Structured Finance

CMBS/Single Borrower SILVER OAK LTD. Presale

Analysts Expected Ratings a Helen Wong, CFA Class Amount Final Maturity Expected Rating LSR Outlook +852 2263 9934 A US dollar‐denominated, June 2018 AAAsf n.a. Stable [email protected] equivalent to approximate SGD800m April Chen +852 2263 9936 a Expected ratings do not reflect final ratings, and are based on information provided by the issuer as of 7 June 2011. [email protected] These expected ratings are contingent on final documents conforming to information already received. Ratings are not a recommendation to buy, sell or hold any security. The offering circular and other material should be reviewed prior Stan Ho to any purchase +852 2263 9668 [email protected]

Related Research Transaction Summary Applicable Criteria Fitch Ratings has assigned an expected rating of ‘AAAsf’ with a Stable Outlook to • Criteria for Analyzing Large Loans in U.S. the class A notes issued by SILVER OAK LTD. (Silver Oak), as indicated above. The Commercial Mortgage Transactions rating reflects the features of the underlying collateral, and the integrity of the (September 2010) • Global Structured Finance Rating Criteria legal and financial structure of the notes. It also addresses the timely payment of (August 2010) interest and ultimate repayment of principal of the notes by the legal final maturity • Counterparty Criteria for Structured date in June 2018. Finance Transactions (March 2011) Silver Oak is a special‐purpose company incorporated under the laws of Singapore. • Counterparty Criteria for Structured Finance Transactions: Derivative The proceeds of this issuance — after hedging against currency and interest‐rate Addendum (March 2011) risks — will be used to extend an approximate SGD800m loan to HSBC Institutional Other Research Trust Services (Singapore) Limited in its capacity as trustee‐manager of RCS Trust. • 2011 Outlook: Non‐Japan Asia Structured The loan facility, along with a term loan of SGD200m extended to Silver Oak by DBS Finance (February 2011) Bank Ltd. (DBS, ‘AA‐’/Stable/‘F1+’), The HongKong and Shanghai Banking • SILVER OAK – Stable Performance (November 2010) Corporation Limited (HSBC, ‘AA’/Stable/‘F1+’) Singapore Branch, and Standard Chartered Bank (SCB, ‘AA‐’/Stable/‘F1+’), are provided under a master facility agreement established to enable RCS Trust to refinance the existing loans issued by Silver Oak in 2006. The underlying property is (Raffles City), comprising Raffles City Shopping Centre, Raffles City Tower, two hotel towers — and Swissotel The Stamford — and one convention centre. The properties are the same as those collateralised in the existing Silver Oak transaction issued in 2006. The two hotels and the convention centre were leased out to RC Hotels (Pte) Ltd (RC Hotels) on a 20‐year lease with an option to renew for a further term in November 2016. Key Rating Drivers • Debt Service Coverage Ratio (DSCR) and Loan‐to‐Value (LTV): Fitch’s stressed Contents DSCR and stressed LTV ratio on the term loan backing the class A notes are Transaction Summary ...... 1 1.92x and 34.9%, respectively, at the expected maturity — assuming a weighted Transaction and Legal Structure ...... 4 average refinancing rate of 6.6%. Property Overview ...... 5 Ownership and Management...... 6 • Property Location and Diversification: Raffles City is an integrated office, Fitch Analysis...... 6 retail and hotel development located on the fringe of Singapore’s central Counterparty Risk ...... 11 Disclaimer...... 11 business district. Raffles City enjoys excellent connectivity, with direct access Performance Analytics...... 11 to City Hall (which serves as an interchange station between the North‐South Appendix A: Singapore’s Economy Line and the East‐West Line) and Esplanade (Circle Line) MRT stations. Raffles Update...... 13 City has a large and diversified tenant base, comprising 219 retail leases, 54 Appendix B: Property Market Updates...... 14 office leases (as of 31 December 2010), and one lease for the two hotels and a Appendix C: Transaction Overview ..17 www.fitchratings.com 7 June 2011 Structured Finance

