The Properties and Business

THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. THE PROPERTIES AND BUSINESS

OVERVIEW OF SF REIT

SF REIT’s initial portfolio at [REDACTED] shall comprise three Properties located in Hong Kong, Foshan and Wuhu, all of which are modern logistics properties with an aggregate Gross Lettable Area of 307,990.8 sq.m. as at 30 September 2020 and comprise distribution centres equipped with automatic sorting and supply chain support facilities, is strategically located within the key logistics hubs and near major airports, seaports, railways, express highways and transportation hubs in Hong Kong and the PRC.

The following map sets out the location of the Properties:

Wuhu Property Gross Lettable Area: 62,777.8 sq.m. (approximately 20.4% of the aggregate Gross Lettable Area of the Properties) Appraised value as at HK$261.6 million 31 December 2020: (approximately 4.3% of the Appraised Value)

Foshan Property Gross Lettable Area: 84,890.8 sq.m. (approximately 27.6% of the aggregate Gross Lettable Area of the Properties) Hong Kong Property Appraised value as at HK$552.0 million Gross Lettable Area: 160,322.2 sq.m. 31 December 2020: (approximately 9.1%of (approximately 52.1% of the Appraised Value) the aggregate Gross Lettable Area of the Properties) Appraised value as at HK$5,280.0 million 31 December 2020: (approximately 86.6% of the Appraised Value)

The REIT Manager believes that the Properties have the following competitive strengths, with further details set out in the section headed “Key Investment Highlights of SF REIT” in this Document:

• Prime property portfolio strategically located in Hong Kong and the PRC

• Able to capitalise on the growth of the Hong Kong and PRC logistics and e-commerce markets

• High-quality and stable tenant base

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The table below provides an overview of the Properties in SF REIT’s portfolio, with further details set out in the subsection headed “The Properties” of this section in this Document:

Property Nature Location Accessibility

1. Hong Kong Modern Tsing Yi, Adjacent to Kwai Tsing Container Property logistics Hong Kong Terminal No. 9 (approximately property 100 metres across the street) and Stonecutters Bridge; approximately 19 kilometres away from Hong Kong International Airport

2. Foshan Modern Nanhai District, Proximity to Foshan First Ring Road; Property logistics Foshan City, approximately (i) 15 kilometres away property the PRC from Foshan Shadi Airport; (ii) 17 kilometres away from Foshan West Railway Station; (iii) 23 kilometres away from Guangzhou Railway Station which is the largest high- speed railway station in the Southern China; and (iv) 28 kilometres from Guangzhou Baiyun Airport which is one of the biggest aviation transportation hubs in the PRC

3. Wuhu Property Modern Jiujiang Approximately (i) six kilometres logistics Economic from Wuhu East High Speed Railway property Development Station; (ii) ten kilometres from Area, Wuhu City, Wuhu International Cargo Port; and the PRC (iii) two kilometres from Ningwu Highway which connects the north and south parts of the Yangtze River Delta Economic Region

The Properties had an aggregate Gross Lettable Area of approximately 307,990.8 sq.m. with an Appraised Value of HK$6,093.6 million as at 31 December 2020. The average Occupancy Rate of the Properties as at the Latest Practicable Date was approximately 94.9%. For further details of the portfolio’s operating data, please refer to the subsection headed “Portfolio of SF REIT’s Properties” of this section in this Document.

As at 30 September 2020, the Properties housed a total of 32 tenants, with the top five tenants in terms of total Gross Rental Income (three of whom are connected persons of SF REIT) contributing to approximately 83.3% of the total Gross Rental Income for the month ended 30 September 2020, and SF Connected Tenants contributing to approximately 81.8% of the total Gross Rental Income for the same period. Approximately 81.9% of the tenants (in

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PORTFOLIO OF SF REIT’S PROPERTIES

The table below sets forth certain details regarding the Properties as at 30 September 2020 unless otherwise noted:

Expiry of land Gross use right/ Number of Gross Lettable Year of government Appraised Number of Number of carparking Property Nature Floor Area Area Completion(1) lease Value tenants(2) leases(3) spaces (HK$’ (sq.m.) (sq.m.) million)

Hong Kong Modern 97,181.3 160,322.2 2014 13 January 5,280.0 10 20 266 Property logistics 2061 property Foshan Modern 74,926.6 84,890.8 2021 20 July 2049 552.0 1 1 0 Property logistics property Wuhu Modern 62,304.2 62,777.8 2018 20 January 261.6 21 29 0 Property logistics 2066 property

Total 234,412.1 307,990.8

Notes:

(1) Year of completion refers to the year in which the (i) the Occupation Permit in respect of the Hong Kong Property was issued; or (ii) the inspection and acceptance procedures of the PRC Properties were completed.

(2) As at the Latest Practicable Date, the total number of tenants of the Properties remained the same.

(3) As at the Latest Practicable Date, the number of leases of the Hong Kong Property, Foshan Property, Wuhu Property were 19, 1, 31, respectively.

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The table below sets out the Gross Rental Income and Net Property Income of the Properties during the Track Record Period:

Gross Rental Income Net Property Income For the For the For the For the nine months For the For the nine months year ended year ended ended year ended year ended ended 31 December 31 December 30 September 31 December 31 December 30 September Property 2018 2019 2020 2018 2019 2020 (HK$’000) (HK$’000) (HK$’000) (HK$’000) (HK$’000) (HK$’000)

Hong Kong Property 207,035 207,888 152,560 194,409 200,967 149,076 Foshan Property – – 2,915 (101) (7) 3,143 Wuhu Property 1,336 10,730 9,954 (283) 6,382 6,768

Total 208,371 218,618 165,429 194,025 207,342 158,987

The table below sets out the Occupancy Rate of each Property, the average Occupancy Rate of the Properties, and the Average Monthly Rental per Leased Square Metre during the Track Record Period as at 31 December 2018, 31 December 2019, 30 September 2020 and as at the Latest Practicable Date:

