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159 158 163 2018 SGX-CS Real Estate Corporate Day
3 October 2018 Important Notice
This presentation should be read in conjunction with the announcements released by OUE Commercial REIT (“OUE C-REIT”) on 2 August 2018 (in relation to its Financial Results for 2Q 2018), and on 10 September 2018 (in relation to its proposed Acquisition of the Office Components of OUE Downtown (the “Acquisition”), the proposed fully underwritten and renounceable Rights Issue and the proposed payment of the sub-underwriting commission).
This presentation is for information purposes only and does not constitute an invitation, offer or solicitation of any offer to acquire, purchase or subscribe for units in OUE C-REIT (“Units”). The value of Units and the income from them, if any, may fall or rise. The Units are not obligations of, deposits in, or guaranteed by, OUE Commercial REIT Management Pte. Ltd. (the “Manager”), DBS Trustee Limited (as trustee of OUE C-REIT) or any of its affiliates. An investment in the Units is subject to investment risks, including the possible loss of the principal amount invested. The past performance of OUE C-REIT is not necessarily indicative of the future performance of OUE C-REIT.
This presentation may contain forward-looking statements that involve risks and uncertainties. Actual future performance, outcomes and results may differ materially from those expressed in forward-looking statements as a result of a number of risks, uncertainties and assumptions. These forward-looking statements speak only as at the date of this presentation. Past performance is not necessarily indicative of future performance. No assurance can be given that future events will occur, that projections will be achieved, or that assumptions are correct. Representative examples of these factors include (without limitation) general industry and economic conditions, interest rate trends, cost of capital and capital availability, competition from similar developments, shifts in expected levels of property rental income, changes in operating expenses (including employee wages, benefits and training costs), property expenses and governmental and public policy changes. You are cautioned not to place undue reliance on these forward-looking statements, which are based on the Manager’s current view of future events.
Investors should note that they will have no right to request the Manager to redeem their Units while the Units are listed on the Singapore Exchange Securities Trading Limited (the “SGX-ST”). It is intended that Unitholders may only deal in their Units through trading on the SGX-ST. Listing of the Units on the SGX-ST does not guarantee a liquid market for the Units.
The information and opinions contained in this presentation are subject to change without notice. 2 Agenda
. Overview . Financial Highlights . Portfolio Performance . Acquisition . Appendices
3 Overview of OUE C-REIT
OUE C-REIT is a Singapore real estate investment trust listed on the Mainboard of Singapore Exchange Securities Trading Limited with the principal investment strategy of investing, directly or indirectly, in a portfolio of income-producing real About OUE C-REIT estate which is used primarily for commercial purposes OUE C-REIT is managed by OUE Commercial REIT Management Pte. Ltd., a wholly-owned subsidiary of OUE Limited
OUE C-REIT’s portfolio comprises : OUE Bayfront, a premium Grade A office building located at Collyer Quay between the Marina Bay downtown and Raffles Place in Singapore; Quality Portfolio One Raffles Place, an integrated commercial development comprising two Grade A office towers and a retail mall located in the heart of the Singapore’s central business district at Raffles Place; and Lippo Plaza, a Grade A commercial building located in Huangpu, one of Shanghai’s established core CBD locations
Committed Sponsor in OUE Group which has a 55.9% stake in OUE C-REIT Right of First Refusal over Sponsor’s income-producing commercial real estate Strong Sponsor Sponsor has proven track record in real estate ownership and operations Leverage on Sponsor’s asset enhancement and redevelopment expertise
4 Premium Portfolio of Assets OUE Bayfront
GFA (sq m) 46,774.6 NLA (sq m) Office: 35,298.3; Retail: 1,830.1; Overall: 37,128.4
Committed Occupancy (@ 30 Jun 2018) Office: 97.6%; Retail: 74.4%; Overall: 96.5% Valuation (@ 31 Dec 2017) S$1,153.0 m (S$2,885 psf) Valuation Cap Rate (Office): 3.75% OUE Bayfront & OUE Tower: 99 yrs from 12 November 2007 Land Use Right Expiry OUE Link: 15 yrs from 26 March 2010 Underpass: 99 yrs from 7 January 2002 Completion Year 2011 5 Premium Portfolio of Assets OUE Bayfront – Tenants by Trade Sector
