SPH REIT Preliminary Prospectus (9 July 2013) PDF

THIS IS A PRELIMINARY PROSPECTUS AND IS SUBJECT TO FURTHER AMENDMENTS AND COMPLETION IN THIS PROSPECTUS TO BE REGISTERED BY THE MONETARY AUTHORITY
OF SINGAPORE (THE MAS). THE COLLECTIVE INVESTMENT SCHEME OFFERED IN THIS PRELIMINARY PROSPECTUS HAS APPLIED FOR AUTHORISATION UNDER THE SECURITIES AND FUTURES ACT, CHAPTER 289 OF SINGAPORE (THE SECURITIES AND FUTURES ACT OR THE SFA). A COPY OF THIS PRELIMINARY PROSPECTUS HAS BEEN LODGED WITH THE MAS. THE MAS ASSUMES NO RESPONSIBILITY FOR THE CONTENTS OF THIS PRELIMINARY PROSPECTUS. LODGEMENT OF THIS PRELIMINARY PROSPECTUS WITH THE MAS DOES NOT IMPLY THAT THE SECURITIES AND FUTURES ACT, OR ANY OTHER LEGAL OR REGULATORY REQUIREMENTS, HAVE BEEN COMPLIED WITH. A PERSON TO WHOM A COPY OF THIS PRELIMINARY PROSPECTUS HAS BEEN ISSUED SHALL NOT CIRCULATE IT TO ANY OTHER PERSON. NO OFFER OR INVITATION SHALL BE MADE OR RECEIVED, AND NO AGREEMENT SHALL BE MADE, ON THE BASIS OF THIS PRELIMINARY PROSPECTUS, TO PURCHASE OR SUBSCRIBE FOR ANY UNITS IN SPH REIT. NO RELIANCE MAY BE PLACED FOR ANY PURPOSE WHATSOEVER ON THE INFORMATION CONTAINED IN THIS PRELIMINARY PROSPECTUS OR ON ITS COMPLETENESS.
PRELIMINARY PROSPECTUS DATED 9 JULY 2013 (Lodged with the Monetary Authority of Singapore on 9 July 2013). This document is important. If you are in any doubt as to the action you should take, you should consult your stockbroker, bank manager, solicitor, accountant or other professional adviser.
SPH REIT
(a real estate investment trust constituted on 9 July 2013 under the laws of the Republic of Singapore) Offering of 308,884,000 Units (subject to the Over-Allotment Option (as defined herein)) Offering Price Range: S$0.85 to S$0.90 per Unit
SPH REIT Management Pte. Ltd., as manager (the Manager) of SPH REIT (SPH REIT), is making an offering (the Offering) of 308,884,000 units representing undivided interests in SPH REIT (Units) for subscription at the Offering Price (as defined below) (the Offering Units). The Offering consists of (i) an international placement of 224,902,000 Units to investors, including institutional and other investors in Singapore (the Placement Tranche) and (ii) an offering of 83,982,000 Units to the public in Singapore (the Public Offer). It is currently expected that the issue price of each Unit under the Offering (the Offering Price) will be between S$0.85 per Unit (the Minimum Offering Price ) and S$0.90 per Unit (the Maximum Offering Price, and the range between the Minimum Offering Price and the Maximum Offering Price, the Offering Price Range). The sole global coordinator and issue manager for the Offering is Credit Suisse (Singapore) Limited (the Global Coordinator or Sole Global Coordinator and Issue Manager). The Offering is fully underwritten at the Offering Price by Credit Suisse (Singapore) Limited, DBS Bank Ltd. and Oversea-Chinese Banking Corporation Limited (collectively, the Joint Bookrunners and Underwriters or the Joint Bookrunners ) on the terms and subject to the conditions of the Underwriting Agreement (as defined herein). The total number of Units in issue as at the date of this Prospectus is one Unit (the Sponsor Initial Unit). The total number of outstanding Units immediately after completion of the Offering will be 2,500,995,000 Units. The exercise of the Over-Allotment Option will not increase the total number of Units in issue. Concurrently with, but separate from the Offering, nominees of Orchard 290 Ltd (O290) and nominees of CM Domain Pte. Ltd ( CM Domain, together with O290, the Vendors and each, a Vendor), as vendors of the Properties (as defined herein), will receive an aggregate of 1,941,110,999 Units (the Consideration Units) on the Listing Date (as defined herein) in part satisfaction of the purchase consideration for the Properties. In addition, concurrently with, but separate from the Offering, each of the Cornerstone Investors (as defined herein) has entered into a subscription agreement to subscribe for an aggregate of 251,000,000 Units (the Cornerstone Units) at the Offering Price conditional upon the Underwriting Agreement having been entered into, and not having been terminated, pursuant to its terms on or prior to the Settlement Date (as defined herein). Prior to the Offering, there has been no market for the Units. The offer of Units under this Prospectus will be by way of an initial public offering (IPO) in Singapore. Application has been made to Singapore Exchange Securities Trading Limited (the SGX-ST) for permission to list on the Main Board of the SGX-ST (i) all Units comprised in the Offering, (ii) the Sponsor Initial Unit, (iii) the Consideration Units, (iv) the Cornerstone Units, (v) all the Units which will be issued to the Manager from time to time in full or part payment of the Managers fees and (vi) all the Units which will be issued to SPH Retail Property Management Services Pte. Ltd. (the Property Manager) from time to time in full or part payment of the Property Managers fees. Such permission will be granted when SPH REIT has been admitted to the Official List of the SGX-ST (the Listing Date). Acceptance of applications for Units will be conditional upon issue of the Units and upon permission being granted to list the Units. In the event that such permission is not granted or if the Offering is not completed for any other reason, application monies will be returned in full, at each investors own risk, without interest or any share of revenue or other benefit arising therefrom, and without any right or claim against any of SPH REIT, the Manager, DBS Trustee Limited, as trustee of SPH REIT (the Trustee), Singapore Press Holdings Limited (SPHL or the Sponsor), the Global Coordinator or the Joint Bookrunners. SPH REIT has received a letter of eligibility from the SGX-ST for the listing and quotation of (i) all Units comprised in the Offering, (ii) the Sponsor Initial Unit, (iii) the Consideration Units, (iv) the Cornerstone Units, (v) all the Units which will be issued to the Manager from time to time in full or part payment of the Managers fees and (vi) all the Units which will be issued to the Property Manager from time to time in full or part payment of the Property Managers fees on the Main Board of the SGX-ST. SPH REITs eligibility to list on the Main Board of the SGX-ST does not indicate the merits of the Offering, SPH REIT, the Manager, the Trustee, the Sponsor, the Global Coordinator, the Joint Bookrunners or the Units. The SGX-ST assumes no responsibility for the correctness of any statements or opinions made or reports contained in this Prospectus. Admission to the Official List of the SGX-ST is not to be taken as an indication of the merits of the Offering, SPH REIT, the Manager, the Trustee, the Sponsor, the Global Coordinator, the Joint Bookrunners or the Units. The collective investment scheme offered in this Prospectus is a scheme pending authorisation under the Securities and Futures Act, Chapter 289 of Singapore (the Securities and Futures Act or SFA). A copy of this Prospectus has been lodged with and registered by the Monetary Authority of Singapore (the Authority or the MAS) on 9 July 2013 and , respectively. The MAS assumes no