Average Monthly Rent Per Occupancy Rate Leased Square Metre As at For the For the For the nine As at As at As at Latest year ended year ended months ended 31 December 31 December 30 September Practicable 31 December 31 December 30 September Property 2018 2019 2020 Date 2018 2019 2020 (%) (%) (%) (%) (HK$) (HK$) (HK$)

Hong Kong Property 94.4 97.2 93.7 91.5 113.3 108.3 107.4 Foshan Property N/A N/A 100 100 N/A N/A 35.2 Wuhu Property 49.7 80.3 46.9 96.6 20.5 22.0 26.1

Average 81.8 92.4 85.9 94.9

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TENANT PROFILE OF THE PROPERTIES

The Properties housed a total of 32 tenants as at 30 September 2020, with the top five tenants in terms of total Gross Rental Income (three of whom are connected persons of SF REIT) contributing to approximately 83.3% of the total Gross Rental Income for the month ended 30 September 2020, and SF Connected Tenants contributing to approximately 81.8% of the total Gross Rental Income for the same period.

Tenants’ Industry Sectors

The following table sets out details of the Properties’ tenants by reference to industry sectors, their Gross Lettable Area as a percentage of the total Gross Lettable Area as at 30 September 2020, and the percentages of their respective contributions to the Gross Rental Income for the month ended 30 September 2020:

Gross Rental Income as Gross Lettable Area as a percentage of the total a percentage of the total Gross Rental Income Gross Lettable Area as for the month ended Tenants’ Industry Sectors(1) at 30 September 2020 30 September 2020 (%) (%)

Logistics 81.9 94.5 Pharmaceutical 1.9 4.3 Technology 0.3 0.7 Others 1.7 0.5 Vacant 14.1 –

Total 100.0 100.0

Note:

(1) The tenants’ industry sectors are based on the classification of the REIT Manager and the active leases as at 30 September 2020.

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Top Five Tenants

The following table sets out information on the five largest tenants in term of total Gross Rental Income for the month ended 30 September 2020(1):

Percentage Percentage of total Gross Gross Lettable of total Gross Rental Income Area Lettable Area attributable to attributable to attributable to tenant for the tenant as at tenant as at month ended Tenants’ 30 September 30 September 30 September Tenant industry sector Property Expiry date(s) 2020 2020 2020 (sq.m.) (%) (%)

Tenant 1 Logistics Hong Kong 31 December 63,501.9 20.6 30.4 Property 2020 – 16 December 2026(2) Tenant 2(3) Logistics Hong Kong 30 November 47,061.2 15.3 28.8 Property 2020(4) – 31 January 2028 Tenant 3 Logistics Foshan 31 August 2025(5) 84,890.8 27.6 15.6 Property Tenant 4 Pharmaceutical Hong Kong 31 May 2021 5,721.1 1.9 4.3 Property Tenant 5 Logistics Hong Kong 30 April 2022 5,479.6 1.8 4.2 Property

Total 206,654.5 67.1 83.3

Notes:

(1) The tenants’ industry sectors are based on the classification of the REIT Manager and the active leases as at 30 September 2020. Tenants 1-3 are connected persons of SF, while Tenants 4 and 5 are independent third parties.

(2) As at 30 September 2020, Tenant 1 (S.F. Express (China) Limited) has entered into several leases in respect of the Hong Kong Property which expire on different dates between 31 December 2020 and 16 December 2026. After 30 September 2020, Tenant 1 [has entered into] a new lease (replacing each of the aforementioned leases) for a term of five years commencing from [1 May 2021], with an option to renew a further term of five years. (3) As at 30 September 2020, Tenant 2 (S.F. Express (Hong Kong) Limited) has sub-leased an aggregate Gross Lettable Area of 14,398.8 sq.m. to an independent third party sub-tenant. It is expected that such sub-tenant will become a direct tenant prior to the [REDACTED]. (4) As at 30 September 2020, Tenant 2 (S.F. Express (Hong Kong) Limited) has entered into several leases in respect of the Hong Kong Property which expire on different dates between 30 November 2020 and 31 January 2028. After 30 September 2020, Tenant 2 [has entered into] a new lease (replacing each of the aforementioned leases) for a term of five years commencing from [1 May 2021], with an option to renew a further term of five years.

(5) As at 30 September 2020, Tenant 3 (Foshan SF Express Co., Ltd.* (佛山順豐速運有限公司)) has entered into a lease in respect of the Foshan Property which will expire on 30 August 2025. After 30 September 2020, Tenant 3 [has entered into] a new lease (replacing the aforementioned lease) for a term of five years commencing from [1 May 2021], with an option to renew a further term of five years.

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The following table sets out information on the five largest tenant groups in terms of Gross Rental Income for the nine months ended 30 September 2020:

Percentage of Gross Percentage Rental Income of revenue attributable attributable to tenant for the to tenant for the nine months nine months Tenant (grouped under ended ended common control Principal Property/ 30 September 30 September (“GUCC”))(1) business activities properties 2020 2020 (%) (%)

GUCC Tenant 1(2) Please refer to the Hong Kong 74.4 76.6 section headed Property, Foshan “Information Property and about SFH, SF Wuhu Property Holding and SF Fengtai” in this Document GUCC Tenant 2(2) Pharmaceutical Hong Kong 4.5 4.2 Property GUCC Tenant 3(2) Logistics Hong Kong 4.2 3.9 Property GUCC Tenant 4(2) Logistics Hong Kong 3.6 3.3 Property GUCC Tenant 5(2) Logistics Hong Kong 2.6 2.3 Property

Total 89.3 90.3

Notes:

(1) Tenants are grouped under common control for the nine months ended 30 September 2020.

(2) GUCC Tenant 1 is a connected person of SF REIT. GUCC Tenants 2-5 are independent third parties.