convention centre. The annualised average occupancy rates of the retail and Key Information office properties were above 97% for 2010. Type of Transaction: Commercial Mortgage Backed Securities (CMBS) • Property Cash Flow: Fitch’s sustainable cash flow derives from property Collateralised Properties: Raffles revenue, operating expenses, and capex from the historical data during 2007 to City Singapore, comprising Raffles 2010. The historical occupancy rates and cash flow from the surveillance City Tower (an office tower) and trustee reports received since 2006 for the Silver Oak 2006 transaction were Raffles City Shopping Centre; and a also monitored and taken into consideration when deriving Fitch’s stabilised master lease over the two hotel towers, known as Swissotel The cash flow. Stamford and Fairmont Singapore, and a convention centre • Property Sponsorship and Management: The owner of the properties providing the security under the loans is RCS Trust, which was formed under a joint‐ Number of Leases: 219 retail leases, 54 office leases (as of 31 venture agreement between CapitaCommercial Trust (CCT) and CapitaMall Trust December 2010), and a master (CMT). CapitaLand (RCS) Property Management Pte Ltd, an indirect subsidiary of hotel lease with RC Hotels (Pte) Ltd CapitaLand Limited, is the property manager for the retail and office Note Issuance Amount: US dollar‐ properties. denominated, equivalent to approximate SGD800m • Asset Outlook: Singapore demonstrated a sharp rebound in 2010 from the 2007‐ Transaction Parties 2009 financial crisis, with Q111 GDP growth recorded at 8.3% on a year‐on‐year Originator: RCS Trust (yoy) basis. The office, retail and hotel sectors are steadily improving in their respective occupancy rates and rental levels. Fitch expects Singapore’s property CMBS Notes Issuer (also the Lender): SILVER OAK LTD. market to be stable in 2011 and 2012. Trustee: The Bank of New York • Swap: Currency and interest‐rate mismatches arise as the CMBS notes carry Mellon floating interest rates and are denominated in US dollars, whereas the interest Loan Borrower: HSBC Institutional payments of the property‐backed loans are at fixed rates and denominated in Trust Services (Singapore) Limited, as Trustee‐Manager of RCS Trust Singapore dollars. These mismatches are mitigated by the currency and Swap Providers: DBS, HSBC, and interest‐rate swaps entered into between the issuer and the swap providers, SCB DBS, HSBC and SCB. The swap counterparties’ ratings and the counterparty Account Bank: DBS and HSBC downgrade language included in the transaction documents are expected to be Liquidity Facility Providers: DBS, in line with Fitch’s counterparty criteria. HSBC and SCB Rating Sensitivity1 Term Loan Lenders: DBS, HSBC and SCB Revolving Credit Facility Lenders: Figure 1 DBS, HSBC and SCB Rating Sensitivity to Net Property Income (NPI) Property Manager: CapitaLand Original Rating AAAsf (RCS) Property Management Pte Ltd A 15% decrease in the portfolio’s stabilised NPI AAsf Transaction Details A 20% decrease in the portfolio’s stabilised NPI Asf Interest Payments of CMBS Notes: Quarterly, 3M USD Libor + Margin A 30% decrease in Retail’s stabilised NPI (stabilised NPIs of Office & Hotel sectors remain AAsf Closing Date: June 2011 the same) Loan Maturity Date: June 2016 A 30% decrease in Office’s stabilised NPI (stabilised NPIs of Retail & Hotel sectors remain AAAsf the same) CMBS Notes Expected Maturity: June 2016 A 30% decrease in Hotel’s stabilised NPI (stabilised NPIs of Retail & Office sectors remain AAAsf the same) CMBS Notes Legal Maturity: June 2018 Source: Fitch Principal Payments: Bullet at maturity For this transaction, Fitch’s stabilised annual net property income for the entire DSCR Trigger Reserves: Loan portfolio was 16% below the actual NPI in 2010. The above rating sensitivities borrower will deposit six months of describe how the ratings would react to further NPI declines below Fitch’s the monthly interest amount of the term loan of approximate SGD800m stabilised NPI. The implied rating sensitivities are only indicative of some of the or that of both the total term loans potential outcomes, and do not take into consideration other risk factors to which of approximate SGD1bn and the transaction is exposed. Stressing additional risk factors may result in different SGD300m revolving credit facility to outcomes. Furthermore, the implied ratings, after the further NPI stresses are the DSCR accrual accounts (built over three months, and thus one‐ third of the required amount per month) when the respective DSCR trigger is breached 1 These sensitivities only describe the model‐implied impact of a change in one of the input variables. This is designed to provide information about the sensitivity of the rating to model assumptions. It should not be used as an indicator of possible future performance

SILVER OAK LTD. June 2011 2 Structured Finance

applied, are more akin to what the ratings would be at deal issuance had those further stressed NPIs been in place at that time. Model, Criteria Application and Data Adequacy Fitch’s stabilised cash flow and modelling assumptions are based mainly on the 2007‐2010 historical data provided by RCS Trust. In addition, the agency has analysed the transaction’s risks in accordance with the following criteria, available at www.fitchratings.com: “Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions”, dated 27 September 2010; “ Global Structured Finance Rating Criteria ”, dated 16 August 2010; “ Counterparty Criteria for Structured Finance Transactions ”, dated 14 March 2011 and “ Counterparty Criteria for Structured Finance Transactions: Derivative Addendum”, dated “14 March 2011”. Data provided by RCS Trust to support Fitch’s asset analyses were:

• The breakdown of revenue, expenses and net property income (NPI) from 2007 to 2010 • Tenancy schedule and details as of end‐December 2010 for the retail and office sectors • Cash flow‐based financials for RCS Trust from 2006 to 2010 • RCS Trust‐audited financial statements from 2006 to 2010 • Properties’ insurance policies • RCS Trust monthly financial reports for the existing Silver Oak transaction from September 2006 to April 2011.