As at June 2018 6 Premium Portfolio of Assets One Raffles Place
GFA (sq m) 119,626.3 Attributable NLA (sq m) Office: 56,013.0; Retail: 9,386.0; Overall: 65,399.0 Committed Occupancy (@ 30 Jun 2018) Office: 96.6%; Retail: 97.4%; Overall: 96.7% Valuation(1) (@ 31 Dec 2017) S$1,773.2 m (S$2,519 psf) Valuation Cap Rate (Office): 3.60% - 3.90% Office Tower 1: 841 yrs from 1 Nov 1985; Office Tower 2: 99 yrs from 26 May 1983; Land Use Right Expiry Retail: ~75% of NLA is on 99 yrs from 1 Nov 1985 Completion Year Office Tower 1: 1986; Office Tower 2: 2012; Retail (major refurbishment): 2014 (1) Based on OUB Centre Limited’s 81.54% interest in One Raffles Place. OUE C-REIT has an 83.33% indirect interest in OUB Centre Limited held via its wholly-owned subsidiaries 7 Premium Portfolio of Assets One Raffles Place – Tenants by Trade Sector
As at June 2018 8 Premium Portfolio of Assets Lippo Plaza
GFA (sq m) 58,521.5 Attributable NLA (sq m) Office: 33,538.6; Retail: 5,685.9; Overall: 39,224.5 Committed Occupancy (@ 30 Jun 2018) Office: 95.1%; Retail: 70.7%; Overall: 91.4%
Valuation(1) (@ 31 Dec 2017) RMB2,887.0 m / RMB49,332 psm (S$606.1m)(2) Land Use Right Expiry 50 yrs from 2 July 1994 Completion Year Office : 1999; Retail (major refurbishment) : 2010
(1) Based on 91.2% strata ownership of Lippo Plaza 9 (2) Based on SGD:CNY exchange rate of 1 : 4.764 as at 30 June 2018 Premium Portfolio of Assets Lippo Plaza – Tenants by Trade Sector
As at June 2018 10 Portfolio Composition
By Asset Value(1) By Revenue Contribution(2) By Segment Income(2)
(1) Based on independent valuations as at 31 December 2017 and OUE C-REIT’s proportionate interest in One Raffles Place (2) For 2Q 2018 and based on OUE C-REIT’s attributable interest in One Raffles Place 11 Well-Diversified Portfolio Tenant Base
As at June 2018 12 Quality and Diversified Tenant Base
Top 10 tenants contribute approximately 28.7% of gross rental income
WALE by NLA 3.2 years
As at 30 Jun 2018
13 Financial Highlights Delivered Sustainable Distribution
Delivered sustainable distribution to Unitholders since IPO
Distribution Since IPO
(1) Period commencing from OUE C-REIT’s listing date of 27 January 2014 to 31 December 2014 (2) Growth rate from FY2014 to FY2015 is calculated based on annualised amount available for distribution for the period from OUE C-REIT’s listing date of 27 January 2014 to 31 December 2014 15
Key Highlights
1H 2018 1H 2018 1H 2018 Revenue Net Property Income Amount Available for Distribution S$87.2 million S$69.2 million S$33.9 million Portfolio Committed 1H 2018 Substantially completed Occupancy Distribution Per Unit 2018 refinancing - (As at 30 June 2018) no refinancing
2.18 cents 95.2% until 2020
. Proposed acquisition of office components of OUE Downtown for S$908.0 million or S$1,173 psf . Partially funded by fully underwritten rights issue of S$587.5 million . Post-acquisition assets-under-management of S$4.4 billion and aggregate leverage of approximately 39.8%(1)
(1) Pro forma aggregate leverage as at 30 June 2018 assuming additional debt of S$361.6 million is raised for the proposed transactions 16 2Q 2018 vs 2Q 2017
2Q 2018 2Q 2017 Change
Revenue (S$m) 43.1 44.2 -2.6%
Net Property Income (S$m) 33.9 34.8 -2.4% Amount Available for Distribution 16.5 17.8 -7.5% to Unitholders (S$m) DPU (cents) 1.06 1.15 -7.8%
• Net property income in 2Q 2018 of S$33.9 million was down 2.4% year-on-year (“YoY”) due mainly to lower retail revenue from One Raffles Place Shopping Mall as a result of transitional vacancy from the departure of an anchor tenant, offset partially by lower utilities cost • With higher interest expenses in 2Q 2018 as a result of higher borrowings, partially offset by higher drawdown of income support and lower CPPU distribution, amount available for distribution in 2Q 2018 was S$16.5 million, a decline of 7.5% YoY
17
2Q 2018 vs 2Q 2017
S$'000 2Q 2018 2Q 2017 Change (%) Revenue 43,060 44,214 (2.6) Property operating expenses (9,126) (9,445) (3.4) Net property income 33,934 34,769 (2.4) Other income 1,073 756 41.9 Amortisation of intangible asset (1,113) (1,113) - Manager's management fees (2,456) (2,367) 3.8 Other expenses (630) (583) 8.1 Interest income 225 180 25.0 Interest expense (10,817) (9,423) 14.8 Amortisation of debt establishment costs (1,260) (1,353) (6.9) Net fair value movement of financial derivatives 734 655 12.1 Foreign exchange differences 22 (112) NM(1) Total return before tax 19,712 21,409 (7.9) Tax expense (4,458) (4,489) (0.7) Total return for period 15,254 16,920 (9.8) Non-controlling interests (1,782) (1,969) (9.5) CPPU holder distribution (935) (1,371) (31.8) Distribution adjustments 3,957 4,253 (7.0) Amount available for distribution to Unitholders 16,494 17,833 (7.5) (1) NM: Not meaningful 18 1H 2018 vs 1H 2017