Duration of Leases

During the Track Record Period, the term of the Third Party Leases of the Properties generally ranges from one to five years, depending on the size and use of the subject premises. As at 30 September 2020, more than half of the Third Party Leases were for a term of at least three years.

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The term of the SF Leases that [have been entered into] by SF Connected Tenants is for a term of five years commencing from [1 May 2021], with an option to renew for a further term of five years on substantially the same terms (except for rent), which is exercisable by the tenant no later than six months before the expiry of the initial term. For further details, please refer to the section headed “Connected Party Transactions – Continuing Connected Party Transactions – Non-Exempt Continuing Connected Party Transactions – SF Leases” in this Document.

The Properties had a WALE of 4.1 years by Gross Lettable Area as at 30 September 2020 and 4.1 years by Gross Rental Income for the month ended 30 September 2020. The following table sets out the lease expiration profile for the Properties by reference to Gross Lettable Area as at 30 September 2020 and Gross Rental Income for the month ended 30 September 2020:

Gross Rental Income from the leases Gross Lettable Area expiring as a of the leases expiring percentage of as a percentage total Gross of total Gross Rental Income for Rentable Area as at the month ended Leases expiring during 30 September 2020 30 September 2020 (%) (%)

Prior to 31 December 2020 2.6 3.2 Year ending 31 December 2021 3.4 6.9 Year ending 31 December 2022 15.9 13.3 Year ending 31 December 2023 3.0 5.0 Year ending 31 December 2024 0.0 0.0 Year ending 31 December 2025 and beyond 61.0 71.7 Vacant 14.1 0.0

Total 100.0 100.0

Other key lease terms

The Third Party Leases in respect of a Property generally follow a standard form for that Property.

At the time of entering into a lease, tenants of the Properties are generally required to pay a non-interest bearing rental deposit equal to two to three months’ rent. Rent is payable monthly, and rent-free periods (as the case may be) generally range from one to three months (or longer for selected key tenants).

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Under the Third Party Leases, tenants are generally responsible for the payment of outgoings such as property management fees. Tenants are also generally responsible for maintaining, repairing, and paying all expenses relating to, the interior of the premises, while the landlord is generally responsible for repairing the public facilities and main structures. If the premises or a substantial part of it are rendered unfit for use or inaccessible by force majeure or by any cause other than the result of the negligence or fault of the tenants, the tenants are generally entitled to rent abatement until the premises shall again be rendered fit for occupation and in some leases, either the landlords or the tenants are entitled to terminate the lease if the premises are not reinstated after a certain period of time. Tenants are generally not permitted to assign or sublet the premises without the written consent of the landlord.

The Third Party Leases generally give the landlord the right to terminate the Third Party Lease upon the occurrence of certain events, such as non-payment of rent or breach of covenants by the tenants. In addition, the tenants are required to use the premises for the permitted purposes only and otherwise in accordance with all applicable laws and regulations in the PRC or Hong Kong (as the case may be).

For further details of the provisions in the SF Leases, please refer to the section headed “Connected Party Transactions – Continuing Connected Party Transactions – Non-Exempt Continuing Connected Party Transactions – SF Leases” in this Document.

THE PROPERTIES

The following provides details of the different features and strengths of each of the Properties in SF REIT’s portfolio, including their locations, size and surroundings, their tenant profiles, duration of the leases, ownership and transaction history.

1. Hong Kong Property

The Hong Kong Property was completed in 2014 and is a 15-storey (plus one Basement Floor) ramp-up modern logistics property with an aggregate Gross Lettable Area of approximately 1,725,692.5 sq.ft. (equivalent to approximately 160,322.2 sq.m.). The Hong Kong Property is designed for operating at a high level of throughput functioning 24-hours a day, comprising (a) a distribution centre equipped with automatic sorting and supply chain support facilities; (b) carpark spaces and warehouses; and (c) ancillary offices. It is one of the newest modern logistics properties in Hong Kong. According to the Market Consultant Report, approximately 76.0% of the modern logistics properties in Hong Kong are more than 20 years of age and only approximately 18.8% are less than ten years of age, with the average vacancy rate of the latter being as low as 2.4% in the second quarter of 2020. The Hong Kong property is a LEED-certified building which was given the LEED Gold Award granted by the U.S. Green Building Council in recognition of the efficiency and sustainability of its design.

The Hong Kong Property has the following key features of a ramp-up modern logistics property, such as:

• vehicular ramp access to every warehouse floor with direct and spacious loading and unloading docks, which permit direct truck access to each floor and enhance operational efficiency

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• high quality building specifications, such as large and regular floor plates ranging from 2,204 sq.m. to 14,389 sq.m., high ceilings ranging from 5.3 metres to 6.5 metres and wide column spacing of 16.0 metres by 16.3 metres for optimal spacing utilisation

• flexibility to accommodate customised features, such as office space, warehouses and cold-storage facilities

• 24-hour security and surveillance, advanced ventilation system, fire-fighting and sprinkler systems

• regular shuttle bus services for tenants to neighbouring MTR station

• environmentally friendly and energy-saving features such as the use of energy- efficient building materials

Asia Logistics Hub – SF Centre (亞洲物流中心-順豐大廈)

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The Hong Kong Property is strategically located at Tsing Yi, Hong Kong, which is a premium logistics cluster with a high concentration of logistics properties and a critical mass of modern logistics properties. Tsing Yi is well-connected with the rest of Hong Kong, with easy access to different parts in Hong Kong within 30-minutes’ drive. It is adjacent to Kwai Tsing Container Terminal No. 9 (approximately 100 metres across the street) and Stonecutters Bridge offering easy access to arterial roads and major business districts and is well connected to Hong Kong International Airport (approximately 19 kilometres away).

