ESR-REIT Annual Report 2024 15 In FY2024, ESR-REIT further strengthened its financial position by securing its inaugural sustainability-linked and green loans. This included a S$200 million sustainabilitylinked unsecured revolving credit facility in March 2024 and a S$225 million sustainability-linked unsecured term loan in October 2024, as well as a S$341.5 million term loan1 which had a green loan component in November 2024 as part of the acquisition of 51% interest in 20 Tuas South Avenue 14. These financings are aligned with the REIT’s commitment to integrate environmental, social, and governance (“ESG”) considerations into its capital management strategy. These milestones underscore ESRREIT’s ongoing dedication to sustainability and responsible financial stewardship. ESG ESR-REIT recognises the importance of integrating ESG principles to create long-term value for our Unitholders while contributing positively to the environment and communities we operate in. We have continued to enhance our commitment to sustainability under the guidance and supervision of the Board Sustainability Committee (“BSC”) which was set up in FY2024. The BSC is chaired by Mr. George Agethen, a Non-Executive Director of the Board of Directors (“Board”), and includes Ms. Julie Lo Lai Wan, an independent Non-Executive Director of the Board, as well as Mr. Chan Mun Wei, an external sustainability consultant who is an independent third-party member neither from the Board nor affiliated with ESR Group, to provide a diversity of views within the BSC thus enabling fresh insights as well as advise on industry-best ESG practices. FY2024 marked the implementation of the Decarbonisation Roadmap for the Singapore portfolio, which provides actionable plans and focused targets. We have also embarked on the development of Decarbonisation Roadmaps for our overseas portfolios in Australia and Japan. Prudent Capital Management Approach Lowers Cost-ofDebt with No Refinancing Risks In FY2024, alongside our ongoing efforts to Rejuvenate our portfolio and pursue strategic acquisitions, we also placed a strong emphasis on capital management as a key pillar of our focus and strategy. Given the prevailing interest rate environment, we proactively navigated the challenges and opportunities presented by fluctuations in borrowing costs. By closely monitoring market conditions, we were able to time the refinancing of our debt effectively, taking advantage of the early signs of declining interest rates. All FY2025 expiring debt has been refinanced, removing any refinancing risk for ESR-REIT in the coming year. While the impact of these initiatives may not be immediately reflected in our financial results, we anticipate that they will lead to significant cost savings in the near future, as we reduce our cost of debt. These prudent decisions lay the foundation for continued financial stability, enabling ESR-REIT to maintain a flexible and resilient capital structure moving forward. As at 31 December 2024, ESR-REIT’s all-in cost of debt stands at 3.84%, down from 4.03% as at 30 June 2024. This reduction in interest costs is expected to continue, driven by several factors, including: (a) the refinancing of FY2025 expiring debt at margins that are approximately 15 basis points lower, (b) early refinancing of FY2026 expiring debt with no prepayment penalties at potentially lower margins, (c) refinancing of hedges at more favourable rates, and (d) the potential redemption or exchange of the remaining S$75.3 million of outstanding 6.632% coupon perpetual securities. ESR-REIT reported gearing of 42.8% as at 31 December 2024, with a MAS Interest Coverage Ratio (ICR) of 2.5x. To manage interest rate risk, 74.8% of ESR-REIT’s interest rate exposure is fixed and the debt maturity profile remains well spread, with a weighted average debt expiry of 2.8 years as at 31 December 2024, up from 2.1 years as at 30 June 2024. ESR-REIT’s liquidity position continues to remain robust, with S$790.2 million in debt headroom and access to S$235.8 million in undrawn, committed revolving credit facilities, supported by a network of 11 lending banks. 1 The S$341.5 million term loan was obtained by Tuas South Avenue Pte. Ltd., of which ESR-REIT has a 51% ownership interest.
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