Replace - Extraordinary/ Special General Meeting :: Voluntary

(Constituted in the Republic of Singapore pursuant to a trust deed dated 19 October 2006 (as amended))

RESPONSE TO SUBSTANTIAL AND RELEVANT QUESTIONS RECEIVED FROM UNITHOLDERS

1. Background. The Board of Directors (the "Board") of First REIT Management Limited in its capacity as manager of First Real Estate Investment Trust ("First REIT", and as manager of First REIT, the "Manager"), refers to:
2. 1. the Circular dated 28 December 2020 (the "Circular") in relation to the Proposed LPKR MLA Restructuring and the Proposed Whitewash Resolution (both as defined in the Circular) (the
      "Proposed Transactions");
   2. the notice of extraordinary general meeting ("EGM") dated 28 December 2020 notifying Unitholders of the EGM to be convened and held by way of electronic means on 19 January 2021 at 2.30 p.m.;
   3. the accompanying general announcement released on 28 December 2020 titled "Extraordinary General Meeting of the Unitholders to be held on 19 January 2021" setting out, amongst others, the alternative arrangements relating to attendance at the EGM via electronic means and the submission of questions in advance of the EGM; and
   4. the announcement of First REIT released on 28 December 2020 titled "Proposed Rights Issue".
3. Response to questions from unitholders. The Manager would like to thank unitholders of First REIT
   ("Unitholders") for submitting their questions in advance of First REIT's EGM. The Manager would like to inform that the responses to substantial and relevant questions which have been submitted by unitholders shall be published in this announcement. Please refer to Annex Aattached hereto for a list of substantial and relevant questions received from Unitholders, and the Management and the Board's responses to these questions.

By Order of the Board

Tan Kok Mian Victor

Executive Director and Chief Executive Officer First REIT Management Limited

(Company registration no. 200607070D)

As Manager of First Real Estate Investment Trust

13 January 2021

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ANNEX A

RESPONSES TO SUBSTANTIAL AND RELEVANT QUESTIONS FROM UNITHOLDERS

For full details of the Proposed Transactions by First REIT, please refer to the Circular to Unitholders dated 28 December 2020 in relation to, among others, the proposed restructuring of certain master leases of First REIT (the "Circular"). Capitalised terms used herein, unless otherwise defined, shall have the meanings ascribed to them in the Circular.

Questions		Responses
Alignment of the Manager and Stakeholders

1. Can the Manager list out all the sacrifices they have made individually and also collectively (as the Manager) in this crisis?
2. What assurances can First REIT's management provide so that there is no further share price dilution after issuing the rights entitlements?

Since the listing of First REIT, the Manager has been committed to enhancing Unitholder value and delivering stable dividends and returns for Unitholders. However, First REIT is now facing a confluence of challenges which require an immediate and resolute response.

Commitment from Sponsor Group

The Sponsor Group1 has been supporting First REIT in the Proposed Recapitalisation Exercise (as defined herein) including in its discussion with the lending banks for the S$260 million Refinancing Facility.

The Sponsor Group has additionally committed to provide up to approximately S$158.2 million of additional equity injection into First REIT via an irrevocable undertaking ("Sponsor Irrevocable Undertaking") to subscribe for its pro rata entitlement under the Rights Issue and also to take up any Units which are not subscribed for under the Rights Issue without any underwriting fee.

The Sponsor Irrevocable Undertaking is a critical component of the Proposed Recapitalisation Exercise as it underpins the Rights Issue which is a condition of the S$260 million Refinancing Facility. Without it, First REIT will not be able to meet its up and coming S$196.6 million repayment obligation due on 1 March 2021.

Commitment from the Manager

Additionally, the Manager has provided an irrevocable undertaking to subscribe for its pro rata share of the proposed Rights Issue, amounting to a commitment of approximately S$17.8 million.

Beyond the Manager's fiduciary duties to Unitholders, the Manager's economic interest are also aligned with Unitholders.

The Manager currently holds approximately 9.36% of First REIT Units2, and has consistently elected to receive a majority of its management fees in units (approximately 85.5% for the financial year ended 2019 ("FY2019")) since OUE and OUELH acquired the Manager in 2018.

The Manager's fee structure (the "Manager Fee Structure") of (i) a base fee of 0.4% per annum of First REIT's assets; and (ii) a performance fee of 5.0% per annum of First REIT's net property income, was designed to ensure alignment of interest and is expected to decline as a result of the

1

2

"Sponsor Group" means OUE Limited ("OUE"), OUE Lippo Healthcare Limited ("OUELH"), the Manager and their respective affiliates, and any reference to the Sponsor Group includes each of them.

As at 31 December 2020.

2

Questions	Responses
	Proposed Transactions. There will be an impact to the Manager's fee,
	based on the existing Manager Fee Structure.
	The Sponsor Group and the Manager remain fully committed to First REIT
	and believe in the strong fundamentals of First REIT. Further, First REIT
	remains an integral element of OUE's strategy to grow its healthcare
	platform.

