14 STRATEGICALLY ADVANCING Portfolio Rejuvenation through Divestments, Redevelopments and AEIs Our portfolio Rejuvenation strategy remains a key component of ESR-REIT’s long-term growth, centred on: (i) the divestment of non-core assets; (ii) the redevelopment of older, lower-specification assets into modern, futureready properties; and (iii) the execution of AEIs to repurpose and upgrade dated assets to meet the evolving needs of the New Economy. Divestment of Non-Core Assets In FY2024, ESR-REIT continued to progress its portfolio Rejuvenation strategy by successfully divesting two noncore assets in Singapore and Australia, at a premium over their respective valuations. These assets were characterised by factors such as: (i) short remaining land leases; (ii) smaller asset sizes; (iii) limited potential for AEI or redevelopment; and/or (iv) outdated property specifications. The properties divested in FY2024 are: • 182-198 Maidstone Street, Altona, Victoria, Australia • 81 Tuas Bay Drive, Singapore Furthering this strategy, ESR-REIT also announced the divestment of 79 Tuas South Street 5, Singapore and 1 Third Lok Yang Road and 4 Fourth Lok Yang Road, Singapore in 1Q2025, at a 1.5% and 3.5% premium above its valuation respectively. With these divestments, the REIT currently has only approximately 13% of its assets with less than 15 years remaining on their land leases. Moving forward, we are targeting the divestment of approximately S$200 million of non-core assets in FY2025 as part of our continued portfolio Rejuvenation efforts. Asset Enhancement Initiatives and Redevelopments In FY2024, we successfully achieved Temporary Occupation Permit (“TOP”) for the Build-to-Suit redevelopment project at 21B Senoko Loop, developed specifically for NTS Singapore Pte Ltd (“NTS Singapore”). This transformation elevated the property from a dated General Industrial facility to a Green Mark Gold certified, High-Specifications Industrial property and is currently leased to NTS Singapore on a triple-net basis for 15 years with builtin annual rental escalations. The redevelopment was completed on time and within budget, delivering a yield on cost of approximately 6.0%. In addition, significant progress was made on the ongoing AEI at 16 Tai Seng Street, which is approximately 80% completed as at 31 December 2024. This AEI is set to add 2,793 sqm of new GFA, with an estimated yield on cost of around 6.0%. The AEI is expected to be completed in 1H2025, contributing value by modernising the property to meet the dynamic needs of the market. Recycling Capital into Two Transformational Acquisitions of High-Quality New Economy Assets Entering FY2024 with a stronger balance sheet and lower gearing puts ESR-REIT in a position of strength to explore growth opportunities and intensify its focus on capital Recycling. As a result, ESR-REIT completed the acquisition of two quality New Economy assets in FY2024, ESR Yatomi Kisosaki Distribution Centre in Japan and a 51% interest in 20 Tuas South Avenue 14 in Singapore, further strengthening its presence in the New Economy sector. ESR Yatomi Kisosaki Distribution Centre, Japan Located in Nagoya, Japan, ESR Yatomi Kisosaki Distribution Centre is a modern, four-storey, doubleramp logistics facility spanning 79,096 sqm, with a WALE of 2.3 years as at 31 December 2024. The freehold property, completed on 28 April 2022, holds a CASBEE A Sustainability Rating, one of the highest functional standards for grading green buildings in Japan. The facility is occupied by tenants from the logistics and warehousing, food and beverage, and general and precision engineering sectors. The acquisition was completed in November 2024 and has since begun contributing to ESR-REIT’s income stream. 20 Tuas South Avenue 14, Singapore Situated in close proximity to the Tuas Mega Port, 20 Tuas South Avenue 14 comprises a high-specifications manufacturing facility and ramp-up logistics warehouse which is Green Mark Platinum certified with modern specifications. The property sits on a total land area of 252,733 sqm, has a WALE of 10.7 years as at 31 December 2024, and a remaining land lease tenure of approximately 44 years. Its cutting-edge design and sustainable features position it as a high-quality, future-ready asset. The acquisition was completed in November 2024 and has since begun contributing to ESR-REIT’s income stream. These two “on-strategy” acquisitions are expected to be +3.0% DPU accretive on a pro forma basis and were secured at a 2.3% discount to their respective average valuations. Sourced from the pipeline of assets managed by ESR-REIT’s Sponsor, ESR Group, these acquisitions Reinforce the Sponsor’s commitment to grow ESRREIT into its flagship New Economy REIT. By judiciously Recycling capital from divestments and equity fundraising completed in 4Q2024 into the two strategically aligned, income-generating assets, ESR-REIT has significantly enhanced its portfolio quality, improved earnings visibility, and extended its underlying land lease tenure, marking a key milestone in our 4R Strategy.
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