1H 2018 1H 2017 Change
Revenue (S$m) 87.2 89.0 -2.1%
Net Property Income (S$m) 69.2 69.4 -0.3% Amount Available for Distribution 33.9 34.5 -1.6% to Unitholders (S$m) DPU (cents) 2.18 2.38 -8.4%
• Revenue in 1H 2018 of S$87.2 million was 2.1% lower YoY due mainly to lower retail revenue from One Raffles Place Shopping Mall as a result of transitional vacancy from the departure of an anchor tenant • Due to utilities costs savings and lower maintenance expenses, the resultant net property income in 1H 2018 was S$69.2 million, 0.3% lower YoY • With higher interest expenses in 1H 2018 as a result of higher borrowings, partially offset by higher drawdown of income support and lower CPPU distribution, amount available for distribution in 1H 2018 was S$33.9 million, 1.6% lower YoY
19
1H 2018 vs 1H 2017
S$'000 1H 2018 1H 2017 Change (%) Revenue 87,155 89,030 (2.1) Property operating expenses (17,944) (19,619) (8.5) Net property income 69,211 69,411 (0.3) Other income 2,029 1,431 41.8 Amortisation of intangible asset (2,226) (2,226) - Manager's management fees (4,880) (4,706) 3.7 Other expenses (1,230) (1,208) 1.8 Interest income 433 225 92.4 Interest expense (21,249) (18,996) 11.9 Amortisation of debt establishment costs (2,509) (3,512) (28.6) Net fair value movement of financial derivatives 716 (1,260) NM(1) Foreign exchange differences 424 (333) NM Total return before tax 40,719 38,826 4.9 Tax expense (9,294) (8,937) 4.0 Total return for period 31,425 29,889 5.1 Non-controlling interests (3,717) (3,961) (6.2) CPPU holder distribution (1,860) (2,727) (31.8) Distribution adjustments 8,067 11,274 (28.4) Amount available for distribution to Unitholders 33,915 34,475 (1.6) (1) NM: Not meaningful 20 Healthy Balance Sheet
S$ million As at 30 Jun 2018
Investment Properties 3,532.7
Total Assets 3,580.9
Loans and borrowings 1,363.6
Total Liabilities 1,565.5
Net Assets Attributable to Unitholders 1,422.1
Units in issue and to be issued (’000) 1,552,336
NAV per Unit (S$) 0.92
21 Capital Management as at 30 June 2018
. With 74.1% of debt on fixed rate basis, earnings are mitigated against interest rate fluctuations . Every 25bps increase in floating interest rates is expected to reduce distribution by S$0.9 million per annum, or 0.06 cents in DPU
As at 30 Jun 2018 As at 31 Mar 2018
Aggregate Leverage 40.3% 40.5%
Total debt S$1,322m(1) S$1,329m(2)
Weighted average cost of debt 3.5% p.a. 3.4% p.a.
Average term of debt 2.3 years 2.6 years
% fixed rate debt 74.1% 73.7%
Average term of fixed rate debt 1.6 years 1.9 years
Interest service ratio 3.2x 3.3x
(1) Based on SGD:CNY exchange rate of 1:4.764 as at 30 June 2018 and includes OUE C-REIT’s share of OUB Centre Limited’s loan (2) Based on SGD:CNY exchange rate of 1:4.803 as at 31 March 2018 and includes OUE C-REIT’s share of OUB Centre Limited’s loan 22 Debt Maturity Profile as at 30 June 2018
. Post 30 June 2018, substantially completed 2018 refinancing requirement on unsecured terms. Consequently, proportion of unsecured debt expected to increase from approximately 14% to close to 50%, improving OUE C-REIT’s credit profile and financial flexibility . Assuming completion of refinancing on 30 June 2018, weighted average debt maturity expected to lengthen from 2.3 years to 3.6 years . No refinancing requirement until 2020
Debt Maturity Profile as at 30 June 2018 Pro forma Debt Maturity Profile as at 30 June 2018
(S$ million) (S$ million)
23 Portfolio Performance Resilient and Stable Portfolio
. Portfolio committed occupancy as at 30 June 2018 of 95.2% was lower quarter-on-quarter (“QoQ”) due to lower retail occupancy at OUE Bayfront and Lippo Plaza . Committed office occupancy at all three properties continued to be above market
Portfolio Committed Occupancy
(1) Proforma committed occupancy as at 30 September 2013 as disclosed in OUE C-REIT’s Prospectus dated 17 January 2014 25
Office Occupancy Higher Than Market
All three properties continued to achieve above market office occupancy Singapore
Shanghai
26 Source: CBRE, Colliers Shanghai Committed Office Rents In Line Or Above Market
Average Passing Average Expired 2Q 2018 Committed Rents(1) Market Rents Rents for Rents Jun 2018
OUE Bayfront S$11.71 psf/mth S$11.50 – S$12.80 psf/mth S$10.10 psf/mth(2) S$11.42 psf/mth
One Raffles S$10.66 psf/mth S$9.00 – S$11.00 psf/mth S$10.10 psf/mth(2) S$9.49 psf/mth Place