The following map sets out the location of the Hong Kong Property:

Lok Ma Chau

Shenzhen Bay

23km Tai Po 20km

14km

Shatin 9km

Kwai Tsing Container Terminal No.9 19km Hong Kong 12km Property 7km Kwun Tong Hong Kong International Airport

Central

Tenant Profile of the Hong Kong Property

The Hong Kong Property housed ten tenants as at 30 September 2020, with the five largest tenants of the Hong Kong Property in terms of Gross Rental Income contributing to approximately 89.5% of the property’s Gross Rental Income for the month ended 30 September 2020 and approximately 79.3% of the property’s Gross Lettable Area as at 30 September 2020. Two of the top five tenants are connected persons of SF REIT, and SF Connected Tenants contributed to approximately 77.9% of the property’s Gross Rental Income for the month ended 30 September 2020 and approximately 78.6% of the property’s Gross Lettable Area as at 30 September 2020.

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The following table sets out details of the Hong Kong Property’s tenants by reference to their industry sectors, the Gross Lettable Area occupied by them as a percentage of the total Gross Lettable Area as at 30 September 2020, and their respective contributions as a percentage of the Gross Rental Income for the month ended 30 September 2020:

Logistics 89.5 93.8 Pharmaceutical 3.6 5.3 Technology 0.6 0.9 Vacant 6.3 –

Total 100.0 100.0

Note:

(1) The tenants’ industry sectors are based on the classification made by the REIT Manager and the active leases as at 30 September 2020.

Duration of Leases

The term of the Third Party Leases in respect of the Hong Kong Property ranges from two years to five years. The term of the SF Leases that [have been entered into] by SF Connected Tenants is for a term of five years commencing from [1 May 2021], with an option to renew for a further term of five years on substantially the same terms (except for rent), which is exercisable by the tenant no later than six months before the expiry of the initial term. For further details, please refer to the section headed “Connected Party Transactions – Continuing Connected Party Transactions – Non-Exempt Continuing Connected Party Transactions – SF Leases” in this Document.

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The Hong Kong Property had a WALE of 4.0 years by Gross Lettable Area as at 30 September 2020 and 4.1 years by Gross Rental Income for the month ended 30 September 2020. The following table sets out the expiry periods of the leases for the Hong Kong Property by reference to their respective Gross Lettable Area and Gross Rental Income as compared to the total Gross Lettable Area as at 30 September 2020 and the total Gross Rental Income for the month ended 30 September 2020, respectively:

Gross Rental Income Gross Lettable Area from the leases of the leases expiring expiring as a as a percentage percentage of total of total Gross Gross Rental Income Lettable Area as at for the month ended Leases expiring during 30 September 2020 30 September 2020 (%) (%)

Prior to 31 December 2020 4.8 3.9 Year ending 31 December 2021 5.6 8.4 Year ending 31 December 2022 15.1 11.8 Year ending 31 December 2023 3.9 5.9 Year ending 31 December 2024 0.0 0.0 Year ending 31 December 2025 and beyond 64.2 70.0 Vacant 6.3 –

Total 100.0 100.0

Ownership and Five Year Transaction History

The Hong Kong Property will be wholly owned by SF REIT through Goodear following the Asset Injection Completion. Goodear is a Special Purpose Vehicle, the principal business activity of which is the ownership and operation of the Hong Kong Property. The government lease in relation to the Hong Kong Property will expire on 13 January 2061. Based on land searches dated 5 February 2021, there has not been any sale and purchase transactions for the Hong Kong Property in the past five years other than as specified in the Reorganisation.

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2. Foshan Property

The Foshan Property was completed in February 2021 and is a modern logistics property with a total Gross Lettable Area of approximately 84,890.8 sq.m.. The Foshan Property comprises: (a) a ramp-up three-storey distribution centre; and (b) an ancillary building. The Foshan Property is equipped with intelligent technology and built-to-suit facilities, such as automatic sorting and supply chain support facilities, to house the needs of its single logistics tenant.

Foshan Guicheng Fengtai Industrial Park (佛山桂城豐泰產業園)

The Foshan Property is located in the Nanhai district of Foshan, which is part of the Greater Bay Area. Foshan’s logistics properties are concentrated in Nanhai district due to its convenience and economic prosperity. According to the Market Consultant Report, as at 30 September 2020, the Foshan Property was the sixth largest (by Gross Floor Area) modern logistics property in the Nanhai District of Foshan and the 16th largest in Foshan. The Foshan Property is close to Foshan First Ring Road, and approximately 15 kilometres away from Foshan Shadi Airport, 17 kilometres away from Foshan West Railway Station, 23 kilometres away from Guangzhou Railway Station which is the largest high-speed railway station in the Southern China, and 28 kilometres from Guangzhou Baiyun Airport which is one of the biggest aviation transportation hubs in the PRC.

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The following map sets out the location of the Foshan Property:

Guangqing Expressway

Conghua Expressway Foshan-Qingyuan-

Guangzhou Baiyun Airport

28km Conghua Expressway Foshan-Qingyuan-

Guangqing Expressway

Foshan First Huanan Expressway Ring Road

Guangzhou-Foshan- Foshan

Zhaoqing Expressway Property 23km

Conghua Expressway Conghua Foshan-Qingyuan-

Guangzhou

Expressway 15kmGuangzhou-Foshan-Jiangmen-Zhuhai Guangzhou Railway 17km Station Guangsan Expressway

Shenhai

Expressway Foshan West Foshan Shandi Railway Airport Station

Tenant Profile of the Foshan Property

As at 30 September 2020, the Foshan Property was leased entirely to Foshan SF Express Co., Ltd.* (佛山順豐速運有限公司), being a SF Connected Tenant, to operate mainly as a modern logistics property for regional distribution purposes.

Duration of the SF Lease

The abovementioned SF Connected Tenant [has entered into] a new SF Lease for a term of five years commencing from [1 May 2021], with an option to renew for a further term of five years on substantially the same terms (except for rent), which is exercisable by the tenant no later than six months before the expiry of the initial term.

