FSGL: Announcement of the conclusion of a legally binding agreement for the proposed acquisition of the hotel component of the Pitt Street development project, Sydney

FIRST SPONSOR GROUP LIMITED

(Incorporated in Cayman Islands)

(Company registration number: AT-195714)

ENTRY INTO LEGALLY BINDING AGREEMENTS – PROPOSAL TO ACQUIRE THE HOTEL COMPONENT OF THE DEVELOPMENT PROJECT IN PITT STREET, SYDNEY

1. INTRODUCTION

1. Previous announcements.The board of directors of First Sponsor Group Limited (“Society“, and collectively with its subsidiaries,”Group“) refers to the Company’s announcements dated November 25, 2019 and January 16, 2020 (“Previous announcements“) in connection with the subscription of shares in v5 Pitt Street Trust (formerly ICD SB Pitt Street Trust) (“Confidence“) and shares of v5 Pitt Street Pty Ltd (formerly ICD SB Pitt Street Pty Ltd) (in its capacity as trustee of the Trust,”Developer“).
   Unless defined otherwise herein, capitalized terms used in this announcement will have the same meaning as assigned to them in previous announcements.
2. Entry into HOA.The Board wishes to announce that, on October 18, 2021, the Promoter and President of the City Tattersall’s Club for and on behalf of the City Tattersall’s Club (“CCT“) has entered into a legally binding Memorandum of Understanding (“HOA“) which defines the key terms on which the parties must negotiate and work to finalize the detailed documentation of the transaction (“Detailed documentation“) concerning, inter alia:
3. 1. the transfer by the CTC to the Promoter (or its agent) of the legal title of the proposed hotel component of the Project (“Hotel component transfer“) which will include, among others, certain storage spaces in basement 1, spaces on the ground floor and levels 5 to 13 of the Project (“Hotel component“); and
   2. the capping of certain costs, charges, expenses, fees and disbursements incurred by or on behalf of the CCT in connection, among other things, with the design and construction of works in the premises of the Club, cold work in 194, Pitt Street and Cold Base construction work and base construction work associated with 202 to 204 Pitt Street (“CTC development costs“) which are payable by CTC under the DMA (“CTC development cost cap“).

It is expected that the developer’s agent will be an entity owned by the Group (70%), ICD Land (20%) and Bull-Oak (10%).

2. KEY HOA TERMS

2.1 Hotel component transfer.In accordance with the HOA, the developer and the CTC have agreed, among other things, that:

1. Unless otherwise agreed after obtaining legal and tax advice, the Transfer of the Hotel Component will be effected by the exercise of a put option that can be exercised by CTC upon completion of the design and construction of the Component. Hotel (“Hotel works“) or the exercise of a purchase option that may be exercised by the Promoter (or its agent) at any time (whether before, at or after the completion of the Hotel Works);
2. The consideration for the transfer of the hotel component payable to the CCT (“Consideration“) will be an amount equal to the aggregate of certain costs, charges, expenses, fees and disbursements incurred by or on behalf of the Promoter and the CTC in connection with the Hotel Works (“Hotel development costs“); and

1. 1. The hotel development costs payable by the CTC under the DMA will be deducted from the consideration on the date of the transfer of the hotel component.
2. CTC development cost cap.Subject, among other things, to the approval by the members of the CTC of the transfer of the hotel component and of the transactions contemplated within the framework of the HOA (collectively, “Proposed operation“) and registration in the Detailed Documentation relating to the Transfer of the Hotel Component:
3. 1. CTC development costs will be capped by adding a contingency (calculated at 20% of estimated construction costs) (as estimated by the quantity surveyor jointly appointed by the parties under the DMA) to CTC development costs ( “CTC development cost capAs an example, if (a) CTC’s estimated development costs are A $ 75 million and (b) 20% of the estimated construction costs are A $ 10 million , the CTC development cost cap will be the sum of the amounts shown in (a) and (b) (ie A $ 85 million).
   2. If the actual CTC development costs are less than the CTC development cost cap, the developer will be entitled to receive an amount equal to 50% of the difference between the actual CTC development costs and the CTC development cost cap.
4. Some other salient terms.The Developer will have full control over all decisions relating to the Project, with the exception, among others, of certain matters which will require a material modification of the project file concerning the Project or will have a material and unfavorable impact on CTC or the premises of the Project. Club, whether or not, the transfer of the hotel component is carried out.
   The transfer of the hotel component is conditional on certain conditions, including the approval of the members of the CTC of the proposed transaction. In the event that the transfer of the hotel component is not completed due to the failure of the CTC to obtain the approval of its members, the CTC will pay a termination fee equivalent to A $ 1 million as compensation for the time, commitment and expense incurred by the developer to evaluate and negotiate the transfer of the hotel component.
   The DMA will be amended to reflect the terms of the HOA.

1. JUSTIFICATION OF THE PROPOSED TRANSACTION
   Most importantly, the proposed transaction will provide the trust with greater control and flexibility to manage the project, whether or not the transfer of the hotel component is approved by the members of the CTC. In addition, if the transfer of the hotel component is approved by the members of the CTC, the acquisition of the hotel is in line with the Group’s plan to increase its commercial presence in key cities in Australia.
2. FUNDING
   The Group will finance the transfer of the hotel component using its existing cash resources and committed unsecured credit facilities.
3. OTHER ADS
   The Proposed Transaction is subject to certain conditions precedent such as obtaining approval from CTC members for the Proposed Transaction and contemplated transactions under the HOA by November 30, 2021. The Company will make appropriate announcements if and when the Detailed Documentation is concluded or if there are other significant developments regarding the proposed transaction.

6. CAUTION

Shareholders and potential investors are urged to exercise caution when trading or dealing in shares of the Company, as there is no certainty or assurance that the preconditions for the proposed transaction will be met or that the proposed transaction will materialize. Shareholders and potential investors should consult their brokers, bank managers, lawyers or other professional advisers if in any doubt as to what action they should take.

BY ORDER OF THE COUNCIL

FIRST SPONSOR GROUP LIMITED

Neo Teck Pheng

Managing Director and Executive Director of the Group

October 18, 2021