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Transaction and Legal Structure

Figure 4 Structure Diagram

Raffles City RCS Trust Singapore (Borrower) (Collateral)

First Interest and SGD1bn RCS Term Loan Ranking Principal (Proceeds From CMBS and Silver Oak Term Loan) Security Repayments + Over SGD 300m RCS RCF Facility Raffles City Singapore SGD 200m Silver Oak Term Loan Term Loan Lenders SGD/USD Swap Providers SILVER OAK LTD & (Notes Issuer) Revolving Credit Facility Lenders SGD 300m Silver Oak RCF Liquidity Facility Providers CMBS Notes Proceeds (USD) (USD)

Noteholders

Source: Fitch, Transaction documents

At closing, Silver Oak will issue US dollar‐denominated secured CMBS notes with a total issuance size of approximate SGD800m equivalent. The proceeds will be fully hedged with swap counterparties for currency and interest‐rate risks. The proceeds after hedging will be denominated in Singapore dollars, and will be lent by Silver Oak to RCS Trust in a fixed‐rate term loan of approximate SGD800m. Together with the SGD200m term loan funded by the term loan lenders (namely DBS, HSBC and SCB), the total funds of approximate SGD1bn raised at closing will be lent to RCS Trust under the Master Facility Agreement to refinance the existing Silver Oak CMBS notes. The outstanding balance of loans in the existing Silver Oak transaction is equivalent to the sum of SGD866m from a term loan and the drawn amount of SGD98m (as of 31 March 2011) from the existing revolving credit facility (RCF), with a facility limit at SGD164m. Silver Oak will also engage in a revolving credit facility agreement with facility lenders (namely DBS, HSBC and SCB), and a facility of SGD300m will be lent to RCS Trust for financing asset enhancement initiatives, capital expenditure, and general corporate and working capital purposes. The existing term loan and revolving credit facility were secured by a mortgage over the property; an assignment and charge over the accounts of RCS Trust and the tenancy agreements of units in the property; an assignment of the management agreement relating to the property; and debentures creating fixed and floating charges over the assets of RCS Trust in relation to the property. The new CMBS notes and the new loans will be secured by the same properties — with the same rights over the tenancy agreements, management agreements and insurance policies of the properties. The expected maturity date of the existing CMBS notes is 13 September 2011, and Fitch expects the refinancing of the existing loan and the full repayment of the existing CMBS notes to occur prior to the expected maturity date of the existing CMBS notes.

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Property Overview Raffles City Shopping Centre Raffles City Shopping Centre is located within a seven‐storey podium block which includes three basement levels. The shopping centre has direct access from the City Hall MRT Station, and has been linked to Esplanade MRT Station since 2010. The total lettable area of the shopping centre is 39,042 square metres (sq m), including the Basement 1 extension, outdoor dining area and B2 Circle Link. The asset enhancement initiatives (AEI) at B1 marketplace and B2 Circle Link were completed in 2010, and have been fully leased. Most tenancies are under a standard lease term of three years, and the charged rentals consisted of fixed rent and turnover rent (calculated based on the sales revenues of the tenants). According to the lease expiry profile as of 31 March 2011, 35.4% of retail leases by rental contribution to total portfolio income will expire in or before 2013. Raffles City Shopping Centre enjoys a broad tenancy profile, with a wide assortment of fashion, jewellery, footwear and food outlets. It adequately services the shopping needs of both Singapore residents and tourists. Major tenants include retail chains such as Robinsons Department Store and Jasons Market Place; fashion retailers such as Esprit and Mango; and food and beverage providers such as Food Junction Management. Raffles City Tower The Raffles City Tower is a 42‐storey office building, with a total lettable area of 35,334 sq m. The main lift lobby has direct access from and the Raffles City Shopping Centre. Major tenants include the Economic Development Board, Accenture Pte Ltd and Phillip Securities (Pte) Ltd. Most of the tenancies are occupied under a standard lease term of three years. According to the lease expiry profile as of 31 March 2011, 14.1% of office leases by rental contribution to total portfolio income will expire in or before 2013. Swissotel the Stamford, Fairmont Singapore and Raffles City Convention Centre Swissotel The Stamford and Fairmont Singapore, both five‐star, are situated within two towers in Raffles City. The 73‐storey Swissotel the Stamford has 1,261 rooms, while the 28‐storey Fairmont Singapore has 769. The Raffles City convention centre is located within the seven‐storey podium. It offers meeting and function space, which comprises three ballrooms and 15 primary meeting rooms. Master Lease of the Two Hotels and Convention Centre The two hotels and convention centre were leased out to RC Hotels on a 20‐year lease commencing 7 November 1996, with an option to renew for a further term from 7 November 2016 to 31 December 2036. Under the master lease, RC Hotels pays a gross rental — which includes a step‐up minimum rent component, a service charge and a variable rent component based on a percentage of gross operating revenue generated from the hotels and convention centre. The volatile nature of the hotel sector can be partially mitigated by the rental structure which incorporates the minimum rent. The schedule for minimum and variable rental rates is available for the period from November 2005 to November 2011, while the new schedule for November 2011 until lease expiry in November 2016 remains under negotiation.