responsibility for the contents of the Prospectus. Registration of the Prospectus by the MAS does not imply that the Securities and Futures Act or any other legal or regulatory requirements have been complied with. The MAS has not, in any way, considered the investment merits of the collective investment scheme. This Prospectus will expire on (12 months after the date of the registration of this Prospectus). See Risk Factors commencing on page 48 of this Prospectus for a discussion of certain factors to be considered in connection with an investment in the Units. None of the Manager, the Trustee, the Sponsor, the Global Coordinator or the Joint Bookrunners guarantees the performance of SPH REIT, the repayment of capital or the payment of a particular return on the Units. Investors who are members of the Central Provident Fund ( CPF) in Singapore may use their CPF Ordinary Account savings to purchase or subscribe for Units as an investment included under the CPF Investment Scheme Ordinary Account. CPF members are allowed to invest up to 35.0% of the Investible Savings (as defined herein) in their CPF Ordinary Accounts to purchase or subscribe for Units. Investors applying for Units by way of Application Forms (as defined herein) or Electronic Applications (both as referred to in Appendix G, Terms, Conditions and Procedures for Application for and Acceptance of the Units in Singapore) in the Public Offer will have to pay the Offering Price on application, subject to a refund of the full amount or, as the case may be, the balance of the application monies (in each case without interest or any share of revenue or other benefit arising therefrom), where (i) an application is rejected or accepted in part only, or (ii) if the Offering does not proceed for any reason. The Offering Price of between S$0.85 and S$0.90 per Unit will be determined following a book-building process by agreement between the Joint Bookrunners and the Manager on a date currently expected to be (the Price Determination Date), which date is subject to change. Notice of the Offering Price will be published in one or more major Singapore newspapers such as The Straits Times, The Business Times and Lianhe Zaobao not later than two calendar days after the Price Determination Date. In connection with the Offering, the Joint Bookrunners have been granted an over-allotment option (the Over-Allotment Option) by TPR Holdings Pte. Ltd. (the Unit Lender), a company incorporated in Singapore that is a wholly-owned subsidiary of the Sponsor, exercisable by Credit Suisse (Singapore) Limited (the Stabilising Manager) (or any of its affiliates or other persons acting on behalf of the Stabilising Manager), in consultation with the other Joint Bookrunners, in full or in part, on one or more occasions, only from the Listing Date but no later than the earliest of (i) the date falling 30 days from the Listing Date; or (ii) the date when the Stabilising Manager (or its affiliates or other persons acting on behalf of the Stabilising Manager) has bought, on the SGX-ST, an aggregate of 55,988,000 Units, representing 18.1% of the total number of Units in the Offering, to undertake stabilising actions to purchase up to an aggregate of 55,988,000 Units (representing 18.1% of the total number of Units in the Offering), at the Offering Price. The exercise of the Over-Allotment Option will not increase the total number of Units outstanding. In connection with the Offering, the Stabilising Manager (or its affiliates or other persons acting on behalf of the Stabilising Manager) may, in consultation with the other Joint Bookrunners and at its discretion, over-allot or effect transactions which stabilise or maintain the market price of the Units at levels that might not otherwise prevail in the open market. However, there is no assurance that the Stabilising Manager (or its affiliates or other persons acting on behalf of the Stabilising Manager) will undertake stabilising action. Such transactions may be effected on the SGX-ST and in other jurisdictions where it is permissible to do so, in each case in compliance with all applicable laws and regulations. Nothing in this Prospectus constitutes an offer for securities for sale in the United States of America (United States or U.S.) or any other jurisdiction where it is unlawful to do so. The Units have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the Securities Act ) or the securities laws of any state of the United States and accordingly, may not be offered or sold within the United States (as defined in Regulation S under the Securities Act (Regulation S)) except in certain transactions exempt from, or not subject to, the registration requirements of the Securities Act. The Units are being offered and sold outside the United States in offshore transactions as defined in, and in reliance on, Regulation S.
Sole Global Coordinator and Issue Manager
Joint Bookrunners and Underwriters
Co-Lead Managers and Sub-Underwriters CIMB Securities (Singapore) Pte. Ltd. Nomura Singapore Limited
TABLE OF CONTENTS
Page NOTICE TO INVESTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . FORWARD-LOOKING STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CERTAIN DEFINED TERMS AND CONVENTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . MARKET AND INDUSTRY INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . OWNERSHIP OF THE UNITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CAPITALISATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . UNAUDITED PRO FORMA FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PROFIT FORECAST AND PROFIT PROJECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . STRATEGY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . BUSINESS AND PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . THE MANAGER AND CORPORATE GOVERNANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . THE SPONSOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . THE FORMATION AND STRUCTURE OF SPH REIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . CERTAIN AGREEMENTS RELATING TO SPH REIT AND THE PROPERTIES . . . . . . . . TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CLEARANCE AND SETTLEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . REPORTING AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . GLOSSARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii v vi vii 1 48 71 73 75 76 77
81 93 104 111 134 160 162 173 207 212 222 223 224 225 230
APPENDIX A
REPORTING AUDITORS REPORT ON THE PROFIT FORECAST AND PROFIT PROJECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . REPORTING AUDITORS REPORT ON THE UNAUDITED PRO FORMA FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . UNAUDITED PRO FORMA FINANCIAL INFORMATION . . . . . . . INDEPENDENT TAXATION REPORT . . . . . . . . . . . . . . . . . . . . . . INDEPENDENT PROPERTY VALUATION SUMMARY REPORTS . INDEPENDENT RETAIL PROPERTY MARKET RESEARCH REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TERMS, CONDITIONS AND PROCEDURES FOR APPLICATION FOR AND ACCEPTANCE OF THE UNITS IN SINGAPORE . . . . . LIST OF PRESENT AND PAST PRINCIPAL DIRECTORSHIPS OF DIRECTORS AND EXECUTIVE OFFICERS . . . . . . . . . . . . . . . . .