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The Foshan Property had a lease expiry of 4.9 years by Gross Lettable Area as at 30 September 2020 and 4.9 years by Gross Rental Income for the month ended 30 September 2020.

Based on the PRC Legal Advisors’ advice, the subsisting SF Lease in respect of the Foshan Property is legal, valid, binding and enforceable by or on behalf of SF REIT in accordance with its terms.

Ownership and Five Year Transaction History

The Foshan Property will be wholly owned by SF REIT through its PRC Property Company, Foshan Company (PRC), following the Asset Injection Completion. Foshan Company (PRC) is a Special Purpose Vehicle, the principal business activity of which is the ownership and operation of the Foshan Property. The term of the land use rights in respect of the Foshan Property will expire in July 2049. The land use rights in respect of the Foshan Property were transferred from Foshan Nanhai Dali Hualuan Trading Co., Ltd.* (佛山市南海大瀝華鑾貿易有限公司) to Foshan Company (PRC) on 3 February 2016 in consideration of RMB42,912,000. Based on land searches dated 23 November 2020 and updated on 7 January 2021, there has not been any sale and purchase transactions for the Foshan Property in the past five years other than as mentioned above and as specified in the Reorganisation.

3. Wuhu Property

The Wuhu Property was completed in 2018 and is a modern logistics property with a total Gross Lettable Area of approximately 62,777.8 sq.m. It comprises (a) two single-storey high standard warehouses that offer features such as temperature and humidity controls to support cold chain logistics; (b) a two-storey distribution centre equipped with automatic sorting and supply chain support facilities; (c) a research and development building; and (d) two ancillary buildings. The Wuhu Property is positioned as a modern logistics property to meet various commercial needs of the tenants.

Wuhu Fengtai Industrial Park (蕪湖豐泰產業園)

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The Wuhu Property is located in the Jiujiang Economic Development Area, being the political, cultural and financial centre of Wuhu and a core logistics cluster in Yangtze River Delta Economic Region. According to the Market Consultant Report, in terms of Gross Floor Area as at 30 September 2020, the Wuhu Property was the fourth largest modern logistics property in Wuhu. The Wuhu Property is approximately (i) six kilometres from Wuhu East High Speed Railway Station; (ii) ten kilometres from Wuhu International Cargo Port; and (iii) two kilometres from Ningwu Highway which connects the north and south parts of the Yangtze River Delta Economic Region.

The following map sets out the location of the Wuhu Property:

Nanjing

Wuhu Economic Wuhu East High Speed Development Area Railway Station

Hefei 6km

Wuhu 10km International Cargo Port 2km Ningwu Highway

Wuhu Jiujiang Economic Property Development Area

7km 4km Shangqiu-Hefei- Hangzhou Shanghai High Speed Railway Wuhu Government Shenshan Affairs Cultural Center Park Wuhu High Speed Railway Station

Wuhu Hefei Highway

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Tenant Profile of the Wuhu Property

The Wuhu Property housed 21 tenants as at 30 September 2020, with the five largest tenants of the Wuhu Property in terms of Gross Rental Income contributing to approximately 95.3% of the property’s Gross Rental Income for the month ended 30 September 2020 and approximately 43.6% of the property’s Gross Lettable Area as at 30 September 2020. Two of the top five tenants are connected persons of SF REIT, and SF Connected Tenants contributed to approximately 87.2% of the property’s Gross Rental Income for the month ended 30 September 2020 and approximately 37.9% of the property’s Gross Lettable Area as at 30 September 2020.

The Wuhu Property has a diverse and quality tenant base, including major tenants from the logistics sector. The following table sets out details of the Wuhu Property’s tenants by reference to their industry sectors, the Gross Lettable Area occupied by them as a percentage of the total Gross Lettable Area as at 30 September 2020, and their respective contributions as a percentage of the Gross Rental Income for the month ended 30 September 2020:

Logistics 38.1 87.5 Industrial 4.2 6.2 Others 4.6 6.4 Vacant 53.1 –

Total 100.0 100.0

Note:

(1) The tenants’ industry sectors are based on the classification made by the REIT Manager and the active leases as at 30 September 2020.

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Duration of the Leases

Each of the Third Party Leases in respect of the Wuhu Property has a term of one year to three years. The term of the SF Leases that [have been entered into] by SF Connected Tenants is for a term of five years commencing from [1 May 2021], with an option to renew for a further term of five years on substantially the same terms (except for rent), which is exercisable by the tenant no later than six months before the expiry of the initial term. For further details of the term of the SF Leases in respect of the Wuhu Property, please refer to the section headed “Connected Party Transactions – Continuing Connected Party Transactions – Non-Exempt Continuing Connected Party Transactions – SF Lease” in this Document.

The Wuhu Property had a WALE of 2.0 years by Gross Lettable Area as at 30 September 2020 and 2.1 years by Gross Rental Income for the month ended 30 September 2020. The following table sets out the expiry periods of the leases for the Wuhu Property by reference to their respective Gross Lettable Area and Gross Rental Income as compared to the total Gross Lettable Area as at 30 September 2020 and the total Gross Rental Income for the month ended 30 September 2020, respectively:

Gross Rental Income Gross Lettable Area of from the leases the leases expiring as expiring as a a percentage percentage of total of total Gross Gross Rental Income Rentable Area as at for the month ended Leases expiring during 30 September 2020 30 September 2020 (%) (%)

Prior to 31 December 2020 0.6 0.8 Year ending 31 December 2021 2.5 2.5 Year ending 31 December 2022 39.2 89.3 Year ending 31 December 2023 4.7 7.4 Year ending 31 December 2024 0.0 0.0 Year ending 31 December 2025 and beyond 0.0 0.0 Vacant 53.1 –

Total 100.0 100.0

Based on the PRC Legal Advisors’ advice, all subsisting leases in respect of the Wuhu Property are legal, valid, binding and enforceable by or on behalf of SF REIT in accordance with its terms.

