Asset Acquisitions And Disposals :: Proposed Acquisition Of 100% Trust Beneficiary Interest In Esr Sakura Distribution Centre

(Constituted in the Republic of Singapore pursuant to a trust deed dated 31 March 2006 (as amended))

THE PROPOSED ACQUISITION OF 100.0% TRUST BENEFICIARY INTEREST IN ESR SAKURA DISTRIBUTION CENTRE WHICH IS LOCATED AT SAKURA CITY, CHIBA PREFECTURE, JAPAN

1. INTRODUCTION

1. Acquisition
   ESR-LOGOS Funds Management (S) Limited, in its capacity as manager of ESR-LOGOS
   REIT (the "Manager"), is pleased to announce that ESR-LOGOS REIT TMK1 ("ESR TMK"), a Japan tokutei mokuteki kaisha ("TMK") which is indirectly wholly-owned by ESR-LOGOS
   REIT ("E-LOG") has entered into a sale and purchase agreement (the "Japan Sale and Purchase Agreement") with ESR 34 GK (the "Sponsor Vendor") to acquire 100% of the trust beneficiary interest in the logistics property known as ESR Sakura Distribution Centre located at 2464-11 and others, Ota, Sakura-shi,Chiba-ken ("ESR Sakura DC", and the acquisition, the "Japan Acquisition"), for a purchase consideration of approximately S$183.5 million (JPY 17,800 million) including rental support (as defined herein).
2. Interested Person Transaction
   The Japan Acquisition will constitute an "interested person transaction" under Chapter 9 of the Listing Manual as well as an "interested party transaction" under the Property Funds
   Appendix, in respect of which the approval of unitholders of E-LOG ("Unitholders") is required.
   A circular (the "Circular") will be issued to the Unitholders in due course, together with a notice of extraordinary general meeting ("EGM"), for the purpose of seeking the approval of
   Unitholders for the Japan Acquisition.

2. INFORMATION ON ESR SAKURA DC

ESR Sakura DC comprises a five-storey logistics property in Sakura City, Chiba Prefecture in Tokyo, with a total land area of 41,658.2 sqm, an overall occupancy rate of 75.0% and a weighted average lease expiry ("WALE") of 2.9 years as at 30 June 2022. ESR Sakura DC is freehold and was completed in 2015. As such, the age of the asset is less than 10 years old.

1

Selected information on ESR Sakura DC is set out in the table below.

		ESR Sakura DC
Asset Type		Distribution Centre
Japan Purchase		approximately S$183.5 million(2)
Consideration(1)		(JPY 17,800 million)
Location		2464-11 and others, Ota, Sakura-shi,Chiba-ken
Land Area (sqm)	41,658.2
Net Lettable Area ("NLA")	81,507.4
(sqm)
Land Tenure		Freehold
Weighted Average Lease	2.9
Expiry (years)
First year Net Property Income		JPY 790.0 million
("NPI")(3)
Occupancy Rate(4)	75.0%
Number of Tenants	4

Notes:

1. Based on illustrative exchange rate of JPY 97.00 = S$1.00.
2. The Japan Purchase Consideration represents the higher of the purchase price payable, as compared to the purchase price in respect of the Fund SPA, in consideration of the provision of rental support (as defined herein) by the Sponsor Vendor in relation to the Japan Sale and Purchase Agreement.
3. Including Rental Support (as defined herein).
4. Occupancy rate as at 30 June 2022.

3. DETAILS OF THE JAPAN ACQUISITION

3.1 Valuation and Purchase Consideration

Pursuant to the Japan Sale and Purchase Agreement dated 29 August 2022, E-LOG, through its wholly-owned TMK, ESR TMK, will acquire ESR Sakura DC through the acquisition of 100% of the trust beneficiary interest in ESR Sakura DC.

The purchase consideration payable for the Japan Acquisition ("Japan Purchase Consideration") is approximately S$183.5 million (JPY 17,800 million), and was arrived at on a willing-buyer and willing-seller basis after taking into account the independent valuations of ESR Sakura DC.