A-1
APPENDIX B
B-1 C-1 D-1 E-1
APPENDIX C APPENDIX D APPENDIX E APPENDIX F
F-1
APPENDIX G
G-1
APPENDIX H
H-1
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NOTICE TO INVESTORS
No person is authorised to give any information or to make any representation not contained in this Prospectus and any information or representation not so contained must not be relied upon as having been authorised by or on behalf of SPH REIT, the Manager, the Trustee, the Global Coordinator, the Joint Bookrunners or the Sponsor. If anyone provides you with different or inconsistent information, you should not rely upon it. Neither the delivery of this Prospectus nor any offer, subscription, sale or transfer made hereunder shall under any circumstances imply that the information herein is correct as of any date subsequent to the date hereof or constitute a representation that there has been no change or development reasonably likely to involve a material adverse change in the affairs, conditions and prospects of SPH REIT, the Manager, the Units or the Sponsor since the date on the front cover of this Prospectus. Where such changes occur and are material or required to be disclosed by law, the SGX-ST and/or any other regulatory or supervisory body or agency, the Manager will make an announcement of the same to the SGX-ST and, if required, lodge and issue a supplementary document or replacement document pursuant to Section 298 of the Securities and Futures Act and take immediate steps to comply with the said Section 298. Investors should take notice of such announcements and documents and upon release of such announcements and documents shall be deemed to have notice of such changes. None of SPH REIT, the Manager, the Trustee, the Global Coordinator, the Joint Bookrunners and the Sponsor or any of their respective affiliates, directors, officers, employees, agents, representatives or advisers is making any representation or undertaking to any purchaser or subscriber of Units regarding the legality of an investment by such purchaser or subscriber under appropriate legal, investment or similar laws. In addition, investors in the Units should not construe the contents of this Prospectus as legal, business, financial or tax advice. Investors should be aware that they may be required to bear the financial risks of an investment in the Units for an indefinite period of time. Investors should consult their own professional advisers as to the legal, tax, business, financial and related aspects of an investment in the Units. Copies of this Prospectus and the Application Forms may be obtained on request, subject to availability, during office hours, from: Credit Suisse (Singapore) Limited One Raffles Link #03/#04-01 South Lobby Singapore 039393 DBS Bank Ltd. 12 Marina Boulevard Level 46 DBS Asia Central @ Marina Bay Financial Centre Tower 3 Singapore 018982 Oversea-Chinese Banking Corporation Limited 65 Chulia Street OCBC Centre Singapore 049513
and, where applicable, from members of the Association of Banks in Singapore, members of the SGX-ST and merchant banks in Singapore. A copy of this Prospectus is also available on the SGX-ST website: http://www.sgx.com. The Units have not been, and will not be, registered under the Securities Act and accordingly, may not be offered or sold within the United States except in certain transactions exempt from, or not subject to, the registration requirements of the Securities Act. The Units are being offered and sold outside the United States in offshore transactions as defined in, and in reliance on, Regulation S.
iii
The distribution of this Prospectus and the offering, subscription, purchase, sale or transfer of the Units in certain jurisdictions may be restricted by law. SPH REIT, the Manager, the Trustee, the Global Coordinator, the Joint Bookrunners and the Sponsor require persons into whose possession this Prospectus comes to inform themselves about and to observe any such restrictions at their own expense and without liability to SPH REIT, the Manager, the Trustee, the Global Coordinator, the Joint Bookrunners and the Sponsor. This Prospectus does not constitute, and the Manager, the Trustee, the Global Coordinator, the Joint Bookrunners and the Sponsor are not making, an offer of, or an invitation to subscribe for or purchase, any of the Units in any jurisdiction in which such offer or invitation would be unlawful. Persons to whom a copy of this Prospectus has been issued shall not circulate to any other person, reproduce or otherwise distribute this Prospectus or any information herein for any purpose whatsoever nor permit or cause the same to occur. In connection with the Offering, the Stabilising Manager (or its affiliates or other persons acting on behalf of the Stabilising Manager) may, in consultation with the other Joint Bookrunners and at its discretion, over-allot or effect transactions which stabilise or maintain the market price of the Units at levels that might not otherwise prevail in the open market. However, there is no assurance that the Stabilising Manager (or its affiliates or other persons acting on behalf of the Stabilising Manager) will undertake stabilising action. Such transactions may be effected on the SGX-ST and in other jurisdictions where it is permissible to do so, in each case in compliance with all applicable laws and regulations (including the SFA and any regulations thereunder). Such transactions may commence on or after the Listing Date, and, if commenced, may be discontinued at any time and shall not be effected after the earliest of (i) the date falling 30 days from the Listing Date or (ii) the date when the Stabilising Manager (or any of its affiliates or other persons acting on behalf of the Stabilising Manager) has bought, on the SGX-ST, an aggregate of 55,988,000 Units, representing 18.1% of the total number of Units in the Offering, to undertake stabilising actions to purchase up to an aggregate of 55,988,000 Units (representing 18.1% of the total number of Units in the Offering), at the Offering Price. The exercise of the Over-Allotment Option will not increase the total number of Units outstanding.
iv
FORWARD-LOOKING STATEMENTS
Certain statements in this Prospectus constitute forward-looking statements. This Prospectus also contains forward-looking financial information in Profit Forecast and Profit Projection. Such forward-looking statements and financial information involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of SPH REIT, the Manager, the Sponsor, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements and financial information. Such forward-looking statements and financial information are based on numerous assumptions regarding the Managers present and future business strategies and the environment in which SPH REIT, the Manager or the Sponsor will operate in the future. As these statements and financial information reflect the current views of the Manager and the Sponsor concerning future events, these statements and financial information necessarily involve risks, uncertainties and assumptions. Actual future performance could differ materially from these forward-looking statements and financial information. You should not place any undue reliance on these forward-looking statements. Among the important factors that could cause the actual results, performance or achievements of SPH REIT, the Manager or the Sponsor to differ materially from those in the forward-looking statements and financial information are the conditions of, and changes in, the domestic, regional and global economies, including, but not limited to, factors such as political, economic and social conditions in Singapore, changes in government laws and regulations affecting SPH REIT, competition in the property market of Singapore in which SPH REIT may invest, industry, interest rates, inflation, relations with service providers, relations with lenders, hostilities (including future terrorist attacks), the performance and reputation of SPH REITs properties and/or acquisitions, difficulties in identifying future acquisitions, difficulty in completing and integrating acquisitions, changes in the Managers directors and executive officers, risks related to natural disasters, general volatility of the capital markets, general risks relating to the property market in which SPH REIT may invest and the market price of the Units as well as other matters not yet known to the Manager or not currently considered material by the Manager. Additional factors that could cause actual results, performance or achievements to differ materially include, but are not limited to, those discussed under Risk Factors, Profit Forecast and Profit Projection, and Business and Properties. These forward-looking statements and financial information speak only as at the date of this Prospectus. The Manager expressly disclaims any obligation or undertaking to release publicly any updates of or revisions to any forward-looking statement or financial information contained herein to reflect any change in the expectations of the Manager or the Sponsor with regard thereto or any change in events, conditions or circumstances on which any such statement or information is based, subject to compliance with all applicable laws and regulations and/or the rules of the SGX-ST and/or any other relevant regulatory or supervisory body or agency.