Lippo Plaza RMB9.86 psm/day RMB9.80 – RMB11.00 psm/day RMB9.46 psm/day(3) RMB9.83 psm/day
. Given the pace of recovery in Singapore office market rents, OUE Bayfront achieved positive rental reversions in 2Q 2018 while the rental gap between expiring office rents and market continued to narrow at One Raffles Place . In Shanghai, Lippo Plaza also achieved positive rental reversions in 2Q 2018
(1) Committed rents for renewals, rent reviews and new leases (2) Refers to Grade A CBD Core office rents in Singapore. Source: CBRE Singapore MarketView 2Q 2018 27 (3) Refers to CBD Grade A office rents in Puxi. Source: Colliers International, Shanghai Office Quarterly 2Q 2018, 30 July 2018 Average Passing Office Rents
Singapore
Shanghai
28 (1) Proforma average passing rents as at 30 September 2013 as disclosed in OUE C-REIT’s Prospectus dated 17 January 2014 Lease Expiry Profile - Portfolio
8.3% of OUE C-REIT’s portfolio gross rental income is due for renewal in 2H 2018
WALE(1) of 2.2 years by NLA(2) and 2.3 years by Gross Rental Income
As at 30 Jun 2018 (1) “WALE” refers to the weighted average lease term to expiry (2) “NLA” refers to net lettable area 29 Lease Expiry Profile - OUE Bayfront
Well-positioned to benefit from a rising Singapore office market, with more than 50% of OUE Bayfront’s gross rental income due for renewal over the next 2 years
WALE of 2.4 years by NLA and 2.3 years by Gross Rental Income
As at 30 Jun 2018
30 Lease Expiry Profile - One Raffles Place
WALE of 2.4 years by NLA and 2.3 years by Gross Rental Income
As at 30 Jun 2018
31 Lease Expiry Profile - Lippo Plaza
WALE of 2.1 years by NLA and 2.9 years by Gross Rental Income
As at 30 Jun 2018
32 Acquisition Overview of OUE Downtown Office Components OUE C-REIT’s second acquisition since IPO and a strategic addition of a new Singapore CBD submarket to the portfolio . OUE Downtown 1 Office Component and OUE OUE Downtown 1 Downtown 2 Office Component (the “Properties”) Office Component Description . The Properties are part of OUE Downtown, a mixed- use development, comprising two high-rise towers, a retail podium and a multi-storey car park OUE C-REIT to acquire Head Title . 99-year leasehold title commencing 19 July 1967 . Total: 752,634 sq ft OUE Downtown 2 Gross Floor Area – OUE Downtown 1: 161,351 sq ft Office Component – OUE Downtown 2: 591,283 sq ft . Total: 529,981 sq ft Net Lettable Area – OUE Downtown 1: 88,400 sq ft – OUE Downtown 2: 441,581 sq ft
Oakwood Premier Committed . 95.1% OUE Singapore Occupancy(1) (Serviced Net Property Apartments) . 5.0% Income Yield(2)
Weighted Average . By gross rental income: 2.0 years Lease Expiry(1) . By NLA: 2.0 years
. Deloitte & Touche LLP OUE Downtown Key Tenants . Aviva Ltd Gallery . Moody’s Analytics Singapore Pte. Ltd. (Retail) . 53.16% of the total share value of the strata lots in Share Value OUE Downtown (1) As at 30 June 2018 (2) Based on the Properties’ 1H 2018 annualised NPI including the Rental Support, adjusted for one-off expenses, and assumes 12 months of the Management Corporation expenses divided by the Purchase Consideration 34 Transaction Overview
. OUE Downtown Office Component 1: Grade A office space from 35th to 46th Proposed storeys of OUE Downtown 1 (50-storey high-rise tower) Acquisition . OUE Downtown Office Component 2: Grade A office space from 7th to 34th storeys of OUE Downtown 2 (37-storey high-rise tower)
With the Rental Support Without the Rental Support Independent Valuations as at Savills S$927.0 million (S$1,749 psf) S$891.0 million (S$1,681 psf) 30 June 2018 Colliers S$945.0 million (S$1,783 psf) S$920.0 million (S$1,736 psf)
. S$908.0 million (S$1,713 psf) Purchase . Translates to a 2.0% to 3.9% discount to independent valuations with Rental Consideration Support
. Up to an aggregate amount of S$60.0 million or for a period of up to 5 years Rental Support upon Completion, whichever is earlier
Total Acquisition . S$955.9 million (including stamp duty and other transaction expenses) cost
. Rights Issue: S$587.5 million Funding Structure . Debt: S$361.6 million . Acquisition Fee in Units: S$6.8 million
. Underwritten and renounceable Rights Issue on a basis of 83 Rights Units for Proposed Rights every 100 Existing Units in OUE C-REIT Issue . Rights Issue Price: S$0.456 per Rights Unit
. Sub-Underwriting Commitment from the Sponsor to subscribe for 66% of the Proposed Sub- total number of Underwritten Rights Units Underwriting . Sub-Underwriting Commission of 1.80% payable to Sponsor by the Joint Lead Agreement Managers and Underwriters OUE Downtown
35 Details of Rental Support
