recently estimating the net asset value of a unit in RNY at 1-3 cents, compared to its initial listing price of $1.00.

 RAML appears to intend to exit RNY’s residual properties in an accelerated manner, reducing the potential returns for RNY’s unit holders. Aurora is of the view that implementing a ‘hold strategy’ for the properties and deferring any sale process would result in superior returns.

 While market fundamentals in the Westchester and Long Island property markets (the location of RNY’s key residual properties) have experienced challenging conditions, recent independent research on each of these regions identifies that market fundamentals are now improving or stabilised as former excess supply has been absorbed.

 RAML and related entities (which provide services to the RNY property portfolio, such as property management and leasing) appear to have charged $84.7m* in direct and indirect fees to RNY over the last 12 years. Aurora is of the view that appointing tenancy and asset managers that are unrelated to the responsible entity of RNY would likely result in improved tenancy results as well as lower costs for unit holders. Aurora is also of the view that there is opportunity to reduce RNY’s ongoing overhead costs.

 Aurora has been in discussions with US based financiers that have provided indications they would support a refinancing of the key properties on conditions more favourable than current. RAML previously rejected a proposal by Aurora to recapitalise RNY to allow it to retain these properties.

Aurora notes that entities related to RAML have entered into ‘poison pill’ arrangements that could be exercised if RAML is removed as responsible entity and, if exercised, could trigger a liquidation of RNY’s properties that would be expected to further impact unit holder returns. RAML should let unit holders know immediately of its intentions in this regard, and how RAML managed the potential for conflict of interest when these arrangements were put in place and how it intends to avoid its obvious self-interest if these arrangements are enlivened. Aurora also notes that it is possible that the meeting requisition may encourage RAML to provide an alternate proposal to generate value for RNY unit holders, and Aurora remains open to considering such a proposal. Aurora has also established a website (www.rnyREchange.net) where unit holders can subscribe to an email list and receive ongoing updates to ensure they are fully informed in relation to what is being proposed.

RAML is required to convene the meeting and despatch notice of the meeting together with a proxy from for unit holders to consider. A copy of the statement prepared by Aurora that will accompany the notice of meeting is available on the www.rnyREchange.net website.

We believe it is important that RAML is held to account for the performance of RNY as well provide the best opportunity for RNY unitholders to maximise the value of their investment. We accordingly encourage all unitholders to participate in the upcoming meeting.

RNY unit holders can contact me directly with any questions in relation to this proposal on +61 411 241 272 or bnorman@aurorafunds.com.au.

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