Ownership and Five Year Transaction History

The Wuhu Property will be wholly owned by SF REIT through its PRC Property Company, Wuhu Company (PRC) following the Asset Injection Completion. Wuhu Company (PRC) is a Special Purpose Vehicle, the principal business activity of which is the ownership and operation of the Wuhu Property. The term of the land use rights in respect of the Wuhu Property will expire in January 2066. Based on land searches dated 18 November 2020 and updated on 5 January 2021, there has not been any sale and purchase transactions for the Wuhu Property in the past five years other than as specified in the Reorganisation.

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COMPETITION

SF REIT faces competition from other large international and domestic logistics property developers and service providers for tenants. The Properties face competition from other properties in Hong Kong, Foshan and Wuhu and the neighbouring sub-districts in varying degrees. For example, according to the Market Consultant Report, the Hong Kong Property competes with other modern logistics properties in the neighbouring Kwai Tsing district, which has the highest concentration of modern logistics properties in Hong Kong accounting for approximately 46.9% of the modern logistics property stock in Hong Kong as at the end of 2020. Foshan has a high concentration of logistics properties which creates a relatively competitive environment. In Wuhu, most of the well-known modern logistics properties are located in Jiujiang Economic Development Area where the Wuhu Property is located, which also creates a relatively competitive environment for the Wuhu Property.

For further details regarding competition faced by the Properties, please refer to the section headed “Industry Overview” in this Document and the Market Consultant Report as set out in Appendix V to this Document.

INSURANCE

SF REIT has taken out insurance for the Properties which the REIT Manager believes is consistent with the industry norm in the PRC and Hong Kong. This includes comprehensive property insurance (including but not limited to insurance against landship and subsidence) and public liability insurance. No significant or unusual excess or deductible amounts are required under such policies. There are, however, certain types of risks that are not covered by such insurance policies, including but not limited to losses resulting from war, nuclear contamination, theft and/or acts of terrorism committed by a person or persons acting on behalf or in connection with any organisation.

The REIT Manager believes that there are no significant differences between the extent of insurance coverage for the Properties and that for respective logistics properties in Hong Kong, Foshan and Wuhu generally, and that there are no significant differences between the claims recovery processes for the Properties and those for respective logistics properties in Hong Kong, Foshan and Wuhu generally. The REIT Manager also believes that the Properties are adequately covered by insurance which will be renewed when they expire.

LITIGATION

There may be disputes or proceedings involving the Properties from time to time that arise in the ordinary course of business, such as lease or rental payment disputes. As at the Latest Practicable Date, none of the members of the Predecessor Group and the REIT Manager were involved in any material litigation or administrative proceedings nor, to the best of the Directors’ knowledge, was there any material litigation or administrative proceedings threatened against any such parties.

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COMPLIANCE WITH PARAGRAPH 7.7 OF THE REIT CODE

Based on the Hong Kong and the PRC legal advice received by the REIT Manager and its own due diligence, and having regard to the paragraph below, the REIT Manager is of the view that SF REIT (through the Property Companies) will hold good marketable legal and beneficial title to the Properties after Asset Injection Completion and upon [REDACTED].

While the relevant inspection and acceptance procedures for the Foshan Property have already completed in February 2021, the real estate rights certificate in respect of the Foshan Property is still in the process of being obtained. The remaining process of obtaining such certificate involves procedural formalities, and the REIT Manager is not aware of any material risks or legal impediment to such certificate being obtained in a timely manner. It is expected that such certificate shall in any event be obtained prior to Asset Injection Completion, and on this basis, SF REIT will hold good marketable legal and beneficial title to the Foshan Property after Asset Injection Completion and upon [REDACTED].

LEGAL AND REGULATORY COMPLIANCE

An overview of the relevant laws and regulation in the PRC and comparison of certain aspects of the property laws of Hong Kong and the PRC to which SF REIT will be subject are set out in Appendix VII to this Document.

Each of the Property Companies had complied with the relevant laws and regulations in all material respects during the Track Record Period.

Particulars of Certain Non-Compliances

Non-Conforming Uses and Miscellaneous Unauthorised Building Works of the Hong Kong Property

According to the Occupation Permit: (i) the basement floor of the Hong Kong Property (the “Basement Floor”) is permitted to be used as car parking spaces and ancillary accommodation for non-domestic uses and (ii) the ground floor to the eight floor of the Hong Kong Property are permitted to be used as among other things, warehouse, loading and unloading spaces, car parking spaces and ancillary accommodation for non-domestic use (collectively, the “Hong Kong Property Designated Use”). Goodear is also required under the Government Grant to provide and maintain parking, loading and unloading spaces in accordance with the layout plan approved by the Director of Lands.

Based on the REIT Manager’s due diligence: (i) certain parts of the Hong Kong Property amounting to less than approximately 0.2% of the Gross Lettable Area of the Hong Kong Property as at 30 September 2020 have been used by SF Connected Tenants for loading and unloading storage and supporting facilities purposes (such parts of the premises will be referred to as “Subject Carpark Premises”) including the installation of certain equipment for such purposes; and (ii) certain parts of the Hong Kong Property amounting to less than approximately 0.5% of the Gross Lettable Area of the Hong Kong Property as at 30 September 2020 (such parts of the premises being referred to as the “Subject Office Premises”) are currently being used by tenants as ancillary office.

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The existing use of the Subject Carpark Premises does not conform with the Hong Kong Property Designated Use and also constitutes an unauthorised alteration of the layout plan for parking, loading and unloading spaces. The unauthorised alteration of such layout plan as well as the abovementioned equipment, being an unauthorised structure associated with such non-conformity use, are breaches of the Government Grant and the Buildings Ordinance (the “Non-Conforming Carpark Matters”), which entitle the Hong Kong Government as the grantor under the Government Grant to re-enter the Hong Kong Property.