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Ownership and Management The owner of the properties providing the security under the loan is RCS Trust, which is jointly owned by CCT and CMT with a 60% and 40% interest, respectively. CapitaLand (RCS) Property Management Pte Ltd, an indirect subsidiary of CapitaLand Limited, is the property manager for the properties. CCT and CMT are both Singapore‐based unit trusts established with the investment objective of owning and investing in real estate and real estate‐related assets. CCT owns nine centrally‐located quality commercial assets in Singapore, including three Grade A offices and one prime office, three mixed‐use properties, and two multi‐ storey car parks in the central business district (CBD). CMT owns a portfolio of 16 quality retail properties strategically located in the suburban areas and . As of 31 March 2011, CMT was the largest REIT in Singapore — in terms of both market capitalisation and asset size. As part of Fitch’s review of the transaction, the agency met with several members of CCT’s and CMT’s management teams on 13 May 2011 to discuss RCS Trust’s strategy and the management of the properties. The property management team usually starts the lease renewal negotiation with existing tenants in advance before their leases expire. Fitch believes that the collateralised properties are managed according to the same consistent practices as the other properties under the management of CCT and CMT. Fitch Analysis Fitch derived the assumptions as listed below based on the data provided by RCS Trust, and calculated the stabilised net property income for each sector. Raffles City Shopping Centre • Overview: Raffles City Shopping Centre demonstrated a solid performance in both rental and occupancy rates over 2007‐2010. The average annual occupancy rate remained high, at above 99%. The AEI work for B1 Market place and B2 Circle Link, which was completed in 2010, has no significant impact on the occupancy rates. • Occupancy and Rental Rates: Fitch believes RCS Trust would have strong bargaining power in rental negotiations and renewals, due to its high and stable occupancy rate and its direct link to the City Hall MRT station. For its cash flow analysis calculations, Fitch has assumed an occupancy rate of 97.5% and a monthly rental at SGD16 per sq ft, which is close to the average rental level during 2007 to 2010. • Other Income: “Other income” is assumed at the average level during 2007 to 2010. Other income includes termination deposits, licences, and late‐payment interest. • Fitch’s Stabilised Gross Revenue: Fitch assumes the annual stabilised gross revenue is SGD84m for the retail sector. • Operating Expenses: Fitch assumes the maximum level during 2007 to 2010 for most operating expense items, in order to capture the fluctuation of the expenses. This rationale also applies to the office and hotel sectors. • Property Tax: This is assumed to be 10% of the gross revenue. This rationale also applies to the office and hotel sectors. • Fitch’s Stabilised Net Property Income: For Raffles City Shopping Centre, Fitch’s stabilised net property income is SGD62.4m per annum. • Management Fee: Fitch assumes the asset management fee and trustee‐ manager’s fee based on the formula stipulated in the transaction documents. This rationale also applies to the office and hotel sectors.

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• Maintenance Capex: Fitch assumes capex of SGD8m per annum for the entire portfolio. The maintenance capex will then be allocated across each sector according to property value. The assumption and allocation approach also applies to the office and hotel sectors. • Liquidity Facility Interest: The floating interest rate of the drawn liquidity facility, and the commitment fee, have been taken into consideration in Fitch’s stabilised cash flow analysis. According to the payment waterfall, interest payments to the total drawn amount of the liquidity facility will rank pari passu with the interest payments of the CMBS notes (please see details in the Liquidity Facility section). Similar consideration for the liquidity facility also applies to the office and hotel sectors. Raffles City Tower • Overview: Between 2007 and 2010, the average occupancy rate at the Raffles City Tower was relatively volatile but remained at around 97.5%, with the average rental rate increasing gradually during the period. Raffles City Tower’s lowest annualised average occupancy rate was recorded in 2008, at 97.3%. • Occupancy and Rental Rates: For its stabilised cash flow analysis, Fitch has assumed an occupancy rate of 95.0%, and a monthly rental rate of SGD7 per sq ft. The rental assumption is close to the average level during 2007 to 2010, to take into consideration the impact of the financial crisis during that time. • Other Income: Other income is assumed at the average level during 2007 to 2010. Other income includes termination deposits, licences and late‐payment interest. • Fitch’s Stabilised Gross Revenue: Fitch’s stabilised annual gross revenue for the office sector is SGD34.4m, 17.5% lower than the 2010 level, and 6% below the average level during 2007 to 2010, providing a cushion to accommodate fluctuation in performance. • Fitch’s Stabilised Net Property Income: For Raffles City Tower, Fitch’s stabilised net property income is SGD22.3m per annum, 25% below the 2010 level and 6.3% below its average level during 2007 to 2010, providing a cushion to accommodate fluctuation in performance. Hotels and Convention Centre Lease • Rental Income under the Master Lease: The master lease with RC Hotels comprises a minimum rental and a variable portion (which is linked to the gross operating revenue of the hotels). During 2007 to 2010, the minimum rental was in line with the lease’s schedule; however, the variable portion was slightly affected by the recent financial crisis, and rebounded in 2010. In view of the volatile nature of the hotel business, Fitch assumes the minimum rent at SGD33m per annum and the variable rent at SGD31.8m per annum. • Expiry of the Master Lease: The master lease with RC Hotels will expire in November 2016, which is during the legal tail period of the Silver Oak transaction. Based on the conversation with the management of RCS Trust, Fitch has considered the likelihood of RC Hotels renewing the master lease, as well as other alternatives if RC Hotels does not renew. • Gross Lease Revenue: Fitch has reviewed the financial performance of the two hotels and convention centre to understand the capacity of RC Hotels to service the minimum lease payment under the master lease. For its cash flow analysis calculation, the agency has divided the cash flow from the master lease with RC Hotels into two components: (i) the minimum lease payment assumed by Fitch at SGD33m, which implies a coverage of EBITDA before lease payment over the minimum lease payment at 2.5x, and (ii) the variable rent and service charge based on the stabilised gross operating revenue of the hotels, and is assumed at SGD31.8m. Hence, the total stabilised gross revenue from the lease is SGD64.8m, 10% below the average level during 2007 to 2010.

