This Circular has been made available on ESR-REIT's website at https://merger.esr-reit.com.sg, and on the SGX-ST's website at https://www.sgx.com/securities/company-announcements. Unless otherwise requested, no printed copies of this Circular will be despatched to ESR-REIT Unitholders.

CIRCULAR TO UNITHOLDERS IN RELATION TO:
  1. PROPOSED MERGER (THE “MERGER”) WITH SABANA SHARI’AH COMPLIANT INDUSTRIAL REAL ESTATE INVESTMENT TRUST (“SABANA REIT”)
  2. PROPOSED ISSUE OF ESR-REIT UNITS AS CONSIDERATION FOR THE MERGER

(A real estate investment trust constituted in
the Republic of Singapore pursuant to a
trust deed dated 31 March 2006
(as amended))

Managed by
ESR Funds Management (S) Limited

(Company Registration No.: 200512804G)
(Capital Markets Services Licence No.: CMS 100132)

Financial Advisers in relation to the Merger

Logos of Citibank, Maybank, RHB, UOB

Independent Financial Adviser to the Audit, Risk Management and Compliance Committee of the ESR-REIT Manager and the ESR-REIT Recommending Directors

IMPORTANT DATES AND TIMES

Latest Date and Time to
Pre-register Online to Attend the EGM

1 December 2020 (Tuesday), 10.00 a.m.

Latest Date and Time for
Lodgement of Proxy Form

1 December 2020 (Tuesday), 10.00 a.m.

Date and Time of the EGM

4 December 2020 (Friday), 10.00 a.m.
The EGM will be held only by way of electronic means
Your vote counts
Please vote by proxy only

Due to the current COVID-19 restriction orders in Singapore, ESR-REIT Unitholders will not be able to physically attend the EGM. Instead, alternative arrangements have been put in place to allow ESR-REIT Unitholders to participate in the EGM by (a) observing and/or listening to the EGM proceedings via the live audio-visual webcast / live audio-only stream; (b) submitting questions in advance of the EGM and/or (c) appointing the Chairman of the EGM as proxy to vote on their behalf at the EGM. Please refer to paragraph 21 of the Letter to ESR-REIT Unitholders, the Notice of EGM and the Proxy Form for further information, including the steps to be taken by ESR-REIT Unitholders to participate in the EGM.

All capitalised terms shall, if not otherwise defined, have the same meaning as ascribed to them in this Circular.

IMPORTANT NOTICE

IF YOU ARE IN ANY DOUBT AS TO THE COURSE OF ACTION YOU SHOULD TAKE, YOU SHOULD CONSULT YOUR STOCKBROKER, BANK MANAGER, SOLICITOR, ACCOUNTANT OR OTHER PROFESSIONAL ADVISER IMMEDIATELY.

If you have sold or transferred all or any of your issued and fully paid-up units in ESR-REIT, you should immediately inform the purchaser or the agent through whom the sale was effected for onward notification to the purchaser that this Circular together with the Notice of EGM and the accompanying Proxy Form may be accessed via SGXNET.

The Singapore Exchange Securities Trading Limited assumes no responsibility for the correctness of any of the statements made, reports contained or opinions expressed in this Circular.

1
What is the Background of the Merger?

What Has Happened?

On 16 July 2020, the managers of ESR-REIT and Sabana REIT issued a joint announcement on the Merger by way of a trust scheme of arrangement

The Scheme Consideration payable to the Sabana Unitholders, which will be satisfied in full by way of issuance of new ESR-REIT Units (the “Consideration Units”), is based on a gross exchange ratio of 0.940x

94Consideration Units (1)100Sabana Units

Based on the illustrative issue price of S$0.401 per Consideration Unit (2), the implied aggregate Scheme Consideration is approximately S$396.9 million (implied Scheme Consideration of S$0.377 per Sabana Unit is derived from the gross exchange ratio of 0.940x)

Who Is Sabana REIT?

