Financial Statements And Related Announcement :: Full Yearly Results

FINANCIAL STATEMENTS ANNOUNCEMENT FOR THE QUARTER AND FULL YEAR ENDED 31 DECEMBER 2018

The Directors of ESR Funds Management (S) Limited ("ESR-FM"), as manager ("Manager") of ESR-REIT, are pleased to announce the unaudited financial results of ESR-REIT and its subsidiaries (the "Group") for the fourth quarter and full year ended 31 December 2018.

ESR-REIT is a Singapore-based real estate investment trust constituted by the Trust Deed entered into on 31 March 2006 between ESR-FM as the Manager of ESR-REIT and RBC Investor Services Trust Singapore Limited as the Trustee of ESR-REIT, as amended and restated. ESR-REIT was listed on the Singapore

Exchange Securities Trading Limited ("SGX-ST") on 25 July 2006.

ESR-REIT's distribution policy is to distribute at least 90% of its annual distributable income, comprising income from letting of its properties after deduction of allowable expenses. The actual level of distribution will be determined at the Manager's discretion.

On 15 October 2018, ESR-REIT completed its merger with Viva Industrial Trust ("VIT") (comprising Viva

Industrial Real Estate Investment Trust and Viva Industrial Business Trust) by way of a trust scheme of arrangement ("Merger"). Under the Merger, ESR-REIT acquired all of VIT's issued stapled securities for S$9.60 in cash and 160 new ESR-REIT units in exchange for every 100 VIT stapled securities held by the stapled securityholders of VIT.

Following the completion of the Merger, VIT was delisted from SGX-ST. Viva Industrial Real Estate Investment Trust ceased to be an authorised collective investment scheme and became a sub-trust of ESR-REIT and was renamed as Viva Trust. Viva Industrial Business Trust, which was dormant, had been wound up subsequently.

Pursuant to the Merger, an advanced distribution from the distributable income accrued by ESR-REIT for the period from 1 October 2018 to 15 October 2018 ("Advanced Distribution") was made together with

3Q2018 distribution in November 2018. 4Q2018 distribution will comprise the unpaid distributable income for the period from 16 October 2018 to 31 December 2018. Please refer to Statement of Total Return 1(a)(j) for further details of the Advanced Distribution.

As at 31 December 2018, the Group has a diversified portfolio of 57 properties located across Singapore with a diversified tenant base of over 339 tenants across the following sub sectors: logistics/warehouse, hi-specs industrial, light industrial, general industrial and business park. The portfolio has a carrying value of approximately S$3.02 billion* and a total gross floor area of approximately 14.1 million square feet.

The Group's results include the consolidated results of its wholly-owned subsidiaries, Viva Trust, ESR-MTN Pte. Ltd. ("ESR-MTN"), Cambridge SPV1 LLP and ESR-SPV2 LLP and an 80%-owned subsidiary, 7000 AMK LLP. 7000 AMK LLP was converted from a private company to a limited liability partnership with effect from 1 February 2018. The commentaries below are based on the Group's results unless otherwise stated.

*Includes a 20% non-controlling interest in 7000 AMK valued at S$61.1 million as at 31 December 2018.

ESR-REIT

2

FINANCIAL STATEMENTS ANNOUNCEMENT

FOR THE QUARTER AND FINANCIAL YEAR ENDED 31 DECEMBER 2018

4Q2018 Financial Statements

The 4Q2018 financial statements include the following key items:

1. ESR-REIT has successfully completed the Merger with VIT by way of a trust scheme of arrangement on 15 October 2018 (acquisition date) and all the assets and liabilities of VIT have been consolidated thereafter. Revenue and expenses of VIT for the period from 16 October 2018 to 31 December 2018 have been included in the Group's results.

• 2. The consideration for the Merger was S$936.7 million, comprising 10% cash of S$93.7 million and 90% consideration units (1,561.2 million units) issued by ESR-REIT valued at S$843.0 million.

• 3. The payment of the acquisition fee for the Merger to ESR-FM amounting to S$11.7 million was made by way of the issuance of 23.8 million ESR-REIT units to ESR-FM.

• 4. Fair value adjustments relating to the Merger of S$283.2 million which represents the write-off of acquisition-related costs of S$21.7 million and premium over the fair value of net assets of VIT of S$261.5 million at acquisition date. While this was recorded in the Statement of Total Return, it does not have any impact on the distributable income.

• 5. Post-Merger, ESR-REIT extended interest-bearing loans of S$561.8 million to Viva Trust to enable Viva Trust to fully repay all its borrowings and unencumber all its assets.

• 6. Acquisition of property at 15 Greenwich for S$99.5 million (inclusive of acquisition related costs

• and upfront land premium) was completed on 25 October 2018.

• 7. The drawdown of S$673.6 million from the S$700 million unsecured loan facilities in October 2018 from a syndicate of four lenders, namely UOB, HSBC, MBB and RHB to finance the payment of the 10% cash consideration and transaction costs of the Merger and to refinance the existing borrowings of Viva Trust.

8. The drawdown of S$100.0 million from the S$100 million unsecured term loan facility in October 2018 from BNP to finance the acquisition of 15 Greenwich.

9.

The increase in aggregate notional amount of interest rate swaps from S$200.0 million to S$855.0 million in 4Q2018 to increase the proportion of hedged loans and the weighted average hedged tenor.