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• Fitch’s Stabilised Net Property Income: For the hotel sector, Fitch’s stabilised net property income is SGD38.3m per annum, 20.6% below the average level during 2007 to 2010. Debt Service Coverage Methodology The net property income from the properties for 2009 and 2010 was approximately SGD141m and SGD146m, respectively, versus Fitch’s stabilised net property income of SGD123m. Fitch’s annual net cash flow available for debt service, derived by deducting RCS Trust expenses and Silver Oak senior expenses from the net property income, is SGD101.2m. RCS Trust expenses include trust and management fees (assuming payable in cash), capex, and a commitment fee for the liquidity facility. Fitch applies a hypothetical mortgage refinance rate for each sector (see Figure 4), and calculates the debt service at the expected maturity date for each rating category.

Figure 5 Refinancing Rate AAAsf (%) Retail 6.00 Office 6.75 Hotel 7.25 Source: Fitch

Based on the aforementioned refinancing rate assumptions, Fitch then adopts its DSCR thresholds for each sector (see Figure 5), and decides the maximum issuance amount for each rating scale and for each property sector.

Figure 6 DSCR Thresholds AAAsf (x) Retail 1.75 Office 1.80 Hotel – variable rental 2.45 Source: Fitch

Debt Service Coverage Trigger Two debt service coverage tests have been included in the documents to provide an interest reserve. The triggers are listed as below: (i) net operating income to debt service for the term loans of approximate SGD800m (backing the CMBS notes) to fall below 2.0x; (ii) net operating income to debt service for both the total term loans of approximate SGD1bn and the revolving credit facility to fall below 1.5x; If trigger (i) occurs, the loan borrower will have to deposit six months of the interest amount of the term loan of approximate SGD800m (backing the CMBS notes) to the DSCR accrual accounts (built over three months, and thus one‐third per month). If trigger (ii) occurs, the loan borrower will have to deposit six months of the interest amount of the total term loans of approximate SGD1bn as well as that of the SGD300m revolving credit facility to the DSCR accrual accounts (built over three months, and thus one‐third per month). Priority of Payments During the transaction life, the pre‐enforcement and post‐enforcement waterfalls with respect to interest and principal payments before and after enforcement are outlined below.

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Figure 7 Pre‐Enforcement 1 • Professional fees and expenses (subject to a limit of SGD0.5m) and taxes, altogether known as “Senior Expenses” • Fees and expenses to liquidity facility (if the provider has not defaulted) 2 • Payments due in respect of interest on the CMBS notes to swap counterparties, and thereafter, to the noteholders • Interest payment to the total drawn amount under the liquidity facility • Swap termination costs where such termination arises from optional full redemption of CMBS notes or occurrence of event of default where the swap counterparty is not the defaulting party, or the occurrence of termination event where the swap counterparty is not the sole affected party, or the occurrence of termination event where the swap counterparty is the sole affected party and where such termination event is in respect of a tax event or illegality event 3 • Payments due in respect of interest on the SGD200m term loan to swap counterparties, and thereafter, to the term loan providers (after the proportionate AAA interest amount is fulfilled) • Swap termination costs where such termination arises from the situations mentioned in step (2) • Fees and expenses payments to the SGD200m term loan 4 • Payments due in respect of interest on the SGD300m RCF to swap counterparties, and thereafter, to the RCF providers (after the proportionate AAA interest amount is fulfilled) • Swap termination costs where such termination arises from the situations mentioned in step (2) • Fees and expenses payments to the SGD300m RCF 5 • Principal on CMBS notes • Principal repayment to the drawn amount under the senior portion of the liquidity facility 6 Principal on SGD200m term loan 7 Principal on SGD300m RCF 8 Amounts drawn under the junior portion of the liquidity facility 9 Professional fees and expenses (not covered under Senior Expenses in step (1)) 10 Indemnity payments if any 11 Any amount to the liquidity facility provider where the liquidity facility provider has defaulted 12 In respect of the CMBS notes, swap termination costs where the termination arises from the occurrence of event of default where the swap counterparty is the defaulting party, or the occurrence of termination event where the swap counterparty is the sole affected party and such termination event is not a tax event or illegality event. 13 In respect of the SGD200m term loan, swap termination where the termination arises from the events mentioned in step (12) 14 In respect of the SGD300m RCF, swap termination where the termination arises from the events mentioned in step (12) 15 Balance to issuer Source: Transaction documents, Fitch

