16 STRATEGICALLY ADVANCING Since the implementation of the 4R Strategy in FY2022, the portfolio’s weighted average land lease tenure has increased from 37.4 years in FY2022 to 43.8 years in FY2024, while the proportion of freehold and long-tenure (>30 years) assets has risen substantially from 54.2% in FY2022 to 71.6% in FY2024. The percentage of New Economy assets has also grown from 62.8% in FY2022 to 70.2% in FY2024, reinforcing the portfolio’s relevance in a dynamic industrial landscape. These enhancements position ESR-REIT well to navigate market complexities and maintain resilient performance as portfolio Rejuvenation efforts begin to yield tangible benefits. Prudent capital management in FY2024 has also strengthened the REIT’s financial position. All 2025 expiring debt has been refinanced at lower margins, and early refinancing of 2026 expiring debt without prepayment penalties is being explored. These proactive measures will enable ESR-REIT to benefit from reduced financing costs and are expected to contribute to improved financial performance in FY2025. Looking ahead, geopolitical and macroeconomic volatility remain key considerations. The global economy and REIT sector continue to face headwinds from prolonged geopolitical tensions, shifting political dynamics, and tariffs that could impact global trade. Inflation, which showed signs of moderation in the second half of FY2024, remains a critical factor influencing interest rates and operating costs. ESR-REIT will closely monitor these developments and aim to remain agile in adapting to emerging trends. While approximately 90% of utility expenses are structured on a pass-through basis, mitigating exposure to rising energy costs, inflationary pressures on maintenance and labour costs present ongoing challenges. The REIT remains committed to proactive cost management to preserve margins and sustain operational efficiency. With the continued execution of the 4R Strategy to improve asset and earnings quality, ESR-REIT is positioned to navigate market uncertainties, capitalise on growth opportunities, and deliver sustainable long-term value to stakeholders in FY2025 and beyond. On the Environmental front, ESR-REIT made significant strides in reducing the environmental impact of our portfolio. Notable achievements include an increase in solar capacity for the Singapore portfolio by approximately 12% from 13.8 MWp in FY2023 to 15.5 MWp in FY2024, and green building certification coverage from 10 to 18 properties. We have also implemented a Green Procurement Policy, Green Leases and Green Fitout Guide to engage suppliers and tenants to adopt sustainable practices in their daily operations. On the Social front, we partnered local organisations to contribute to various community development projects. To promote healthy practices for our employees, we enhanced the variety of our wellness programs and workshops. In FY2024, we recorded 568 hours of staff volunteerism and 36.5 hours of training per employee, outperforming our target of 500 hours and 16 hours respectively. On the Governance front, we remained focused on maintaining a robust corporate governance framework to ensure transparency and accountability. To strengthen sustainability considerations in our governance frameworks, we have established and/or updated relevant policies, including the Sustainability Policy, Sustainability Information and Data Governance Policy, and Renewable Energy Certificates Management Policy in FY2024. We continue to seek innovative solutions and collaborate with stakeholders to ensure our portfolio complies with the relevant regulatory requirements, adapting to the evolving sustainability landscape. More details on the REIT’s ESG journey can be found in our Sustainability Report on page 121 to 190. Outlook As we enter FY2025, vigilance remains key in navigating the evolving business landscape. While DPU declined in FY2024 primarily due to the loss of income from the divestment of non-core assets and redevelopment works, it is expected to trough, as earnings quality is expected to improve in FY2025, boosted by the full year contribution from the acquisitions of ESR Yatomi Kisosaki Distribution Centre and 51% interest in 20 Tuas South Avenue 14, which only contributed approximately one month of income in FY2024.
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