Rental Support helps to align the rental rates of the Properties to prevailing market rates for a period of 5 years upon Completion of the proposed Acquisition
Rationale Rental Support structure
The majority of the existing committed leases at the Properties Maximum aggregate amount: S$60.0 million were negotiated and signed between 2015 and 2017, when the Singapore CBD office market experienced a downturn Period: Up to 5 years upon Completion
– Unprecedented level of supply, where over 3.4 million sq ft of Rental Support payment: Rental income top up if actual rental space was completed in 2016 and 2017 alone income falls below the target rent (“Base Rate”)(2)
Lower office absorption as employment growth in key office- (S$ psf per month) – occupier industries slowed due to lower economic activity
2018 2019 2020 2021 2022 2023 The average monthly gross rent for the Properties was
approximately S$7.00 psf per month as of June 2018, which is lower than the S$8.43 psf per month in 1Q 2018 for comparable Base Rate 8.90 9.10 9.25 9.40 9.40 9.40 Shenton Way/Tanjong Pagar office properties(1) Forecast 8.40 8.75 8.90 9.10 9.30 9.50 Gross Rental Support helps to align the rental rates of the Properties to to to to to to to the market rate of the Shenton Way/Tanjong Pagar submarket, Effective (1)(3) 9.00 9.15 9.30 9.50 9.75 10.25 forecast to be between S$8.40 to S$9.00 psf per month by end- Rents 2018(1)
Provides income stability for Unitholders and mitigates potential Base Rate is in line with the Independent Market Research risks caused by volatility and uncertainty of global economic forecast of the premium and Grade A office rents for the Shenton conditions Way/Tanjong Pagar submarket
(1) Extracted from the Independent Market Research Report (2) Pursuant to the Deed of Rental Support, the Target Quarterly Rent for each calendar quarter shall start at the Base Rate of S$8.90 psf per month, multiplied by the total NLA of the Properties of 529,981 sq ft 36 (3) Premium and Grade A office average gross effective rents for Shenton Way/Tanjong Pagar submarket
Funding Structure
Total Acquisition Cost Sources of funding
Acquisition Fee Acquisition S$6.8m Fee in Units Rights Issue Purchase (1%) S$6.8m S$587.5m Consideration (1%) (61%) S$908.0m (95%)
Total Total S$955.9m S$955.9m Debt Transaction S$361.6m costs (38%) S$41.1m (4%)
37 Details of the Rights Issue and Sub-Underwriting Agreement
Rights Issue Price . Fully underwritten and renounceable Rights Proposed Issue to raise gross proceeds of Rights Issue approximately S$587.5 million Discount Discount 31.4% Rights Ratio . 83 Rights Units for every 100 Existing Units 20.0%
. Irrevocable undertaking by Sponsor to Sponsor subscribe and pay in full for its provisional Irrevocable allotments of Right Units, representing about Undertaking 55.9% of the Rights Issue size (1) (2)
Joint Lead . Credit Suisse (Singapore) Limited Use of proceeds of the Rights Issue Managers and . Oversea-Chinese Banking Corporation Stamp duty, professional and Underwriters Limited other fees and expenses(3) S$30.5m (5%) Part finance . Sponsor to sub-underwrite 66% of the total Total the Purchase Proposed Sub- number of Underwritten Rights Units S$587.5m Consideration S$550.1m Total costs and Underwriting . Sub-Underwriting Commission of 1.80% (94%) expenses relating to the Agreement payable by the Joint Lead Managers and proposed Rights Issue Underwriters to the Sponsor S$6.9m (1%)
(1) TERP = (Market capitalisation of OUE C-REIT as at 10 September 2018 + Gross proceeds from the Rights Issue) divided by Units in issue after the Completion of the Rights Issue (2) Closing Price as at 10 September 2018 (3) Incurred or to be incurred by OUE C-REIT in connection with the proposed Acquisition and for general corporate funding purposes 38 Key Transaction Rationale
1 Strategic acquisition to benefit from the transformation of Tanjong Pagar
2 Attractive price and Acquisition NPI yield for a high quality Grade A office property
Favourable growth profile from a rising Singapore CBD office market and potential 3 positive rental reversions
4 Enhanced market positioning and diversified product offering
5 Increased portfolio size post-Acquisition
6 Improved portfolio diversification with reduced asset and tenant concentration risk
Increased market capitalisation and potential increased liquidity through the Rights 7 Issue
39 1 Strategic acquisition to benefit from the transformation of Tanjong Pagar
Primed to benefit from the transformation of Tanjong Pagar into a business and lifestyle hub
CROSS ST CENTRAL BLVD Transformation of the Legend