RBC Investor Services Trust Singapore Limited, as trustee of E-LOG (the "Trustee")1, has commissioned an independent valuer, CBRE K.K. ("CBRE"), and the Manager has

1 As at the date of this announcement, the trustee of E-LOG is RBC Investor Services Trust Singapore Limited. However, the Manager has on 14 April 2022 entered into a deed of retirement and appointment of Trustee (the "Supplemental Deed") with RBC Investor Services Trust Singapore Limited (in its capacity as retiring trustee of E-LOG) and Perpetual (Asia) Limited (in its capacity as new trustee of E-LOG). Perpetual (Asia) Limited will be appointed by the Manager as Trustee of E-LOG with effect from the date on which the Conditions Precedent (as defined in the Supplemental Deed) are confirmed by the Manager to be fulfilled or such other date as the parties to the Supplemental Deed may agree in writing.

2

commissioned an independent valuer, Colliers International Japan KK ("Colliers" and together with CBRE, the "Japan Independent Valuers") to value ESR Sakura DC. The valuations of ESR Sakura DC as at 30 June 2022 are set out below.

		CBRE		Colliers
With the Rental Support (as		JPY 18,000 million		JPY 18,030 million
defined herein)		(approximately S$185.6		(approximately S$185.9
		million)		million)
Without the Rental Support		JPY 17,800 million		JPY 17,730 million
		(approximately S$183.5		(approximately S$182.8
		million)		million)

In arriving at the market value of ESR Sakura DC, the Japan Independent Valuers relied on the capitalisation approach, discounted cash flow analysis methods and cost approach.

1. Estimated Total Acquisition Outlay
   The estimated total acquisition outlay for the Japan Acquisition (the "Total Acquisition Outlay") is approximately S$187.0 million, comprising:
2. 1. the Japan Purchase Consideration of approximately S$183.5 million (JPY 17,800 million);
   2. the acquisition fee ("Acquisition Fee") of approximately S$1.8 million payable in units in E-LOG ("Units") to the Manager2; and
   3. other costs including stamp duty, the estimated professional and other fees and expenses3 of approximately S$1.7 million incurred or to be incurred by E-LOG in connection with the Japan Acquisition.
3. Structure of the Japan Acquisition and Sponsor Support
   On 29 August 2022, ESR TMK, a Japan TMK, which is indirectly wholly-owned by E-LOG, entered into the Japan Sale and Purchase Agreement with the Sponsor Vendor to acquire 100% of the trust beneficiary interest4 in ESR Sakura DC, for a purchase consideration of approximately S$183.5 million (JPY 17,800 million) including rental support (as set out in paragraph 3.5 of this announcement).
   The Sponsor Vendor had also on 29 August 2022 entered into a separate sale and purchase agreement (the "Fund SPA") with RW Sakura TMK (the "Fund Vendor"), which currently holds 100% of the trust beneficiary interest in ESR Sakura DC, to acquire such interest from the Fund Vendor for a purchase consideration of approximately S$179.9 million (JPY 17,450

1. As the Japan Acquisition will constitute an "interested party transaction" under the Property Funds Appendix, the acquisition fee shall be payable in Units which shall not be sold one year from the date of issuance in accordance with the Property Funds Appendix.
2. Such fees and expenses include due diligence costs and acquisition costs such as legal expenses and other professional costs.
3. Real estate may be held in the form of a trust beneficiary interest by entrusting the real estate to a trust. Trust Beneficiary Interest is issued by a trust bank licensed in Japan. This is a common ownership structure for foreign asset ownership in Japan to optimise certain transaction taxes, such as real estate acquisition or registration tax.

3

million) without rental support. Thereafter, subject to Unitholders approving the Japan Acquisition at the EGM, the Sponsor Vendor will sell 100% of the trust beneficiary interest in ESR Sakura DC to ESR TMK pursuant to the terms of the Japan Sale and Purchase Agreement.

The Fund Vendor is indirectly held by a fund, and the investors in the fund are third party investors (effective stake of 85.7%) and ESR Group Limited (the "Sponsor"), which holds a minority stake of 14.3% in ESR Sakura DC (the third party investors and together with the Sponsor, the "Investors").