Proposed LPKR Restructuring Terms and Rationale

1. How would we know that LPKR and Siloam would honour the restructuring agreement going forward and not ask for another restructuring?
2. The two resolutions are aimed to stabilise First REIT for now. How long can this plan be sustained?
3. The concern is how confident are the Board and Management that the operation of LPKR will turn positive in the near future, after the restructuring?
4. Is the Manager convinced that without the restructuring, LPKR will go bankrupt or are they just trying to get a better deal? Any analysis?
5. The proposed restructuring rental amount is kind of too low. What methodology did the Management use to estimate the reasonable rental amount to be?
6. Why is First REIT conceding to LPKR under threat of default when LPKR is painting such a rosy and positive picture of their financial position to their own shareholders? Has management considered that any inefficiencies due to poor management and operating cost blowouts on their side should not be passed to First REIT Unitholders, but instead, LPKR should come up with their own way of reducing costs or improving revenue?
7. What other options have been considered, whether viable or not,

PT Lippo Karawaci Tbk ("LPKR") is facing significant liquidity pressure and this is confirmed by the three rating agencies in their most recent reports; the Covid-19 pandemic also played a significant role in worsening their financial condition. This is covered extensively in paragraph 5 of the Circular.

If the terms of the existing LPKR master lease agreements ("LPKR MLAs") are enforced, there is a real risk and high probability that LPKR will default and there are severe consequences in such a scenario; these are listed as follows:

• First REIT will be faced with a loss of approximately 72.1% of rental income represented by the LPKR MLAs that are within the scope of the Proposed LPKR MLA Restructuring;
• There will be lengthy, costly and cumbersome legal disputes, during which, First REIT will be incurring operating and capital expenditures with limited visibility on the rental income stemming from the LPKR MLAs;
• Consequently, friction costs will be incurred to identify a new tenant for a large proportion of the Indonesian portfolio. At the end of 2019, the Manager conducted a similar process on a smaller scale without success. This is a highly complex process as there are attributes unique to the healthcare asset class, one of which being the licensing and regulatory requirements of operating a hospital in Indonesia. This will therefore be a difficult, uncertain and lengthy leasing exercise to secure an alternative tenant-cum-operator, that will be doubly challenging to administer during the current Covid-19 pandemic; and
• First REIT will breach its existing debt covenants.

The Board together with the Management took a proactive approach as it was critical to move resolutely to renegotiate a new plan to restructure all the MLAs with LPKR following LPKR's unilateral announcement in June 2020.

Given that the Proposed LPKR MLA Restructuring constitutes an interested party transaction, an independent board committee (the "Independent Committee") comprising the Independent Directors of the Board was set up and together with our appointed advisors, negotiated and evaluated the proposals from LPKR rigorously, with the intention of protecting Unitholder interest.

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	Questions				Responses
besides the restructuring of the	Given the numerous meetings and length of time in which the
LPKR MLAs? Was First REIT in a	Independent Committee had worked to deliver a viable restructured
position to counter propose? If so,	plan, the Independent Committee is confident that LPKR has been sincere
what was/were proposed? If not,	and professional in the negotiation process and that this new plan is
what's the worst that can happen?	sustainable for LPKR and in turn, for First REIT.
10. Why not get LPKR to do their own
rights issue or other fundraising so	Finally, it is important to note that in terms of hospital operators in
as to meet their rent obligations?	Indonesia, Siloam stands out as it is the largest hospital operator in
Why is this problem instead being	Indonesia and has an extensive hospital and healthcare network and it
passed down to the Unitholders?	would be beneficial for First REIT to continue a long-term partnership
11. The	Proposed	LPKR	MLA	with such a professional operator. The entry of its major shareholder CVC
Capital Partners, has also further professionalised its business.
Restructuring will have 66% expiry
in 2035, which will give LPKR great
bargaining power. How does First
REIT intend to ensure that LPKR will
continue to renew the rental
without	negotiating	down	the
rental price?
12. What are the options to replace
LPKR as middleman between First
REIT and Siloam?
13. What would be the FY2019 pro	This scenario analysis involves backdating the proposed rentals and
forma rent payable by LPKR and	rental structure as contained within the Proposed Transactions which will
MPU based on the proposed "Base	apply for the period of 1 January 2021 to 31 December 2035, to the date
Rent Escalation 4.5% annually" if	of First REIT's IPO, being 11 December 2006.
the rent is calculated backdated
from	the	initial public offering
("IPO") until today.			This is a hypothetical scenario that is not based on any legal
					agreement(s), be it existing or proposed, and the Manager is of the
					opinion that there is no merit in conducting such an academic exercise.
14. What would be the FY2019 pro	Under the restructured LPKR MLAs, if given Unitholder approval, the first
forma rent payable by LPKR and	year will commence on 1 October 2021 and end on 30 September 2022,
MPU based on the proposed "8% of	and the adopted annual rent shall be the higher of:
GOR performance-based rent"?	(i)	8.0% of the gross operating revenue ("GOR") for each respective
						hospital for the preceding financial year (from 1 January to 31
						December); or
					(ii)	the Commencement Base Rent X (1 + S) = Second Lease Year Base
						Rent, where "S" is the escalation amounting to 4.5%. For the
						avoidance of doubt, (1 + S) will equal 1.045.
					Point (i) refers to the performance-based rent which will apply from the
					second year and onwards, and will kick in when the 8% of the GOR for
					each of the respective hospitals exceeds the computation that is defined
					in (ii).
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