Tanjong Pagar DOWNTOWN MARINA OUE Downtown precinct has SHENTON (including the commenced with the BAY Properties) WAY/ Sofitel So Singapore Asia Square completion of offices, Marina One Tower 1 & 2 MARINA new premium hotels TANJONG The Westin BAY CBD offices and the entry of unique PAGAR F&B players – elevate Frasers SHENTONWAY Tower Capital SHENTON Hotel landmarks the “live, work and Tower WAY
play” image of Tanjong ASB Tower OUE Pagar district Downtown Retail/F&B MAXWELL RD STRAITS BOULEVARD landmarks The Tanjong Pagar MAXWELL and Downtown MRT ROBINSON RD Marina Coastal Marina Bay office
Maxwell Expressway & submarket stations and the Chambers East Coast upcoming Prince AXA Tower Guoco Parkway Shenton Way/ Edward and Shenton Sofitel Singapore Tower Tanjong Pagar City Centre Tanjong RD ANSON office submarket Way MRT stations are Pagar Centre TANJONG within a short walking PAGAR PRINCE MRT Lines EDWARD distance from the Circle Line Oasia Downtown PRINCE EDWARD RD Properties, providing Amara Hotel East West Line
easy accessibility and North South Line Twenty Anson connectivity for office Greater Southern 100AM Icon Village Downtown Line tenants Ayer Rajah MAS Building Waterfront land to be Thomson-East Coast Line Expressway developed as per MRT lines under Master Plan 2014 construction
Source: Independent Market Research Report 40 2 Attractive price for a high quality Grade A office property
Acquisition price of S$1,713 psf is attractive compared to the recently transacted Grade A properties in the Singapore CBD, even after adjusting for land tenure Adjusted price assuming fresh 99 years lease(1) (S$ psf) 3,379 3,237
2,827 2,820 2,762 2,739 2,737 2,558 2,234(2) 2,253 2,200 2,031 1,963
1,713
OUE Straits GSH Plaza CapitaGreen Chevron Asia Square One George Asia Square Twenty PwC Building CPF Building AXA Tower Robinson 77 Downtown Trading House Tower 1 Street Tower 2 Anson Building
Remaining Land Lease 48 999 70 55 70 88 85 89 88 77 49 63 75 Tenure (years)
Price on NLA 1,713 3,520 2,900 2,276 2,526 2,704 2,650 2,689 2,505 2,100 1,698 1,731 1,810 (S$ psf) Transaction In Jun-16 Feb-17 May-16 Dec-17 Jun-16 May-17 Sep-17 Jun-18 Feb-17 Nov-15 Jan-15 Nov-16 Date progress
Note: Based on transactions from 2015 of more than S$500 million (1) These figures are provided to allow like-for-like price comparison between office properties of different land tenures within the CBD. This is an indicative value psf of NLA should the residual tenure of the land for each property be reset – or in the case of 999-year leasehold properties, converted – to a fresh 99-year leasehold tenure. The estimate, provided for comparison purposes only, is calculated by referencing the residual tenure of the land at the time of acquisition, and adjusting the price psf of NLA for each property using the Singapore Land Authority’s Bala’s table of discounted values. For the purpose of the adjusted price estimate, 999-year leasehold tenure is considered a form of freehold tenure. Accordingly, the same rates of discounted values apply 41 (2) The Purchase Consideration is equivalent to a price of S$1,713 psf, and translates to an indicative value of S$2,234 psf assuming that the Properties’ remaining leasehold tenure of 48 years is reset to a fresh 99-year leasehold tenure 3 Favourable growth profile from a rising Singapore CBD office market…
Positions OUE C-REIT favourably to benefit from a rising Singapore CBD office market Increased portfolio exposure to the Singapore CBD office market… … with strong rental growth momentum (S$ psf per month)
NLA of OUE C-REIT's Average gross effective rents of premium and Grade A office space in Singapore portfolio Singapore CBD and Shenton Way/Tanjong Pagar submarket(1)
9.75 9.60 9.50 1.6m sq ft 9.15 9.25 8.76 9.53 8.51 9.30 8.45 9.10 1.1m sq ft 8.16 8.21 8.95 7.93 8.02 8.70 8.50 7.54 8.16 8.18 8.05 7.82 7.86 7.49 7.21
Pre-Acquisition Post-Acquisition
2012 2013 2010 2011 2014 2015 2016 2017
2018E 2019E 2020E 2021E 2022E
OUE C-REIT’s Existing Portfolio The Properties Shenton Way/Tanjong Pagar CBD
The proposed Acquisition is expected to increase the Rental growth momentum for premium and Grade A NLA of OUE C-REIT’s Singapore portfolio by 48.0% office space in the Singapore CBD and Shenton to 1.6 million sq ft Way/Tanjong Pagar submarket is expected to continue going forward Enlarges OUE C-REIT footprint within the Singapore CBD and exposure to a rising Singapore CBD office market