ESR-REIT

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FINANCIAL STATEMENTS ANNOUNCEMENT

FOR THE QUARTER AND FINANCIAL YEAR ENDED 31 DECEMBER 2018

Summary of the Group's Results

Gross revenue

Net property income

Amount available for distribution

• - Taxable income

• - Tax exempt income

• - Other gains

Distribution per unit ("DPU")

4Q2018 S$'000	4Q2017 S$'000	Fav/ (Unfav) %	FY2018 S$'000	FY2017 S$'000	Fav/ (Unfav) %
58,401 42,262 29,288	27,177 19,928 12,195	114.9 112.1 140.2	156,916 112,036 74,466	109,700 78,445 50,390	43.0 42.8 47.8
27,529 - 1,759	12,195 - -	125.7 - n.m.	67,908 519 6,039	50,390 - -	34.8 n.m. n.m.
1.005	0.929	8.2	3.857	3.853	0.1

n.m. - not meaningful

Distribution and Book Closure Date Details

Distribution period (i)		16 October 2018 to 31 December 2018
Distribution rate	0.841 cents per unit comprising (a) taxable income 0.794 cents per unit (b) other gains 0.047 cents per unit
Books closure date	28 January 2019
Payment date	28 February 2019

Note:

(i)This relates to the unpaid distribution for 4Q2018. Distribution for period from 1 October 2018 to 15 October 2018 was paid on 26 November 2018, together with the 3Q2018 distribution. Please refer to Section 1(a)(j) for further details.

The Manager has determined that the distribution reinvestment plan ("DRP") will not apply to the distribution for the period from 16 October 2018 to 31 December 2018.

ESR-REIT

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FINANCIAL STATEMENTS ANNOUNCEMENT

FOR THE QUARTER AND FINANCIAL YEAR ENDED 31 DECEMBER 2018

1(a) Statement of Total Return together with comparative statements for the corresponding period of the immediate preceding financial year

Statement of Total Return

Gross revenue

Property manager's fees Property tax

Land rental

Other property expenses Property expenses

Net property income

Management fees Trust expenses Interest income Borrowing costs Non-property expenses

Net income

Gain on disposal of investment properties Change in fair value of financial derivatives Change in fair value of investment properties Fair value adjustments relating to the Merger

Total loss for the period before income tax and distribution

Less: Income tax expense

Total loss for the period after income tax before distribution

Attributable to:

Unitholders and perpetual securities holders Non-controlling interest

Note	Group
	4Q2018 S$'000	4Q2017 S$'000	Fav/ (Unfav) %
(a) (b) (c) (d) (e) (f) (g)	58,401 (2,344) (3,778) (2,126) (7,891)	27,177 (1,157) (1,866) (2,136) (2,090)	114.9 (102.6) (102.5) 0.5 (277.6)
	(16,139)	(7,249)	(122.6)
	42,262 (3,664) (499) 16 (10,885)	19,928 (1,912) (766) 79 (5,267)	112.1 (91.6) 34.9 (79.7) (106.7)
	(15,032)	(7,866)	(91.1)
	27,230 - (14,773) (1,954) (283,219)	12,062 287 - (47,393) -	125.8 n.m. n.m. 95.9 n.m.
	(272,716) -	(35,044) -	(678.2) -
	(272,716) (274,151) 1,435	(35,044) (35,826) 782	(678.2) (665.2) 83.5
	(272,716)	(35,044)	(678.2)

n.m. - not meaningful

ESR-REIT

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FINANCIAL STATEMENTS ANNOUNCEMENT

FOR THE QUARTER AND FINANCIAL YEAR ENDED 31 DECEMBER 2018

Distribution Statement

Total loss for the period after income tax before distribution attributable to Unitholders and perpetual securities holders

Net effect of non-tax deductible/(non-taxable) items

Amount reserved for distribution to perpetual securities holders

Net income available for distribution for the period

Distribution from other gains

Total amount available for distribution for the period

Distribution per unit for the period (cents)

Group
Note	4Q2018 S$'000	4Q2017 S$'000	Fav/ (Unfav) %
(h) (i) (j)	(274,151) 303,419	(35,826) 49,136	(665.2) 517.5
	29,268 (1,739)	13,310 (1,115)	119.9 (56.0)
	27,529	12,195	125.7
	1,759	-	n.m.
	29,288	12,195	140.2
	1.005	0.929	8.2

n.m. - Not meaningful

Notes:

(a) The Group recorded gross revenue and net property income of S$58.4 million and S$42.3 million respectively in 4Q2018 and these were higher than the corresponding quarter last year by 114.9% and 112.1% respectively.

The revenue growth was mainly attributed to the full quarter contributions from the two acquisitions at 8 Tuas South Lane and 7000 Ang Mo Kio Avenue 5 ("7000 AMK") acquired in December 2017, additional contributions from newly acquired property at 15 Greenwich and the inclusion of Viva Trust's portfolio of nine properties after the Merger from 16 October 2018.

The revenue growth was partially offset by revenue reduction from the master lease conversion of property at 16 Tai Seng (2Q2018) to multi-tenancy, expiry of leases at several properties, the property at 30 Marsiling undergoing asset enhancement initiatives and the absence of revenue from four properties that have been divested since 4Q2017.

Property expenses increased by S$8.9 million to S$16.1 million in 4Q2018, which was 122.6% higher than the corresponding quarter last year. The property expenses increased largely due to property manager's fees, marketing commission expense, property tax and other property expenses from the new property acquisitions, the Merger and master lease conversions.