As at 30 June 2020
S$0.9bn
Total Assets
18
Properties across Singapore
90.9%
High-Specs &
Logistics / Warehouse
4.1m sq ft
GFA

2
Why Should ESR-REIT Merge With Sabana REIT?

1. Value Accretive on a Historical Pro Forma Basis

The Merger is expected to be DPU and NAV accretive for ESR-REIT Unitholders on a historical pro forma basis

1a. Distribution per Unit (Cents) (3)

3.5293.637Before the MergerAfter the Merger2.7182.812Before the MergerAfter the MergerAccretion+3.1%(4)Accretion+3.5%FY20191H2020 Annualised(5)(6)(7)(7)(8)(9)

1b. NAV per Unit (Cents)

41.043.2Before the MergerAfter the Merger43.345.1Before the MergerAfter the MergerAccretion+4.2%Accretion+5.2%As at 31 December 2019As at 30 June 2020(10)(11)(12)(13)(14)(15)1b. NAV per Unit (Cents)

2. Enhances Diversification and Resilience of the Enlarged REIT Platform

2a. Increase Exposure to High-Specs and Logistics / Warehouse Segments

c.43%19%24%30%27%Valuation (16)c.S$3.1bnAfter the MergerHigh-Specs and Logistics / Warehouse:Before the MergerHigh-Specs and Logistics / Warehouse:c.53%27%26%25%22%Valuation (16)(17)c.S$4.0bnLogistics / WarehouseHigh-SpecsGeneral IndustrialBusiness ParkMore “future-ready”High-Specs andresilient Logistics /Warehouse assets,and reducedexposure to older /dated GeneralIndustrial Assets

2b. Larger Tenant Base Reduces Concentration Risks

After the MergerBefore the Merger(18)25%of GRI456TenantsEnlarged REITTop 10TenantsTop 10 tenants’contribution to GRIreduces fromapproximately 31%to 25% on a pro formabasis as at 30 June 2020,with no singletenant accountingfor more than 4.1%of the EnlargedREIT’s GRI (18)Top 10TenantsTop 10Tenants(18)31%of GRI343Tenants

3. 100% Pure-Play Singapore REIT Post-Merger

No. of properties will increase by 31.6%from 57 in ESR-REIT to 75 in the EnlargedREIT Total number of tenants will increase by32.9% from 343 in ESR-REIT to 456tenants in the Enlarged REIT

3b. Operational Synergies and Portfolio Optimisation Potential

3c. Organic AEI(19) Growth Opportunities to Realise Unutilised GFA

Enhances potential returns and lowers portfolio risks of future growth strategies such as value-adding AEIs and/or redevelopments

Up to 2.2m sq ft of Additional GFA in Enlarged REIT from Unutilised Plot Ratio1.015.14.119.21.221.4ESR-REITSabana REITEnlarged REITSabana REITUnutilised GFAESR-REITUnutilised GFAEnlarged REIT(Increased GFA)GFA (m sq ft)4.0%3.6%2.8%(21)(21)Additional GFA can be developed by the Enlarged REIT at a lower cost of capital with lower leasing risksSingaporeIndustrial GFAMarket Share (%)(20)

4. Size Does Matter

4a. Solidifies Position Amongst Top 5 Industrial S-REITs

Total Asset Size (S$bn)(22)SingaporeIndustrial GFAMarket Share (%)(23)EPRA Index(25)13.7 (26)9.16.0 (27)5.34.1 (28)3.21.81.71.41.40.96.0%3.8%0.2%(24)4.0%3.6%2.8%-1.4%0.7%1.0%0.8%Top 5 Developer-Backed Industrial S-REITsAscendas REITMapletreeLogistics TrustFrasers Logistics &Commercial TrustMapletreeIndustrial TrustEC World REITAIMS APAC REITSoilbuild BusinessSpace REITARA LOGOSLogistics TrustEnlargedREIT----Top 5 developer-backed industrial S-REIT4th largest industrial S-REIT by Singaporeindustrial GFA market share (23)Top 5 Developer-Backed Industrial S-REITs

4b. Larger Size Leads to More Competitive Costs of Capital...

Enlarged REIT is expected to have a lower cost of debt, longer WADE (29) and access to wider pools of capital while retaining balance sheet flexibility with a fully unencumbered portfolio

3.29%3.54%3.80%2.50%2.7 years WADE (31)100% UnencumberedS$1.2bn Debt (31)(32)1.6 years WADE (31)6.2% UnencumberedS$0.3bn Debt (31)5.0 years WADE100% UnencumberedS$0.4bn Debt (33)3.2 years WADE (31)100% UnencumberedS$1.6bn Debt (31)(32)(34)ReplacedByDecrease 25bpsPart of the S$0.4bn willbe used to replaceexisting loanNew Loan to ReplaceSabana REIT’s Debt (33)Enlarged REIT