Source: Independent Market Research Report 42 (1) 2018E to 2022E gross effective rents were calculated based on the mid-point of the range of gross effective rents of premium and Grade A office space in Shenton Way/Tanjong Pagar submarket and Singapore CBD as forecast by the Independent Market Research Consultant in the Independent Market Research Report
3 … and potential positive rental reversions
The passing rent of the Properties and balanced lease expiry profile positions the Properties to achieve positive rental reversions Balanced lease expiry profile provides for … and high growth potential from future rental income stability… reversions (S$ psf per month)
Lease expiry profile of the Properties(1) Difference between the Properties' passing rent and 1Q 2018 market rent for office properties in Shenton Way/Tanjong Pagar 44.6% 41.4% 8.43 +20.4%
26.7% 24.6% 19.4% 19.8% 7.00 9.6% 10.2%
1.7% 2.0%
2018 2019 2020 2021 2022 The Properties' passing rent (As of June 2018)
By NLA By Gross rental income The passing rent for the Properties (as of June 2018) was approximately S$7.00 psf per month, which is below the S$8.43 psf per month in 1Q 2018 for comparable Shenton Way/Tanjong Pagar office properties Provides potential positive rent reversion of approximately 20.4%
Source: Independent Market Research Report. 43 (1) As of June 2018 4 Enhanced market positioning and diversified product offering
Strengthens OUE C-REIT’s footprint within the Singapore CBD and allows OUE C-REIT to capture tenant demand within the three major office rental submarkets
Legend
The proposed Acquisition would OUE Downtown allow OUE C-REIT to capture (including the Properties) tenant demand within the three major office rental submarkets OUE C-REIT properties in the Singapore CBD, namely Raffles Place, New Downtown 1 (Marina Bay area) and Shenton 2 CBD office Way/Tanjong Pagar
Hotel landmarks
Raffles Place office 1 One Raffles Place – submarket
commanding an iconic position Marina Bay office in the Raffles Place submarket submarket Intersection between Raffles Place and Marina 2 OUE Bayfront – gateway Bay office submarket between the developing Shenton Way/Tanjong Marina Bay area and the Pagar office submarket established financial hub of MRT Lines 3 Raffles Place Circle Line
East West Line
3 The Properties – positioned North East Line to benefit from the North South Line rejuvenation of the Tanjong Pagar precinct Downtown Line Thomson-East Coast Line MRT lines under construction
Source: Independent Market Research Report 44 5 Increased portfolio size post-Acquisition
The increased portfolio size post-Acquisition will provide OUE C-REIT with an enlarged debt headroom and a stronger platform for growth Increase in total AUM Enlarged debt headroom(3) (S$ million) (S$ million)
(2)
(1)
OUE C-REIT’s aggregate leverage of 40.3% as at 30 June 2018 is expected to improve to 39.8%(4) after the proposed Transactions
(1) As at 31 December 2017 (2) Based on the AUM of OUE C-REIT’s Existing Portfolio as at 31 December 2017 and the valuation of the Properties without Rental Support (3) Based on the aggregate leverage limit of 45% under the Property Funds Appendix 45 (4) Pro forma aggregate leverage as at 30 June 2018 assuming additional debt of S$361.6 million is raised for the proposed Transactions 6 Improved portfolio diversification with reduced asset and tenant concentration risk
Reduce OUE C-REIT’s asset and tenant concentration risks, and contribute to the long- term stability and resilience of income streams Portfolio composition by revenue contribution
The Properties OUE Bayfront Lippo Plaza 20.4% 28.1% 21.0% . No single property is OUE Bayfront expected to contribute to 35.3% more than 34.8% of OUE C-REIT’s revenue post- Lippo Plaza 16.7% Acquisition One Raffles One Raffles Place Place 43.7% 34.8% Pre-Acquisition(1) Post-Acquisition(2) Improved tenant diversification with contribution from top 10 tenants decreasing from 28.7% to 26.9%
9.3% Top 10 tenants by revenue contribution
7.3% Pre-Acquisition Post-Acquisition Addition of the Properties' tenants to OUE C-REIT’s top 10 tenants
4.6% 4.3% 3.4% 2.7% 2.1% 2.5% 2.3% 2.1% 1.9% 1.8% 1.7% 1.4% 1.4% 1.5% 1.2%
Bank of America Deloitte & L Brands Hogan Lovells OUE Limited Allen & Overy Virgin Active Aviva Ltd Professional Raffles Business Merrill Lynch Touche LLP Lee & Lee LLP Singapore Pte Investment Suites Pte Ltd Ltd Advisory Services Pte Ltd
(1) Calculated based on the 1H 2018 revenue of OUE C-REIT’s Existing Portfolio (adjusted for OUE C-REIT’s attributable interest in One Raffles Place) (2) Calculated based on the 1H 2018 revenue of OUE C-REIT’s Existing Portfolio (adjusted for OUE C-REIT’s attributable interest in One Raffles Place) and the 1H 2018 46 revenue of the Properties 7 Increased market capitalisation and potential increased liquidity through the Rights Issue