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Figure 8 Post‐Enforcement 1 • Fees and expenses to trustee and security trustee 2 • Professional fees, expenses and taxes • Fees and expenses to liquidity facility (if the provider has not defaulted) 3 • Payments due in respect of interest on the CMBS notes to swap counterparties, and thereafter, to the noteholders • Interest payment to the total drawn amount under the liquidity facility • Swap termination costs where such termination arises from optional full redemption of CMBS notes or occurrence of event of default where the swap counterparty is not the defaulting party, or the occurrence of termination event where the swap counterparty is not the sole affected party, or the occurrence of termination event where the swap counterparty is the sole affected party and where such termination event is in respect of a tax event or illegality event 4 • Principal on CMBS notes • Principal repayment to the drawn amount under the senior portion of the liquidity facility 5 • Payments due in respect of interest on the SGD200m term loan to swap counterparties, and thereafter, to the term loan providers • Swap termination costs where such termination arises from the situations mentioned in step (3) • Fees and expenses payments to the SGD200m term loan. 6 Principal on SGD200m term loan 7 • Payments due in respect of interest on the SGD300m RCF to swap counterparties, and thereafter, to the RCF providers • Swap termination costs where such termination arises from the situations mentioned in step (3) • Fees and expenses payments to the SGD300m RCF. 8 Principal on SGD300m RCF 9 Amounts drawn under the junior portion of the liquidity facility 10 Professional fees and expenses (which are not specifically covered as more senior‐ranking items above or more junior‐ranking items below) 11 Indemnity payments (if any) 12 Any amount to the liquidity facility provider where the liquidity facility provider has defaulted 13 In respect of the CMBS notes, swap termination costs where the termination arises from the occurrence of event of default where the swap counterparty is the defaulting party, or the occurrence of termination event where the swap counterparty is the sole affected party and such termination event is not a tax event or illegality event. 14 In respect of the SGD200m term loan, swap termination where the termination arises from the events mentioned in step (13) 15 In respect of the SGD300m RCF, swap termination where the termination arises from the events mentioned in step (13) 16 Balance to Issuer Source: Transaction documents, Fitch

Liquidity Facility In order to cover any interest shortfall during the transaction life, the liquidity facility providers — DBS, HSBC and SCB — will provide a liquidity facility of SGD70m to Silver Oak. Silver Oak can draw on the liquidity facility to cover any short‐term cash flow disruption resulting from a shortfall from rental cash flows from the underlying properties, in order to meet ongoing senior fees and expenses and interest payments of the CMBS notes. The limit of the liquidity facility can cover up to 10 months of senior expenses and interest payments. The floating interest rate on the drawn amount of the liquidity facility is not hedged, and Fitch has taken this interest‐rate risk into consideration in its analysis. The liquidity facility has two parts: the senior portion (47% of the total liquidity facility, or SGD33m), and the junior portion (53%, or SGD37m). Once drawn, the total Interest payments under the liquidity facility will rank pari passu with interest payments on the CMBS notes. The senior portion of the drawn principal under the liquidity facility will rank pari passu with principal payments to the CMBS notes. The junior portion of the drawn principal under the liquidity facility will be subordinated to the principal payments to the CMBS notes, the SGD200m term loan and the SGD300m RCF.

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Property Insurance The borrower currently (June 2011) has insurance policies to cover property damage, business interruption, machinery breakdown, electronic equipment and general liability insurance, which are renewed annually. The eligible insurer will be rated at least ‘A’, or otherwise acceptable to Fitch. Counterparty Risk Account Bank From the closing date, all rental revenue and other proceeds from the properties will be deposited into the collection account (under the trustee‐manager name of RCS Trust). The rental revenue and proceeds will be applied towards the payment of interest on the term loans and RCF by way of depositing the payable interest and principal due amounts into the notes payment account (under the name of the issuer). The issuer, Silver Oak, will then follow the pre‐enforcement waterfall (if prior to enforcement), to allocate monies from the note payment account. In the event of a shortfall of interest due on any notes’ interest payment date, the issuer shall transfer the amount standing to the credit of the DSCR accounts to the notes payment account three days prior to such interest payment date. The collection account, note payment account and DSCR accounts will be opened with DBS or HSBC. Counterparties on Rating Watch Negative (RWN) are treated as one notch below their actual ratings for eligibility purposes, as per Fitch’s counterparty criteria. Swap Counterparty Silver Oak will enter into a series of currency swap and interest‐rate swaps with the swap counterparties — namely, DBS, HSBC and SCB — to hedge the currency risk and interest‐rate risk. The swap counterparties’ ratings, and the counterparty downgrade language included in the documents, are expected to be in line with Fitch’s counterparty criteria. For details of Fitch’s counterparty criteria, please refer to “Counterparty Criteria for Structured Finance Transactions”, dated 14 March 2011 and “Counterparty Criteria for Structured Finance Transactions: Derivative Addendum”, dated 14 March 2011, both available at www.fitchratings.com. Disclaimer For the avoidance of doubt, Fitch relies, in its credit analysis, on legal and/or tax opinions provided by transaction counsel. As Fitch has always made clear, the agency does not provide legal and/or tax advice or confirm that the legal and/or tax opinions or any other transaction documents or any transaction structures are sufficient for any purpose. The disclaimer at the foot of this report makes it clear that this report does not constitute legal, tax and/or structuring advice from Fitch, and should not be used or interpreted as legal, tax and/or structuring advice from the agency. Should readers of this report need legal, tax and/or structuring advice, they are urged to contact relevant advisers in the relevant jurisdictions. Performance Analytics The ongoing analysis of transactions forms an essential part of the Fitch rating process. The agency will receive monthly servicer reports detailing the performance of the portfolio. These will provide the basis for the agency’s surveillance of the performance of the transaction against the agency’s expectations. The ratings on Silver Oak will be reviewed by a committee on average every 12 months, or where considered appropriate (eg in the event of a deterioration in performance, or an industry‐wide development), with any affirmation or change in the ratings disseminated publicly. Fitch’s quantitative analysis will focus on monitoring key performance parameters — such as occupancy rate and DSCR ratios — against Fitch’s stabilised assumptions.