Similarly: (i) the existing use of the Subject Office Premises does not conform with the Hong Kong Property Designated Use and constitutes breaches of the Buildings Ordinance (the “Non-Conforming Office Matters”); and (ii) various miscellaneous additions and/or alteration works constitute unauthorised building works (the “Miscellaneous UBWs”) that do not comply with the Buildings Ordinance and/or the regulations made thereunder (the “Miscellaneous UBW Matters”). The Non-Conforming Office Matters and Miscellaneous UBW Matters are breaches of the Government Grant that similarly entitle the Hong Kong Government to re-enter the Hong Kong Property.

Based on the REIT Manager’s due diligence: (a) the Gross Lettable Area of the premises that are subject to the Hong Kong Property Non-Conforming Matters represents less than approximately 0.7% of the Gross Lettable Area of the Hong Kong Property as at 30 September 2020; and (b) Goodear has not received any notices, orders, enquiries, investigations or paid any fees or charges, penalties in connection with the Hong Kong Property Non-Conforming Matters, and a search conducted at the Land Registry on 5 February 2021 in respect of the Hong Kong Property revealed no re-entry notice or order registered.

Non-Conforming Use of the Foshan Property

As stated in the land grant contract in respect of the Foshan Property: (i) the land on which the Foshan Property is situated is designated for industrial use (the “Foshan Property Designated Land Use”); and (ii) the Foshan Property is designated for factory and ancillary use (the “Foshan Property Designated Building Use”). However, the Foshan Property has been leased entirely to one tenant, Foshan SF Express Co., Ltd. (being a connected person of SF REIT) for warehousing and logistics purposes and ancillary uses (the “Foshan Property Non-Conforming Matters”). As advised by the PRC Legal Advisors, such uses technically do not conform with the Foshan Property Designated Land Use or the Foshan Property Designated Building Use because “warehousing and logistics use” is regarded as a category of use that is distinct from industrial use, notwithstanding that it is relatively common for warehousing and logistics properties to be built and operated on industrial land in the PRC. Such Foshan Property Non-Conforming Matters may subject the Foshan Property to certain legal consequences and enforcement actions including fines, rectification orders and/or repossession by the relevant PRC land authority in accordance with the relevant laws and regulations of the PRC. Further, if the relevant PRC land authority allows or requires the Foshan Property Designated Uses to be changed in the future, such change may require payment of land premium.

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Based on the REIT Manager’s consultation with the Shishan Office of Foshan City Natural Resources Bureau Nanhai Branch (佛山市自然資源局南海分局獅山管理所), notwithstanding such Foshan Property Designated Uses, it was confirmed that the Foshan Property can be used for warehousing and logistics purposes. The PRC Legal Advisors have confirmed that the Shishan Office of Foshan City Natural Resources Bureau Nanhai Branch (佛山市自然資源局南海分局獅山管理所) is the competent authority to give such confirmations.

Based on the PRC Legal Advisors’ public searches on 4 February 2021 and Foshan Company (PRC)’s confirmations, the Foshan Property has not been subject to any notices, enquiries, investigations or administrative penalties in connection with the non-conforming use of the Foshan Property.

Non-Fulfilment of Certain Operating Performance Targets Prescribed Under the Wuhu Land Grant Contracts and the Wuhu Project Investment Contracts of the Wuhu Property

According to the land grant contracts (the “Wuhu Land Grant Contracts”) entered into between Wuhu Company (PRC) and Wuhu Municipal Bureau of Land dated 30 December 2015 and 1 June 2016, respectively, as amended by the relevant supplemental agreement, Wuhu Company (PRC) undertook the following in respect of the Wuhu Property: (i) starting from the year after the completion of construction of the Wuhu Property, the expected amount of tax levied per mu of the Wuhu Property shall not be lower than RMB232,200 per year; and (ii) at the time of completion of the inspection and acceptance procedures, the tax leviable per mu shall reach 10% of the expected tax amount in (i) above.

According to the project investment contract and the relevant supplemental contract (the “Wuhu Project Investment Contracts”) entered into between Wuhu Company (PRC) and the local government of Jiujiang District in Wuhu (蕪湖市鳩江區人民政府) dated 26 September 2014, Wuhu Company (PRC) undertook that the tax levied on the Wuhu Property per year shall not be lower than RMB100,000 per mu.

Based on the REIT Manager’s due diligence, the amount of tax levied on the Wuhu Property when construction works for the Wuhu Property were first completed was approximately RMB17,300 per mu, while the current tax leviable per mu is approximately RMB20,400 for the year ended 31 December 2019, both of which were less than the prescribed tax levy amounts set out in the Wuhu Land Grant Contracts and the Wuhu Project Investment Contracts (the “Wuhu Property Non-Conforming Matters”). Such Wuhu Property Non- Conforming Matters may subject the Wuhu Property to certain enforcement actions and legal consequences, including resumption of land and adjustments to the financial incentives granted to Wuhu Company (PRC).

Wuhu Company (PRC) has obtained a written statement issued by the Wuhu Land Bureau, which states that the Wuhu Land Bureau is willing to, having regard to market development and practical circumstances, discuss with Wuhu Company (PRC) on how to deal with the issue with respect to, among other things, the non-fulfilment of the tax leviable targets. In addition, Wuhu Company (PRC) has obtained a written statement issued by the Wuhu Land Bureau

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Enforcement Division, being the enforcement division of the Wuhu Land Bureau, which confirms that they will not, and will also coordinate with other authorities not to, take enforcement actions on such non-compliance in view of the market practical circumstances. Such written statements also confirm that there were no records of non-compliance in relation to land and planning administration laws and regulations, or records of investigations being conducted or administrative penalties being imposed on Wuhu Company (PRC), from Wuhu Company (PRC)’s incorporation until 7 January 2021. The PRC Legal Advisors have confirmed that the Wuhu Land Bureau and the Wuhu Land Bureau Enforcement Division are the competent authorities to confirm the matters set out in the written statements.