CERTAIN DEFINED TERMS AND CONVENTIONS

SPH REIT will publish its financial statements in Singapore dollars. In this Prospectus, references to S$ or Singapore dollars and cents are to the lawful currency of the Republic of Singapore. Unless otherwise defined, capitalised terms used in this Prospectus shall have the meanings set out in the Glossary. The forecast and projected distribution per Unit yields are calculated based on the Minimum Offering Price and the Maximum Offering Price. Such yields and yield growth will vary accordingly for investors who purchase Units in the secondary market at a market price different from the Minimum Offering Price and the Maximum Offering Price. Any discrepancies in the tables, graphs and charts included in this Prospectus between the listed amounts and totals thereof are due to rounding. Where applicable, figures and percentages are rounded to one decimal place. Measurements in square metres ( sq m ) are converted to square feet ( sq ft ) and vice versa based on the conversion rate of 1 sq m = 10.7639 sq ft. References to Appendix or Appendices are to the appendices set out in this Prospectus. All references in this Prospectus to dates and times shall mean Singapore dates and times unless otherwise specified. Unless otherwise specified, all information relating to the Properties in this Prospectus are as at 28 February 2013. (See Business and Properties for details regarding the Properties.) For the purposes of this Prospectus, reference to: Clementi Mall means a 99-year leasehold interest in The Clementi Mall commencing on 31 August 2010; FY means financial year ended or, as the case may be, ending 31 August; Gross Rental Income consists of Fixed Rent which includes (i) base rent (after rent rebates, refunds, credits or discounts and rebates for rent-free periods, where applicable, but excluding turnover rent), (ii) service charges payable by tenants to cover the operation and property maintenance expenses of the respective Properties and (iii) advertising and promotion charges payable by tenants for advertising and promotional activities for the respective Properties ( Fixed Rent ); and Turnover Rent which is generally calculated as a percentage of the tenants gross turnover ( Turnover Rent ). In some cases, turnover rent may be subject to certain thresholds before it is payable; Medical suites refers to medical suites and medical clinics; Paragon in the context of what SPH REIT will be acquiring as part of its Initial Portfolio (as defined herein) means a 99-year leasehold interest in Paragon commencing on the Listing Date. (See Certain Agreements Relating to SPH REIT and the Properties Information Regarding the Title of the Properties Paragon for further details); and primarily when used in relation to the phrase primarily for retail purposes shall mean more than 50.0% of net lettable area ( NLA ) or (in the case of a property where the concept of NLA is not applicable) gross floor area ( GFA ).
vi
MARKET AND INDUSTRY INFORMATION

This Prospectus includes market and industry data and forecasts that have been obtained from internal surveys, reports and studies, where appropriate, as well as market research, publicly available information and industry publications. Industry publications, surveys and forecasts generally state that the information they contain has been obtained from sources believed to be reliable, but there can be no assurance as to the accuracy or completeness of such information. The Manager has commissioned Urbis Pty Ltd ( Urbis or the Independent Market Research Consultant ) to prepare the Independent Retail Property Market Research Report (see Appendix F, Independent Retail Property Market Research Report for further details). While the Manager has taken reasonable steps to ensure that the information is extracted accurately and in its proper context, the Manager has not independently verified any of the data from third-party sources or ascertained the underlying economic assumptions relied upon therein. Consequently, none of SPH REIT, the Manager, the Trustee, the Sponsor, the Global Coordinator or the Joint Bookrunners makes any representation as to the accuracy or completeness of such information and shall not be obliged to provide any updates on the same.
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OVERVIEW
The following section is qualified in its entirety by, and is subject to, the more detailed information contained or referred to elsewhere in this Prospectus. The meanings of terms not defined in this section can be found in the Glossary or in the trust deed constituting SPH REIT dated 9 July 2013 (the Trust Deed ). A copy of the Trust Deed can be inspected at the registered office of the Manager, which is located at 1000 Toa Payoh North, News Centre, Singapore 318994. Statements contained in this section that are not historical facts may be forward-looking statements or are historical statements reconstituted on a pro forma basis. Such statements are based on certain assumptions and are subject to certain risks and uncertainties which could cause actual results of SPH REIT to differ materially from those forecast or projected (see ForwardLooking Statements for further details). Under no circumstances should the inclusion of such information herein be regarded as a representation, warranty or prediction with respect to the accuracy of the underlying assumptions by SPH REIT, the Manager, the Trustee, the Global Coordinator, the Joint Bookrunners, the Sponsor or any other person or that these results will be achieved or are likely to be achieved. Investing in the Units involves risks. Prospective investors are advised not to rely solely on this section, but to read this Prospectus in its entirety and, in particular, the sections from which the information in this section is extracted and Risk Factors to better understand the Offering and SPH REITs businesses and risks. INTRODUCTION TO SPH REIT SPH REIT is a Singapore-based real estate investment trust ( REIT ) established principally to invest, directly or indirectly, in a portfolio of income-producing real estate which is used primarily 1 for retail purposes in Asia-Pacific, as well as real estate-related assets. Objective The Managers key objective for SPH REIT is to provide unitholders of SPH REIT ( Unitholders ) with regular and stable distributions, and sustainable long-term growth in distribution per Unit ( DPU ) and net asset value ( NAV ) per Unit, while maintaining an appropriate capital structure. Initial Portfolio As at the Listing Date, the initial portfolio of SPH REIT (the Initial Portfolio ) comprises two high quality and well located commercial properties in Singapore totalling 898,779 sq ft NLA 2 with an aggregate appraised value of S$3,070.5 million 3 and Committed Occupancy (as defined herein) of 100.0% as at 28 February 2013. The Initial Portfolio consists of: a 99-year leasehold interest 4 in Paragon , a premier upscale retail mall and medical suite/office property located in the heart of Orchard Road, Singapores most famous shopping and tourist precinct. Paragon consists of a six-storey retail podium and one basement level with 483,690 sq ft of retail NLA ( Paragon Mall ) with a 14-storey tower and another three-storey tower sitting on top of the retail podium with a total of 223,000 sq ft of medical suite/office NLA ( Paragon Medical ). The development is strategically located in the heart of Orchard Road shopping and tourist precinct and is very well-known for its upscale mall housing many luxury brands; and
For the avoidance of doubt, the term primarily shall mean more than 50.0% of NLA or (in the case of a property where the concept of NLA is not applicable) GFA. The calculation of the NLA for the Properties is based on the Property Managers record of letters of offer/lease agreements. This takes into account the Income Support (as defined herein). Commencing on the Listing Date.
1 2 3 4
a 99-year leasehold interest 1 in The Clementi Mall ( Clementi Mall ), a mid-market suburban mall located in the centre of Clementi town, an established residential estate in the west of Singapore. The retail mall, which also houses a public library, is part of an integrated mixed-use development that includes Housing Development Board ( HDB ) residential blocks and a bus interchange. The property is connected to the Clementi mass rapid transit ( MRT ) station. Clementi Mall consists of a five-storey retail podium and one basement level with approximately 192,089 sq ft of retail NLA. Due to its location and strong transport connectivity, Clementi Mall enjoys high levels of visitation with over 27.1 million visitors in 2012,
(together, the Properties ). (See Business and Properties for further details.) Key Strategies The Manager plans to achieve its objective through the following key strategies: Proactive asset management and asset enhancement strategy The Manager will take an active role in managing and enhancing SPH REITs properties. The Managers strategy for organic growth will be to actively optimise the tenant mix of SPH REITs properties and to provide proactive property management services to tenants while also undertaking periodic refurbishment of SPH REITs properties, as appropriate. Through active asset management, the Manager seeks to ensure that the interests of all stakeholders, including tenants, shoppers and Unitholders, are protected while keeping SPH REITs properties at the forefront of evolving retail mall trends and relevant to the changing demands of consumers. Investments and acquisition growth strategy The Manager intends to assess acquisition opportunities in line with SPH REITs investment objective. SPH REIT will benefit from the pipeline of income-producing properties ( ROFR Properties and each a ROFR Property ) which could potentially be acquired from the Sponsor if the Sponsor chooses to divest them. The Sponsor has granted a right of first refusal ( ROFR ) over the ROFR Properties to the Trustee for as long as: the Manager or any of its related corporations (as defined in the Companies Act, Chapter 50 of Singapore (the Companies Act )) remains the manager of SPH REIT; the Sponsor and/or any of its related corporations, alone or in aggregate, remains as a controlling shareholder 2 of the manager of SPH REIT; and the Sponsor and/or any of its related corporations, alone or in aggregate, remains as a controlling unitholder 3 of SPH REIT.