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For each transaction, Fitch also monitors counterparty ratings relative to the agency’s counterparty criteria. Details on the transaction’s performance are available at www.fitchratings.com. Please call the Fitch analysts listed on the first page of this report with any queries regarding the initial analysis or the ongoing performance.

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Appendix A: Singapore’s Economy: Update The Singapore economy continued to grow at a healthy pace in the first quarter of 2011, led by the manufacturing sector. GDP expanded by 8.3% yoy, compared with 12.0% in the previous quarter. The manufacturing sector grew by 12.5%, and this strong growth was driven by the electronics and precision‐engineering clusters, which benefitted from a pick‐up in business investment in the region. The Singapore economy has fully recovered from the negative effects of the 2007‐ 2009 global financial crisis, with GDP growing by a 14.5% in 2010 — significantly above Fitch’s ‘AAA’ peer group median of 2.4%. In addition, Singapore’s labour market has become extremely tight, with the unemployment rate falling to 2.2% in 2010 — down from 3.0% in 2009. Based on expectations of a sustained recovery, the Singapore government recently revised its forecast for 2011 GDP growth to a range of 5%‐7% (previously 4%‐ 6% in 2011), while Fitch puts this at 6.0%.

Figure 9 Singapore Real GDP Growth (At 2005 market price)

(%) 19.4 20 16.9 10.5 12.0 8.6 8.5 8.3 10 3.8 1.8 0.0 ‐8.9 0

‐2.5 ‐1.7 ‐10 2006 2007 Q308 Q408 Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 (Quarter/year) Sources: Department of Statistic, Singapore

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Appendix B: Property Market Updates Singapore Office Property Market

Figure 10 Singapore Property Rental Index

Index (Q498 = 100) Office Retail 250 200 150 100 50 0 Q105 Q305 Q106 Q306 Q107 Q307 Q108 Q308 Q109 Q309 Q110 Q310 Q111

(Quarter/year) Source: URA

The office property market recovered steadily in Q111, supported by Singapore’s strong economic performance in 2010. The office property sales market remained optimistic in Q111, benefiting from the continued low‐interest‐rate environment and high liquidity. Fitch expects the retail property market to continue its stable growth in 2011 and 2012. According to the research from the Urban Redevelopment Authority (URA), the Q111 office rental index was 168, up further from 159.4 in Q410 and 142.1 in Q110. The occupancy rate study from Collier International Singapore Research found that the occupancy rate for Grade A office properties in the central business district (other than the /New Downtown) was largely stable, as the majority of the small‐ to medium‐sized enterprises continued to renew their leases. As demonstrated in the trust servicing report in the existing Silver Oak transaction, the annualised average occupancy rates in Raffles City Tower have remained above 97.3% since 2006. Overall, Fitch expects the office sector in Singapore to continue to recover gradually in 2011. Singapore Retail Property Market

Figure 11 Singapore Tourist Arrivals

Number of visitors (m) 12

10

8

6

4

2

0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: Singapore tourism board

Consumer sentiment remained high following 2010’s record economic growth and foreign visitor arrivals, as well as the opening of the two integrated resorts (, and Resorts World at Sentosa). According to the latest available statistics from the Singapore Department of Statistics, the retail sales index (excluding motor vehicles) strengthened by 13.5% yoy in January 2011.

