Financial Results Presentation 3Q2018
Contents A Recent Highlights B 3Q2018 Financial Performance C Real Estate Highlights D Industrial Market Outlook E Appendix 2
Recent Highlights 120 Pioneer Road
Successful Completion of VIT Merger ESR-REIT is now well-positioned with S$3.0bn assets across 56 properties Total asset size of approximately S$3.0bn 79.8% properties 56 across 5 different Portfolio occupancy of sub-asset >90% classes Land lease expiry c.33.5 above JTC Total GFA of average of 88.7% (1) years approximately 13.6m sq ft c.350 tenants Increase in net 40.2% from different property income trade sectors Source: JTC, Company Filings. Notes: 4 4 (1) Based on 2Q2018 data from JTC.
Successful Completion of VIT Merger Significant Proportion of Portfolio in Business Parks/ High Specs Sectors Business Parks/High-Specs are favourable sectors with limited supply and potential to achieve higher rentals Higher rental sectors, in line with Forecast Business Park average supply is Government’s Industry 4.0 initiative half of 10 year average demand and supply (46% of portfolio) Average Industrial Rents (S$ / sq ft / month ) (1) Historical and Future Pipeline (Net Floor Area m sqft) (2) 4.50 4.08 Forecast 4.00 2.5 10y Average Supply: c.1.3m Gap between 3.50 Demand and 2.0 3.15 General Supply of 3.00 Industrial Business 1.5 Business Parks 21% Park 2.50 30% 1.57 1.0 2.00 Light 1.58 Industrial 1.50 10y Average Demand: c.1.1m 1.20 0.5 16% High-Specs 1.23 Logistics/ 1.00 Industrial Warehouse 0.0 16% 17% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018F 2019F 2020F 0.50 1Q13 4Q14 3Q16 2Q18 Factory Business Park High-Specs Potential Average Supply: c.0.6m (Ground Floor) Warehouse Factory Warehouse (Ground Floor) (Upper Floor) (Upper Floor) Additionally allows REIT flexibility to conduct AEIs on ESR- REIT’s existing identified assets – Targeting higher-paying industrialists requiring high-specs space requirements Focus to complete merger integration by end 2018 Note: (1) Based on 2Q2018 data from CBRE and JTC. 5 (2) Based on 2Q2018 data from Knight Franck Consultancy.
ESR-REIT Business Parks Poised to Ride on Potential Upside ▪ Rents for Rest of Island submarket grew 1.3% q-o-q in 2Q2018 (1) ‒ ESR-REIT Business Park rents are poised to ride on potential demand and rental upside Asking Rents Across Key Business Parks in Singapore (S$ / sq ft / month ) (2) 1 Cleantech Park 2 International Business Park S$5.00 3 One North 4 Science Park 2,4,6,8 Changi Business Park S$2.77 – S$3.81 1 S$3.00 – S$5.50 S$3.50 – S$4.40 2 Business Parks – S$5.00 – S$6.50 3 East Region S$3.90 – S$6.80 4 750 – 750E Chai Chee Road S$3.00 – S$3.70 Note: (1) Based on 2Q2018 data from CBRE. 6 (2) Based on CBRE Singapore Industrial & Logistics Asking Rental Guide, September 2018.
Attractive Distribution Yield with Potential Upside Attractive Distribution Yield… …With Potential Upside From: 8% (1) 7.5% Operational Synergies 1 7% and Economies of Scale via Integration of 6% Enlarged Portfolio 5.6% c.500 bps 5% spread 2 4% Flexibility to Accelerate AEI to Optimize Value 3% 2.6% 2% 1% 3 Value-Enhancing Asset Acquisitions 0% Ann. 3Q18 YTD FTSE ST REIT 12M Singapore Govt Dist. Yield Yield 10Y Bond Note: (1) Based on closing price of S$0.51 on 30 Sep 2018 and annualised YTD DPU of 3.80 cents. Annualised DPU is calculated based on actual YTD DPU payout for 3Q2018 and annualised to 7 the full year.