1 2 3
Commencing on 31 August 2010. Controlling shareholder means (i) a person who holds directly or indirectly 15.0% or more of the nominal amount of all voting shares of the company or (ii) in fact exercises control over the company. Controlling unitholder in relation to a REIT means (i) a person who holds directly or indirectly 15.0% or more of the nominal amount of all voting units in the REIT or (ii) in fact exercises control over the REIT.
Currently, there is one applicable ROFR Property, The Seletar Mall 1, which may be suitable to be acquired by SPH REIT in the future 2. The Sponsor will consider and participate in retail development opportunities where appropriate, which may increase the number of ROFR Properties. (See Strategy Investments and Acquisition Growth Strategy Acquisition opportunities in respect of the ROFR Properties for further details.) Capital and risk management strategy The Manager will seek to manage and source capital so as to maximise overall returns for Unitholders. This may include accessing various capital markets to source appropriately priced and structured debt and equity, monitoring and implementing hedging arrangements as well as assessing alternative forms of capital and other capital management strategies where appropriate. The Manager may use fixed rate loans or financial instruments such as interest rate swaps to hedge certain financial risk exposures. With respect to debt financing, the Manager intends to diversify, stagger and extend debt maturities as the Manager deems appropriate, and mitigate interest rate volatility, so as to optimise risk-adjusted returns to Unitholders. KEY INVESTMENT HIGHLIGHTS The Manager believes that an investment in SPH REIT offers the following attractions to Unitholders: (1) Exposure to a high quality retail property portfolio anchored by Paragon, one of Singapores most iconic retail malls (A) (B) Exposure to Paragon Mall, a premier upscale retail mall in Orchard Road Exposure to Clementi Mall, a mid-market suburban mall integrated with a bustling transport hub
(C) Strong brand recognition from shoppers and retail tenants (2) Unique exposure to Singapores robust retail sector and strong healthcare services sector through Paragon Medical (A) (B) Solid retail sector fundamentals Positive retail rental and occupancy outlook
(C) Exposure to the strong healthcare services sector (3) Real estate exposure to Singapores premier shopping and tourist precinct, Orchard Road
The Seletar Mall is owned by The Seletar Mall Pte. Ltd., which is in turn owned by Moon Holdings Pte. Ltd. and United Engineers Developments Pte. Ltd. which respectively hold 70.0% and 30.0% of the total number of ordinary shares issued by The Seletar Mall Pte. Ltd. Moon Holdings Pte. Ltd. is a wholly-owned subsidiary of Times Properties Private Limited (Times Properties), which is in turn a wholly-owned subsidiary of the Sponsor. United Engineers Developments Pte. Ltd. is a wholly-owned subsidiary of United Engineers Limited. Pursuant to the terms of the ROFR granted by the Sponsor, the Sponsor shall procure that The Seletar Mall be offered to SPH REIT prior to any sale of The Seletar Mall to a third party. See Certain Agreements relating to SPH REIT and the Properties Right of First Refusal Agreement for further details.
(4)
Diverse and quality tenant base, providing stable and resilient portfolio performance (A) (B) Diverse and quality tenant base Stable and resilient portfolio performance
(5)
Attractive valuation metrics with an Initial Portfolio that delivers stable and consistent returns to investors Conservative capital structure Experienced management team and committed Sponsor with a proven track record (A) (B) Experienced and professional management Track record in commercial real estate development and management
(6) (7)
(C) Alignment of interest between the Sponsor and Unitholders Details of these key investment highlights are set out below. (1) Exposure to a high quality retail property portfolio anchored by Paragon, one of Singapores most iconic retail malls SPH REIT provides investors with an opportunity to invest in an Initial Portfolio comprising two high quality and strategically located properties with retail and medical suite/office components delivering attractive returns to investors. The table below sets out a summary of the Initial Portfolio as at 28 February 2013: Initial Portfolio summary as at 28 February 2013 Property Type Clementi Mall Retail Initial Portfolio Retail and medical suite/office 1,307,584 898,779 431 100.0 966 125 151.4 (5) 3,070.5 4.9 (5)
GFA (sq ft) NLA (sq ft) Number of tenants Committed Occupancy (%) (1) 2012 annual retail sales (S$m) (2) Sales per sq ft retail NLA per month (S$) Projection Year FY2014 Net Property Income (3) (S$m) Average independent valuation (S$m) Net Property Income yield (7) (%)
Notes: (1)
Paragon Retail and medical suite/office 1,017,707 706,690 285 100.0 738 130 120.4 2,500.0 4.8
289,877 192,089 146 100.0 228 114 31.0 (4) 570.5 (6) 5.4 (4)
Committed Occupancy means the occupancy rate based on all current leases in respect of the Properties including letters of offer accepted by tenants which are to be followed up with tenancy agreements to be signed by the parties and for which a deposit has been paid. Data as at 28 February 2013. All such letters of offer accepted by tenants are binding on the parties. The property management team does not use letters of intent (binding or non-binding). Based on annual retail sales of retail mall tenants only.
(2)
(3) (4) (5) (6) (7)
Net Property Income means Gross Revenue (as defined herein) less property expenses. Based on Guaranteed Income Amount (as defined herein). In the absence of Guaranteed Income Amount, Net Property Income yield is 4.6%. Based on Guaranteed Income Amount of S$31.0 million per year for Clementi Mall. In the absence of Guaranteed Income Amount, Net Property Income yield is 4.8%. The valuation takes into account the Income Support. Net Property Income yield is calculated by using FY2014 Net Property Income over the average independent valuation shown in the table above.
(A) Exposure to Paragon Mall, a premier upscale retail mall in Orchard Road Paragon is a premier upscale retail mall that is strategically located at the heart of Singapores premier shopping and tourist precinct, Orchard Road. Paragon has 483,690 sq ft of retail NLA and 285 tenants, and features an all-glass facade with 136 metres of prime Orchard Road frontage, showcasing duplex flagship stores of top international fashion brands such as Gucci, Miu Miu, Prada, Salvatore Ferragamo and Tods.
Paragon Mall A premier upscale retail mall
Anchor tenants Marks & Spencer Metro MUJI Paragon Market Place
Selected specialty stores Ermenegildo Zegna Gucci Miu Miu Prada Salvatore Ferragamo Tods
Source: Appendix F, Independent Retail Property Market Research Report.