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This growth was backed by the robust tourism industry, which recorded 0.99 million visitors in February 2011 — up by 15.4% yoy to hit a new record level. Total arrivals in 2010 were 11.6 million, growing by 20% from 2009’s 9.7 million. According to the Urban Redevelopment Authority (URA), the rental index for the retail sector has remained stable through the recent financial crisis, at 117.5 in Q111 versus 116.4 in Q407. Singapore Hotel Property Market

Figure 12 Singapore Hotel Revenue Per Available Room (RevPAR)

(SGD) 230 210 190 170 150 130 110 Apr 07 Oct 07 Apr 08 Oct 08 Mar 09 Sep 09 Mar 10 Sep 10 Feb 11 Source: Singapore tourism board

The main drivers to sustain the steady growth of Singapore’s hotel and tourism industry comprise: 1) The commitment from the Singapore government to develop and enhance the tourism and hospitality landscape to meet its target of 17 million arrivals in 2015 (a 47% increase from 11.6 million in 2010), with a SGD90m initiative introduced by Singapore Tourism Board (STB) named BOOST (“Building On Opportunities to Strengthen Tourism”) launched in 2009, and a project called MICE (“Meetings, Incentives, Conventions and Exhibitions”) held by the STB to improve Singapore’s position as one of the most dynamic business events destinations in the world; and 2) The introduction of the two integrated resorts — which began their operations in 2010 — is expected to attract more tourists, and enhance Singapore’s appeal as a leisure destination. Fitch expects this growth trend to continue in 2011, in the light of government’s continued focus on tourism development. The hotel sector has improved significantly from its lows during the financial crisis, as evident from the recovery in its key revenue generating indicator, revenue per available room (RevPAR). This reached its bottom (at around SGD128) in May 2009, but rebounded sharply thereafter — to reach SGD196.9 by June 2010. RevPAR has been stable since mid‐2010, and recorded SGD183.4 at end‐February 2011. This was clearly against the backdrop of healthy economy growth and a rise in visitor arrivals.

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Appendix C: Property Location and Singapore MRT System Raffles City is located above the City Hall MRT station and has direct access to the Esplanade station. The red line in the map below is the North‐South Line, and the green line is the East‐West Line. City Hall is the interchange station for the two main lines. The orange line is the Circle Line, which began its operation in 2009 and was fully completed in 2011.

Source: SMRT Corporation Ltd.

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Appendix C: Transaction Overview

SILVER OAK Singapore/CMBS Figure 13 Capital Structure Class Exp rating Size (%) Size (m) PMT freq. Final maturity Outlook A AAAsf 100 USD‐denominated, equivalent to Quarterly June 2018 Stable approximate SGD800m

Total 100 Approximate SGD800m DSCR Trigger Reserve Six months of interest payments will be deposited (built up in three months, at 1/3 of the required amount each month), once any DSCR trigger is breached Swaps Cross‐Currency Swap Interest‐Rate Swap Source: Fitch

Key Information Details Parties Closing date June 2011 Originator RCS Trust Country of assets and type Singapore/CMBS Property manager CapitaLand (RCS) Property Management Pte Ltd Country of SPV Singapore Loan borrower HSBC Institutional Trust Services (Singapore) Limited, as RCS Trust Trustee‐Manager Analyst(s) Helen Wong Trustee The Bank of New York Mellon +852 2263 9934 CMBS notes issuer (also the Lender) SILVER OAK LTD April Chen Account bank DBS and HSBC +852 2263 9936 Swap counterparty (CCS and IRS) DBS/HSBC/SCB Performance analyst Kate Lin Liquidity facility provider DBS/HSBC/SCB Source: Fitch

Key Rating Drivers • Debt Service Coverage Ratio (DSCR) and Loan‐to‐Value (LTV): Fitch’s stressed DSCR and stressed LTV ratio on the term loan backing the class A notes are 1.92x and 34.9%, respectively, at the expected maturity — assuming a weighted average refinancing rate of 6.6%. • Property Location and Diversification: Raffles City enjoys excellent connectivity with direct access to City Hall and Esplanade MRT stations. Raffles City has a large and diversified tenant base comprising 219 retail leases, 54 office leases (as of 31 December 2010), and one lease over the two hotels and the convention centre. The annualised average occupancy rates of retail and office sectors were above 97% for 2010. • Property Cash Flow: Property revenue, operating expenses, and capex from the historical data during 2007 to 2010 — as well as the historical occupancy rates and cash flow from the trust reports received since 2006 for the existing Silver Oak transaction — are analysed and used to derive Fitch’s sustainable cash flows. • Property Sponsorship and Management: The owner of the properties providing the security under the loans is RCS Trust, which was formed under a collaboration agreement between CCT and CMT. • Asset Outlook: Singapore demonstrated a sharp rebound in 2010 from the recent financial crisis, with its latest quarterly GDP growth recorded at 8.3% yoy in Q111. The office, retail and hotel sectors are steadily improving in their respective occupancy rates and rental levels. Fitch expects Singapore’s property market to be stable in 2011 and 2012. • Swap: Currency and interest‐rate mismatches between the property‐backing loans and the CMBS notes are mitigated by the currency and interest‐rate swap entered into between the issuer and the swap providers, DBS, HSBC and SCB. The swap counterparties’ ratings and the counterparty downgrade language included in the transaction documents are expected to be in line with Fitch’s counterparty criteria. Source: Fitch

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