The increased market capitalisation and liquidity would also provide OUE C-REIT with increased visibility within the investment community
Increased market capitalisation (S$ million)
(2)
(3)
(1)
(3)
(1) The pre-Acquisition market capitalisation is calculated based on the Closing Price, multiplied by the Existing Units (2) The post-Acquisition market capitalisation is calculated based on TERP of S$0.570 per Unit, multiplied by the aggregation of the Existing Units and the Rights Units 47 (3) Assumes all Unitholders subscribe for their pro rata share of the proposed Rights Issue (i.e. Sponsor does not subscribe more than its entitled pro rata stake) Appendices • Singapore Office Market • Shanghai Office Market Overview of Singapore Office Sector
Singapore’s CBD – Comprises traditional areas of Raffles Place, Shenton Way/Robinson Road/Cecil Street as well as Marina Bay – Many established global financial institutions and headquarters of MNCs are located in Marina Bay and Raffles Place, while Shenton Way/Robinson Road/Cecil Street is popular with professional services companies and other financial, insurance and real estate companies Historical supply-demand conditions – Annual average island-wide demand for office space from 2007 – 2016 was about 1.1 million sq ft, compared to annual average supply of 1.4 million sq ft over the same period. For 2017, island-wide net absorption was 2.1 million sq ft, compared to net new supply of 2.7 million sq ft.
CBD Office Locations in Singapore Breakdown of Office Stock(1) (million sq ft)
49 (1) CBRE Pte Ltd, 2Q 2018 Singapore Office Market
. Island-wide net absorption in 2Q 2018 was 503,907 sq ft due mainly to healthy level of pre- commitment at a newly completed office building. Core CBD office occupancy remained unchanged at 94.1% as at 2Q 2018, with demand supported by co-working operators, technology firms as well as the insurance sector . Rental growth for Grade A CBD Core office accelerated 4.1% QoQ to S$10.10 psf per month, the fastest pace of growth since 1Q 2014
Source: CBRE 50 Demand and Supply vs Office Rental
Island-wide Office Demand, Supply and Office Rents
Source: URA statistics, CBRE Research 2Q 2011 was the last period where CBRE provided Prime office Rental data. Prime Grade A office rental data not available prior to 1Q 2002
51 Known Office Supply Pipeline
Office Supply Pipeline in Singapore (CBD and Fringe of CBD)
Note: Excluding strata-titled office Source: CBRE Research, 2Q 2018 52 Overview of Shanghai Office Sector
Puxi, the traditional business and commercial hub of Shanghai – Key office and commercial districts within Puxi are concentrated in the Jing’an, Huangpu and Xuhui areas, which together form the traditional downtown CBD of Shanghai – Puxi draws international retailers, service providers and MNC headquarters operations due to its good connectivity and excellent amenities, while Pudong’s Lujiazui caters to financial institutions due to policy and incentive-driven agglomeration Historical supply-demand conditions – The six main districts that make up Shanghai core CBD provide Grade-A office stock of about 7.3 million sq m as at 2Q 2018 – Average net demand for Shanghai CBD Grade A office from 2012 – 2016 was 290,000 sq m, compared to average net supply of 340,000 sq m over the same period. In 2017, net absorption was 599,000 sq m, compared to 2016 net absorption of 79,000 sq m. Net supply in 2017 was a record 956,000 sq m
Key Districts of Shanghai CBD Breakdown of CBD Grade A Office Stock(1) (million sq m)
(1) Colliers International Research, 2Q 2018 53 Shanghai Office Market
Shanghai . In 2Q 2018, supported by strong demand, Shanghai CBD Grade A office occupancy increased 2.9 ppt QoQ to 89.4% and rents rose 0.8% QoQ to RMB10.36 psm/day. Puxi Grade A office occupancy improved 4.5 ppt QoQ to 90.7%, while rents increased 1.6% QoQ to RMB9.46 psm/day Puxi . Continued significant new office supply is expected in Shanghai over the next two years, before easing in 2020. Nevertheless, healthy demand from the finance and technology sectors and underpin occupancy as well as rental rates
54 Source: Colliers International Demand, Supply and Vacancy
Shanghai CBD Grade A Net Absorption, New Supply and Vacancy Rate
Source: Colliers International 55 CBD Grade A Office Supply Pipeline
Office Supply Pipeline in Shanghai CBD
Source: Colliers International Shanghai, 2Q 2018 56 224 192 127
52 62 72
61 82 97
139 140 142
110 110 110
159 158 163
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