Paragons strategic location, extensive retail offerings and reputation attract customers from all over Singapore and internationally. The catchment and trade area Trade area spanning the entire Singapore According to Urbis, Paragon has a trade area spanning the entire Singapore population of 5.4 million 1. Its primary trade area of the central region of Singapore has a population of 1.6 million 2 and enjoys higher levels of income and retail spend per capita compared to other regions in Singapore. In 2013, the retail spend per capita in the central region is estimated to be S$7,374. This is around 12.2% higher than the Singapore average in 2013 and is estimated to grow at a compounded annual growth rate ( CAGR ) of 2.9% to approximately S$8,522 per capita in 2018. Significant catchment of tourists Tourists form an important market segment for most of the retail malls in Orchard Road including Paragon. According to Urbis, in 2012, international visitor arrivals to Singapore totalled 14.4 million with an estimated tourist expenditure of S$7.8 billion. Tourists are estimated to contribute approximately 40.0% of Orchard Road retail sales. Orchard Road is also a popular hotel and serviced apartment location, with 33 hotels and serviced apartment units along Orchard Road with more than 10,600 rooms, providing a large catchment of tourists and business travellers. According to Singapore Tourism Boards ( STB ) Singapore Annual Report on Tourism Statistics 2010/2011, Orchard Road is the most visited tourist destination in Singapore3. Important medical hub Paragon benefits from regular visitation by local patients and medical tourists and their accompanying relatives by virtue of Paragons location immediately adjacent to Mount Elizabeth Hospital and Mount Elizabeth Medical Centre, a renowned private hospital and specialist medical centre, respectively. In addition, Paragon houses Paragon Medical, comprising a 14storey tower and another three-storey tower sitting on top of the retail podium, that hosts over 60 medical and dental specialist clinics and offices. The specialist clinics at Paragon Medical provide medical services ranging from cardiology, orthopaedics, urology, dermatology, obstetrics, gynaecology, oncology, pediatrics, dentistry and anti-ageing to traditional Chinese medicine. Paragon Medical caters uniquely to patients and their accompanying relatives by providing the amenity of a shopping precinct, cafe and dining venue before or after the patients medical treatments.
Source: Appendix F, Independent Retail Property Market Research Report, Section 2.5.2 (Resident Trade Area Definition). Relevant figures are estimated as of 2013. Per Paragons location in Orchard Road, its very extensive retail offer and Singapores excellent public transportation system which makes Orchard Road very accessible, Paragon is able to draw customers from all over Singapore. Source: Appendix F, Independent Retail Property Market Research Report. Relevant figures are estimated as of 2013. Source: STB, Annual Report on Tourism Statistics 2010/2011. STB has not provided its consent, for the purposes of Section 249 of the SFA (read with Section 302(1) of the SFA), to the inclusion of the information extracted from the relevant report published by it and therefore is not liable for such information under Sections 253 and 254 of the SFA (both read with Section 302(1) of the SFA). While the Manager has taken reasonable actions to ensure that the information from the report published by STB is reproduced in its proper form and context, and that the information is extracted accurately and fairly from such report, none of the Manager, the Joint Bookrunners or any other party has conducted an independent review of the information contained in such report or verified the accuracy of the contents of the relevant information.
2 3
Immediate catchment of workers in Orchard Road Paragon benefits from a meaningful catchment of workers in the Orchard Road vicinity. For 2013, Urbis estimates that there are currently around 62,200 workers in Orchard Road generating an annual retail spend of S$255 million which is expected to rise to S$296 million by 2018.
(B) Exposure to Clementi Mall, a mid-market suburban mall integrated with a bustling transport hub Clementi Mall opened officially in May 2011 with 100.0% Committed Occupancy. It is strategically located in the centre of Clementi town in the west of Singapore. The retail mall, which also houses a public library, is part of an integrated mixed-use development that includes HDB residential blocks and a bus interchange. The property enjoys high footfall as it is connected to the Clementi MRT station and is also easily accessible by car from the expressways located directly next to Clementi Mall.
Clementi Mall A mid-market suburban mall integrated with a transportation hub Anchor tenants
BHG Department Store Clementi Public Library Foodfare FairPrice Finest
Selected specialty stores

Charles & Keith Cotton On G2000 The Body Shop Breadtalk Ootoya Japanese Restaurant
Clementi Malls strategic location in an established residential area and integration with a transportation hub allows it to attract a high number of visitors The catchment and trade area Catchment area that covers the surrounding established residential estates Clementi Mall is strategically located in the heart of Clementi Town Centre with excellent transport connectivity due to its co-location with a bus interchange and connection to the Clementi MRT station. Urbis estimates that Clementi Mall serves over 180,000 residents from its primary and secondary trade areas including the surrounding Clementi town, West Coast, Holland Village and Bukit Timah residential estates. According to Urbis, there are more than 63,000 students from tertiary institutions in the area. Captive customer base with limited competition in the primary trade area Clementi Mall is located in the west of Singapore, which has very low shopping centre floor space at 1.7 sq ft per capita that is significantly below the Singapore average of 4.3 sq ft per capita. Within its primary trade area, the main competitor is West Coast Plaza, which does not have a bus interchange or MRT station nearby. Clementi Mall attracted over 27.1 million visitors in 2012. Accordingly, Clementi Mall benefits from strong demand from shoppers in its primary trade area. High trade area retail spending According to Urbis, Clementi Malls primary and secondary trade area has a retail spend that is above Singapores average. In 2013, retail spend per capita in the west region was estimated to be S$7,257, 10.5% higher than the Singapore average, and is estimated to grow at a CAGR of 2.9% to approximately S$8,374 per capita in 2018.
(C) Strong brand recognition from shoppers and retail tenants Paragon Mall is one of the most established and well-known retail malls located in Orchard Road. Paragon was first acquired by the Sponsor in 1997 1. Since then, the Sponsor has extensively and continually upgraded the mall and optimised its tenant mix in order to keep the property up-to-date with market preferences and expectations and to meet the needs of retailers. The mall has since gained a positive reputation amongst affluent shoppers for its extensive range of top international fashion brands, high street and diffusion brands, wide food and beverage ( F&B ) offerings and gourmet supermarket. After its facade enhancement in 2009, Paragon now features an all-glass facade with 136 metres of prime Orchard Road frontage, showcasing duplex flagship stores of top international fashion brands like Gucci, Miu Miu, Prada, Salvatore Ferragamo and Tods. Paragon Mall is positioned as an upscale mall targeting: (i) affluent and upmarket shoppers with international fashion retailers such as Gucci, Miu Miu, Prada, Salvatore Ferragamo, Tods, Burberry, Dunhill, Ermenegildo Zegna, Etro, Jimmy Choo, Marni and Moschino; (ii) young upwardly mobile shoppers, with high street and diffusion brands, like Adolfo Domnguez, Agnes B, AX Armani Exchange, Banana Republic, Blackbarrett, CK Calvin Klein, DKNY, Evisu, Furla, G-Star, Karen Millen, Longchamp, Miss Sixty and
Times Properties acquisition of interests in the property owning companies that owned Paragon by Sogo and Promenade. The remaining shares in the property owning companies which Times Properties did not own were acquired in 2001.