In order to secure this transaction for E-LOG, which is attractive for E-LOG due to the merits of the transaction as set out in paragraph 4 of this announcement, the Sponsor is providing the following support to allow E-LOG to secure the transaction and to mitigate the short- term leasing risks to E-LOG (the "Sponsor Support"), and accordingly, the Japan Acquisition is structured via two separate sale and purchase agreements5:

1. Sponsor to backstop E-LOG's risk of forfeiting the Deposit
   it is a condition of the willingness of the Fund Vendor to sell ESR Sakura DC that a deposit of JPY 872.5 million (approximately S$9.0 million) (the "Deposit") is payable upon signing of the sale and purchase agreement and such Deposit will not be refundable after 31 August 20226. As E-LOG would not be able to convene an EGM to obtain Unitholder's approval for the Japan Acquisition prior to 31 August 2022, the Deposit would be forfeited if Unitholders do not approve proceeding with the Japan Acquisition. As such, while E-LOG is able to sign a sale and purchase agreement directly with the Fund Vendor, the Deposit which is payable upon signing of such a sale and purchase agreement will become non-refundable on 31 August 2022. The Sponsor Vendor, as a show of support to E-LOG to allow E-LOG to secure the transaction, has therefore agreed to enter into the Fund SPA to backstop E-LOG's risks of having the Deposit forfeited in the event Unitholders do not approve proceeding with the Japan Acquisition. The Japan Sale and Purchase Agreement provides for the refund of the Deposit from the Sponsor Vendor to ESR TMK (subject to the condition as set out in paragraph 3.4(i) below); and
2. Sponsor to provide 12 months of rental support to mitigate leasing risks
   the Sponsor Vendor has agreed to provide E-LOG with a rental support which the Fund Vendor would not be providing, in relation to the vacant space comprising approximately 25% of the NLA. The rental support provided is for a period of 12 months from the completion date in respect of the vacant space to mitigate its leasing risks. The 12 months of rental support for the vacant space amounting to JPY 236.5 million (approximately S$2.4 million) (the "Rental Support") is (i) based on market rent and (ii) in line with the current rates being charged for the rest of the tenanted spaces in ESR Sakura DC. Each of the Japan Independent Valuers is of the opinion that the Rental Support is in line with market rental rates. In addition,

1. The two sale and purchase agreements being, (1) the Fund SPA between the Sponsor Vendor (as buyer) and the Fund Vendor (as seller) which currently owns ESR Sakura DC and (2) the Japan Sale and Purchase Agreement between ESR TMK (as buyer) and the Sponsor Vendor (as seller)).
2. For the avoidance of doubt, 31 August 2022 is NOTthe long stop date for completion of the Japan Acquisition. The long stop date for the completion of the Japan Acquisition is 31 October 2022.

4

the Rental Support will also be used to cover any rent free period(s) provided to new tenant(s) for securing new lease(s). In connection with the provision of the Rental Support which the Fund Vendor is not agreeable to provide, the Sponsor Vendor will enter into the Fund SPA with the Fund Vendor to acquire ESR Sakura DC (at the purchase price of JPY 17,450 million without rental support) and on-sell ESR Sakura DC to E-LOG at JPY 17,800 million with 12 months of Rental Support pursuant to the terms of the Japan Sale and Purchase Agreement. The Japan Purchase Consideration of JPY 17,800 million is below the two independent valuations conducted by CBRE and Colliers at JPY 18,000 million and JPY 18,030 million respectively, taking into account the 12 months of Rental Support and current market conditions.

The Sponsor Support in relation to the Japan Acquisition further demonstrates the alignment of interests of the Sponsor with that of Unitholders in supporting E-LOG's growth by providing certainty of transaction and mitigating risks for E-LOG. The Investors were initially offered the purchase price of JPY 17,800 million with the condition of providing Rental Support and waiving the non-refundable deposit date of 31 August 2022. However, there was no unanimous approval obtained from the Investors in relation to such offer, hence the Sponsor Support is required.

The trustee of ESR Sakura DC is Mitsubishi UFJ Trust and Banking Corporation (the "ESR Sakura Trustee") pursuant to the Trust Property Management and Disposition Trust Agreement (fudousan kanri shobun shintaku keiyakusho) dated 14 November 2018 entered into by the Fund Vendor and the ESR Sakura Trustee as may be amended.

The Manager understands that the Fund Vendor is selling ESR Sakura DC due to the Investors' capital recycling policy.

Note:

1. For the avoidance of doubt, 31 August 2022 is NOTthe long stop date for completion of the Japan Acquisition. The long stop date for the completion of the Japan Acquisition is 31 October 2022.
2. Subject to the Sponsor Vendor selling 100% of the trust beneficiary interest in ESR Sakura DC.
3. The Japan Purchase Consideration of JPY 17,800 million is below the two independent valuations

5