Targeted Strategy To Deliver Returns 3 UNITHOLDERS ENJOY areas targeted to deliver returns SUSTAINABLE RETURNS to Unitholders; adding on to already resilient ESR-REIT portfolio Value-Enhancing Asset ✓ Yield-accretive Acquisitions acquisitions given more competitive cost 3 of funding Flexibility to Optimize Assets ✓ Almost all non-core assets Through AEIs divested ✓ Up to 7 properties identified 2 for AEI over next 3 years ✓ c.1m sq ft of unutilised plot ratio identified Operational Synergies and Economies ✓ Wider product suite for tenants of Scale via Integration of Enlarged and leasing Portfolio ✓ Reduced property expenses 1 ✓ Reduced cost of funding Stable and Resilient ESR-REIT Portfolio Provides Stable Fundamentals to REIT 8
1 Operational Synergies and Economies of Scale via Portfolio Integration Clustering of Property Management Services Bulk Tender Contracts for Property Services A B ▪ Clustering of assets by region for better on-site ▪ Larger portfolio creates economies of scale management ▪ Stronger bargaining power with service providers ▪ Move towards self-management of properties ▪ Bulk tender contracts for property services to ▪ Third-party Integrated Facility Management reduce operational maintenance cost contracts at selected properties will not be renewed Examples of Bulk Contracts Cleaning Security Landscaping ✓ Cost savings from direct self-management model ✓ On-site clusters encourage faster response time and better service quality to tenants 9
2 Flexibility to Optimize Assets Through AEIs Up to 7 ESR-REIT assets have been identified for AEIs over the next 3 years ‒ Includes c.1 million (1) sq ft of unutilized plot ratio (c.20% of portfolio GFA) (2) High-Specs Maximise Plot Ratio General Industrial A B Rejuvenation of Assets Unlocking Value in Unutilized Plot Ratio Redevelopment and Upgrading and Change of building amalgamation of improvement of use to align with adjacent sites to enjoy building specifications current market trends economies of scale 30 Marsiling Industrial Estate Road 8 7000 Ang Mo Kio Avenue 5 3 Tuas South Avenue 4 • AEI works currently c.40% c.495,000 sq ft untapped GFA c.500,000 sq ft untapped GFA complete • Upgrading of the asset to a High- Specs industrial building • Estimated completion 1Q2019 • Unlocking of further value from ESR- REIT’s existing assets to deliver returns Note: (1) With reference to untapped GFA at 7000 Ang Mo Kio Avenue 5 and 3 Tuas South Avenue 4 properties. 10 (2) Based on portfolio GFA as at 30 Sep 2018.
3Q2018 Financial Performance 120 Pioneer Road
3Q2018 at a Glance Gross DPU Net Property Total NAV Per Unit Revenue (Cents) Income Assets (Cents) S$32.4m S$1.68bn (1) 1.004 S$22.5m 58.0 Proactive Asset Prudent Capital Financial Management Management Performance ▪ ▪ ▪ Completed 15 Portfolio remains 100% Payment of MFU in line Greenwich acquisition unencumbered with market practice ▪ ▪ Healthy WALE of 4.4 91.2% of interest rates years fixed ▪ Occupancy of 92.9% ▪ Approx 1.4m sq ft of space renewed and leased in YTD3Q2018 Note: (1) Includes valuation of 7000 Ang Mo Kio Avenue 5 on a 100% basis, of which ESR-REIT has 80% economic interest. 12
3Q2018 Financial Results 3Q2018 3Q2017 +/(-) (S$ million) (S$ million) (%) Gross Revenue (1)(3) 32.4 27.1 19.4 Net Property Income (2)(3) 22.5 19.6 15.0 Amount Available for Distribution to Unitholders 13.4 12.6 6.2 Distribution from Other Gains (4) 2.5 - n.m. Total Amount Available for Distribution to Unitholders 15.9 12.6 26.0 Distribution Per Unit (“DPU”) (cents) for 3Q2018 1.004 0.964 4.1 Note: (1) Includes straight line rent adjustment of S$0.4 million (3Q2017: S$0.2 million). Higher Net Property Income (“NPI”) mainly due to full quarter contributions from two acquisitions (8 Tuas South Lane and 7000 Ang Mo Kio Ave 5) in Dec 2017, partially offset by non renewal of leases (2) at 12 Ang Mo Kio St 65, 31 Tuas Ave 11, 54 Serangoon North Ave 5, 4/6 Clementi Loop, 1&2 Changi North St 2 and 3C Toh Guan Road East, lease conversion of 16 Tai Seng Street (2Q2018) and 21B Senoko Loop (1Q2018), 4 property divestments (87 Defu Lane 10, 23 Woodlands Terrace,55 Ubi Ave 1 and 9 Bukit Batok St 22 ) since 3Q2017 and 30 Marsiling Industrial Est Road 8 AEI. Includes Non- Controlling Interest (“NCI”) of 20% of 7000 Ang Mo Kio Ave 5 in 3Q2018. (3) (4) 35% of management fees are payable in units for 3Q2018. (5) $2.5m payout from ex-gratia payments received from SLA in connection to the compulsory acquisition of land from prior years. 13
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