Raoul; and (iii) families, with quality childrens fashion and toy stores, like Armani Kids, Club 21 Kids, Guess Kids, Petit Bateau, Toys R Us and Early Learning Centre. The mall is underpinned by anchor tenants that are established favourites among locals, and appeal to a wide range of shoppers, such as Metro (its only outlet on Orchard Road and its largest in Singapore), Marks & Spencer, MUJI and Paragon Market Place. Paragon Mall also distinguishes itself as a dining destination with a wide variety of casual and fine dining options, comprising several cafes and Asian and western cuisine restaurants. Two of Singapores well known fine dining Chinese restaurants, Crystal Jade Golden Palace and Imperial Treasure Super Peking Duck Restaurant, have been operating successfully in Paragon Mall for several years. Since commencement of operations in 2011, Clementi Mall has quickly established itself as a popular destination for residents within its catchment area due to its excellent location, scale and transport connectivity. Clementi Mall is positioned as a contemporary and mid-market mall catering to families, executives and students living in its trade area and is anchored by familiar brands such as BHG Department Store and FairPrice Finest and is well complemented by a variety of established F&B, fashion and childrens wear stores. (2) Unique exposure to Singapores robust retail sector and strong healthcare services sector through Paragon Medical Upon listing, SPH REIT will be one of the largest REITs listed on the SGX-ST focused on Singapore retail property. The Manager believes that investing in SPH REIT provides Unitholders with a unique combination of Orchard Road and suburban property exposure with both retail and healthcare services ( HCS ) components. In addition, SPH REIT provides the purest exposure to retail property in the Orchard Road precinct of any REIT listed on the SGX-ST as a percentage of total asset value. SPH REIT offers investors exposure to the attractive retail sector, with retail contributing 75.2% of NLA of the Initial Portfolio, and the strong HCS sector, with medical suite/office contributing 24.8% of NLA of the Initial Portfolio as at 28 February 2013. (A) Solid retail sector fundamentals The Singapore retail sector is expected to continue to benefit from the following trends: (i) an expanding population; (ii) growing international visitor arrivals; (iii) growing retail sales; and (iv) modest supply of retail space. (i) An expanding population In 2013, Singapores population is forecasted to be approximately 5.4 million. Moreover, Singapores population is projected to continue its current trend of growth, with the countrys population expected to reach 5.9 million in 2018, representing a CAGR of 1.5% from 2013.
The following chart shows the historical and forecast population of Singapore for the period from 2005 to 2018:
Historical and forecast population of Singapore for the period 2005 to 2018
(in millions, calendar year)
Forecast
4.22
4.40
4.59
4.84
4.99
5.08
5.18
5.31
5.43
5.52
5.62
5.70
5.78
5.85
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
(ii)
Growing international visitor arrivals Tourism has grown strongly in Singapore with an average annual growth rate of 16.6% over the period from 2009 to 2011. According to STB, the Singapore government continues to actively enhance the business and tourism landscape of Singapore to meet STBs target of 17 million tourist arrivals and S$30 billion in tourism revenue by 2015 1. Urbis estimates that international visitor arrivals will grow at an average annual rate of 5.0% from 15.4 million in 2013 to 19.3 million in 2018. The following chart shows the historical and forecast international visitor arrivals in Singapore from 2001 to 2018:
Historical and forecast international visitor arrivals in Singapore for the period 2001 to 2018
(in millions, calendar year)
Forecast
7.5
7.6
6.1
8.3
8.9
9.8
10.3
10.1
9.7
11.6
13.2
14.4
15.4
16.3
17.1
17.8
18.5
19.3
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: STB Tourism Performance Report Quarter Four and Full Year 2011. STB has not provided its consent, for the purposes of Section 249 of the SFA (read with Section 302(1) of the SFA), to the inclusion of the information extracted from the relevant report published by it and therefore is not liable for such information under Sections 253 and 254 of the SFA (both read with Section 302(1) of the SFA). While the Manager has taken reasonable actions to ensure that the information from the report published by STB is reproduced in its proper form and context, and that the information is extracted accurately and fairly from such report, none of the Manager, the Joint Bookrunners or any other party has conducted an independent review of the information contained in such report or verified the accuracy of the contents of the relevant information.
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(iii) Growing retail sales Retail sales growth in Singapore has historically been fairly strong with downturns caused by external shocks including the terrorist attacks of September 11, 2001 ( 9/11 ), the Severe Acute Respiratory Syndrome ( SARS ) epidemic in 2003 and the global financial crisis in 2008 and 2009 (the GFC ). According to Urbis, retail sales growth is expected to remain strong, growing at an average of 5.0% per annum from 2013 to 2018, driven by expanding private consumption expenditure and growth in the tourism retail spending market. Tourism retail spending growth is expected to outpace local retail spending. The following chart shows the historical and forecast retail sales growth in Singapore for the period 2001 to 2018:
Historical and forecast retail sales growth in Singapore for the period 2001 to 2018 10.0% 8.0% 6.0% 4.0% 2.0% (2.0%) (4.0%) (6.0%)
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
9/11
SARS
GFC
Forecast
Real Retail Sales Growth
Nominal Retail Sales Growth
(iv) Modest supply of retail space By international standards, Singapore is under-supplied in terms of retail floor space per capita, particularly for a country with a high standard of living. Urbis estimates that Singapore had 10.9 sq ft of total retail floor space per capita in 2012 which is lower than other developed Asian economies. The following chart shows the estimated total retail floor space per capita for selected developed countries and projected total retail floor space per capita of Singapore in 2018:
Estimated total retail floor space (sq ft) per capita for selected developed countries
Singapore (2018) Singapore (2012) Hong Kong (2012) China (2012) South Korea (2010) Japan (2009) Australia (2012) USA (2010) 10.9 10.9 11.3 12.9 14.4 16.6 23.7 50.5
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(B) Positive retail rental and occupancy outlook Orchard Road retail precinct In 2012, the Orchard Road retail precinct emerged from a declining trend in rents caused by the combined impact of the GFC and the significant increase in retail supply in 2009 and 2010. From 2013 to 2018, Urbis projects that retail sales growth in the Orchard Road retail precinct and limited new retail supply will lead to average rental growth of around 3.0% per annum with occupancy rates rising from 91.8% in 2012 to 95.0% in 2018. The following chart shows the historical and forecast Orchard Road retail precinct rental growth and occupancy for the period from 2010 to 2018:
Historical and forecast Orchard Road retail precinct rental growth and occupancy for the period 2010 to 2018
Orchard Road retail rental growth Orchard Road retail occupancy Forecast 4.1% Forecast: 3% average annual growth 0.7% 94.1% 94.0% 94.5% 95.0% 95.0% 95.0% 95.0%
(1.1%)
91.8% 91.1%
2010 2011 2012 2013 2014 2015 2016 2017 2018
2010 2011 2012 2013 2014 2015 2016 2017 2018
Suburban retail Rental growth in the suburban market is expected to average around 3.0% per annum from 2013 to 2018 as scheduled new supply is balanced by strong demand and take-up from retailers for retail space in upcoming suburban malls. Occupancy rates are expected to maintain at current level of approximately 95.5% through to 2018. The following chart shows the historical and forecast suburban retail rental growth and occupancy for the period from 2010 to 2018:
Historical and forecast suburban retail rental growth and occupancy for the period 2010 to 2018
Suburban retail rental growth 5.6% 1.1% 1.9% Forecast: 3% average annual growth Suburban retail occupancy Forecast 95.5% 95.5% 95.5% 95.5% 95.5% 95.5% 95.5%
93.3% 92.5%
2010 2011 2012 2013 2014 2015 2016 2017 2018
2010 2011 2012 2013 2014 2015 2016 2017 2018
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(C) Exposure to the strong healthcare services sector Singapore has developed into a medical hub with a reputation for high quality hospitals, medical and dental specialists and HCS at competitive costs. Singapore is a favoured HCS destination amongst medical tourists from Indonesia (54.0% by medical services expenditure), Malaysia (7.0%), other Southeast Asian countries (12.0%) and others (27.0%). The healthcare sector benefits from strong government support. For example, SingaporeMedicine is a Government initiative to work with the industry to strengthen the countrys position as a leading medical hub. SPH REIT offers investors exposure to the strong HCS sector, with the medical suite/office sector contributing 24.8% of NLA as at 28 February 2013. The drivers for continued growth of Singapores HCS market include: population growth; rising household incomes; strong government support; expanding medical services offerings; rising affluence of the growing middle class in Asia; overall aging population in Asia; and a lack of quality HCS regionally.