Further, based on the REIT Manager’s consultation with the Administration Committee of Jiujiang Economic Development Area, which is an agent institute of the local government of Jiujiang District in Wuhu and is responsible to supervise and deal with the performance of the Wuhu Project Investment Contracts, it was confirmed that the Administration Committee of Jiujiang Economic Development Area will continue to provide the financial incentives granted under the Wuhu Project Investment Contracts, notwithstanding the undertakings thereunder not being satisfied, but still urges Wuhu Company (PRC) to fulfil the undertakings. The PRC Legal Advisors have confirmed that the Administration Committee of Jiujiang Economic Development Area is the competent authority to give such confirmations.

The PRC Legal Advisors have also confirmed that, based on their public searches on 4 February 2021 and Wuhu Company (PRC)’s confirmations, the Wuhu Property has not been subject to any notices, enquiries, investigations or administrative penalties in connection with the Wuhu Property Non-Conforming Matters.

Mitigating Measures for the Non-Compliances

Pursuant to the Sale and Purchase Deed, SF Fengtai and SF Holding, the latter being a wholly-owned subsidiary of SFH with net assets of approximately HK$8.0 billion as at 31 December 2019, agreed to indemnify on a joint and several basis, among others, SF REIT, the Trustee and the REIT Manager, to the fullest extent permissible by law, for any liabilities, losses, damages, fines, fees and costs (on a full indemnity basis) which any one of them may suffer in respect of the Hong Kong Property Non-Conforming Matters, the Foshan Property Non-Conforming Matters and the Wuhu Property Non-Conforming Matters (such indemnities being the Subject Properties Indemnities). The Subject Properties Indemnities in respect of a Property will be limited to the Agreed Property Value plus the Proportionate Initial Adjustment Sum (if any) for such Property, and will terminate upon expiration of the land use rights or government lease (as the case may be) of such Property. The expiration of the land use rights or government lease (as the case may be) of the Hong Kong Property, the Foshan Property and the Wuhu Property are 13 January 2061, 20 July 2049 and 20 January 2066, respectively. For details of the indemnity, please refer to the section headed “Material Agreements and Other Documents – Sale and Purchase Deed” in this Document.

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In addition, SF Holding has undertaken to maintain net assets in excess of the aggregate limitation cap of the Subject Properties Indemnities that remain outstanding from time to time, for so long as such indemnities are in force. Certain recourses may also be available against the relevant tenants under the relevant leases to which the abovementioned non-compliances relate, such as termination of such leases and forfeiture of rental deposits, as well as against SF Holding and Shenzhen SF Taisen pursuant to the SF Lease Guarantees.

View of the REIT Manager in respect of the Non-Compliances

Based on the Hong Kong legal advice received by the REIT Manager and its own due diligence, notwithstanding the Hong Kong Property Non-Conforming Matters, the REIT Manager is of the view that: (i) there is no real risk of enforcement action by the Hong Kong Government by way of re-entry of the Hong Kong Property and SF REIT shall, through Goodear, hold good and marketable legal and beneficial title to the Hong Kong Property upon [REDACTED]; (ii) the Hong Kong Non-Conforming Matters will not affect Goodear’s ability to sell or mortgage the Hong Kong Property where such matters are disclosed to the purchaser or mortgagee and they are fully aware of the legal consequences and have accepted the Hong Kong Property on such basis prior to their signing of the relevant agreement; and (iii) the mere existence of the Hong Kong Property Non-Conforming Matters does not render the relevant leases to which such Hong Kong Property Non-Conforming Matters relate unenforceable.

In respect of the Foshan Property Non-Conforming Matters, the PRC Legal Advisors have confirmed that notwithstanding the Foshan Property Non-Conforming Matters, after the real estate rights certificate in respect of the Foshan Property is obtained, SF REIT shall, through Foshan Company (PRC), hold good marketable legal and beneficial title in the Foshan Property after Asset Injection Completion and upon [REDACTED]. Further, the PRC Legal Advisors are of the view that: (i) after the real estate certificate in respect of the Foshan Property is obtained, the Foshan Property Non-Conforming Matters will not, in and of itself, prevent the Foshan Property from being bought, sold or being accepted by banks as security for mortgages; (ii) the subsisting lease at the Foshan Property remains legal and enforceable; and (iii) the risk of any of the abovementioned enforcement actions being imposed in respect of the Foshan Property Non-Conforming Matters, is practically non-existent.

In respect of the Wuhu Property Non-Conforming Matters, the PRC Legal Advisors have confirmed that notwithstanding the Wuhu Property Non-Conforming Matters, SF REIT shall, through Wuhu Company (PRC), hold good marketable legal and beneficial title in the Wuhu Property after Asset Injection Completion and upon [REDACTED]. Further, the PRC Legal Advisors are of the view that as at the Latest Practicable Date: (i) the Wuhu Property Non-Conforming Matters will not prevent the Wuhu Property from being bought, sold or being accepted by banks as security for mortgages; (ii) all subsisting leases in respect of the Wuhu Property remain legal and enforceable; and (iii) the risk of any of the abovementioned enforcement actions being imposed in respect of such non-compliance is practically non- existent.

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Having regard to the above, the REIT Manager is of the view that the Hong Kong Non-Conforming Matters, the Foshan Non-Conforming Matters and the Wuhu Non- Conforming Matters are not reasonably expected to have a material and adverse impact on the financial condition and business of SF REIT.

BUILDING SURVEYOR’S REPORT

The REIT Manager has commissioned Colliers International (Hong Kong) Limited, the Building Surveyor, to prepare a building survey report in respect of the Properties. A copy of the Building Surveyor’s report is included in Appendix VI to this Document. The REIT Manager is not aware of any issues identified in the Building Surveyor’s report that are material to an investor’s decision to invest in the Units.

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