Urbis estimates Singapores medical tourism spending to grow from S$980.0 million in 2011 to S$1.7 billion in 2018, representing a CAGR of 8.3%. The following chart shows the historical and forecast annual medical tourist spending in Singapore for the period from 2007 to 2018:
Historical and forecast annual medical tourist spending for the period 2007 to 2018
(S$ million, calendar year)
Forecast 1,391 1,490 1,597 1,710
1,283
1,165 777 856
980
1,069
1,178
1,287
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Source: STB1: Appendix F, Independent Retail Property Market Research Report. 1 STB has not provided its consent, for the purposes of Section 249 of the SFA (read with Section 302(1) of the SFA), to the inclusion of the information extracted from the relevant report published by it and therefore is not liable for such information under Sections 253 and 254 of the SFA (both read with Section 302(1) of the SFA). While the Manager has taken reasonable actions to ensure that the information from the report published by STB is reproduced in its proper form and context, and that the information is extracted accurately and fairly from such report, none of the Manager, the Joint Bookrunners or any other party has conducted an independent review of the information contained in such report or verified the accuracy of the contents of the relevant information.
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The following chart shows the breakdown of medical tourist spending in Singapore in 2011:
Breakdown of medical tourist spending (2011)
Other 19% North Asia 1% South Asia 7% Other South East Asia 12% Indonesia 54% Malaysia 7%
Source: STB1: Appendix F, Independent Retail Property Market Research Report.
(3)
Real estate exposure to Singapores premier shopping and tourist precinct, Orchard Road Orchard Road, Singapores premier shopping and tourist precinct, is a 2.2-kilometre ( km ) one-way boulevard located in the central region of Singapore flanked by 43 retail centres with approximately 7.3 million sq ft of NLA and over 10,600 guest rooms and serviced apartment units in the vicinity. The precinct is well connected by underground pedestrian walkways and linkages between malls. Orchard Road is an epicentre for shopping, leisure activities, entertainment, events and festive celebrations that is regularly visited by the local population and tourists. Events are organised by the Orchard Road Business Association such as: Fashion Steps Out @ Orchard , a six-week fashion event in March to April that showcases the latest season collections from around the globe; Rev-up @ Orchard , celebratory events in September during the Grand Prix Season Singapore; and Christmas Light-up @ Orchard , a six week-long Christmas lighting display and other events in November to December.
The STB and Singapore Retailers Association ( SRA ) organise the annual Great Singapore Sale in May to July. Many of the promotions are centered around promoting retail across the island through retail discounts, tourist privileges, late night shopping and other events. According to Urbis, Orchard Road has consistently been ranked as the most visited free-access attraction in Singapore and was recently ranked number one in The Most Beautiful Avenues of the World in International Survey 2011/2012 report conducted by French survey company Presence.
STB has not provided its consent, for the purposes of Section 249 of the SFA (read with Section 302(1) of the SFA), to the inclusion of the information extracted from the relevant report published by it and therefore is not liable for such information under Sections 253 and 254 of the SFA (both read with Section 302(1) of the SFA). While the Manager has taken reasonable actions to ensure that the information from the report published by STB is reproduced in its proper form and context, and that the information is extracted accurately and fairly from such report, none of the Manager, the Joint Bookrunners or any other party has conducted an independent review of the information contained in such report or verified the accuracy of the contents of the relevant information.
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The following chart reflects data showing that Orchard Road was the most visited attraction in Singapore in 2011:
Most visited attractions in Singapore (2011)
(in millions of visitors) 45 31 30 24 23
19
18 10 8 Night Safari 6 Singapore Zoological Gardens
Singapore River
Free-access
Paid-access
According to Urbis, by international standards, prime rentals in Orchard Road are moderately priced compared to the worlds top retail boulevards and streets. Orchard Road was ranked 16th in terms of the average prime rent for the worlds top retail boulevards and streets in 2012. The chart below illustrates the average prime rent for Singapore compared with the other top retail boulevards and streets:
Most expensive retail strips worldwide (2012)
(rents, in USD per sq.ft per annum)
2,630 2,500
1,129 1,057 952
936
854
825
686
495
481
425
418
403
375
Portal de l'Angel (Bar)
Singapore Flyer
Integrated Resorts
Orchard Road
Chinatown
Little India
Sentosa
Merlion Park
360
Orchard Road (Sg)
331
Grafton Street (Dub)
330
Kalverstraat (Ams)
321
Pavilion KL (KL)
314
Bloor Street (Tor)
Causeway Bay (HK)
Myeongdong (Seo)
Pitt Street Mall (Syd)
Bahnhofstrasse (Zur)
5th Avenue (NYC)
New Bond Street (Lon)
Kaufingerstrae (Mun)
Champslyses (Par)
Via Montenapoleone (Mil)
Ginza (Tok)
Tverskaya (Msw)
Kohlmarkt (Vienna)
A key strength of Orchard Road lies in the focus of its stakeholders and the Singapore Government to maintain the appeal of the retail and tourist precinct. In 2005, the Urban Redevelopment Authority, Singapores national land use planning and conservation authority, promoted the development of more interesting and varied building facades through incentives such as relaxation of building setbacks and additional GFA. In 2009, Orchard Road underwent a S$40.0 million rejuvenation to enhance its position as a world-class shopping street. The rejuvenation of Orchard Road has been spearheaded by an interagency taskforce led by the STB, and comprises agencies such as the Urban Redevelopment Authority, Land Transport Authority ( LTA ) and the National Parks Board. Key features of the rejuvenation include: widening of the pedestrian walkway to cater to increased shopper traffic;
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Iguatemi Shopping (Sao P.)
Wangfujing (Bei)
introduction of thematic zones of flowers, forests and fruits along the 2.2-km shopping stretch and installation of coordinated street furniture, re-pavement of walkways and creation of urban green rooms; and installation of state-of-the-art lighting systems.
The revamp of Orchard Road has resulted in the upgrading of the area and has further solidified its position as a world-leading shopping and tourist precinct. (4) Diverse and quality tenant base, providing stable and resilient portfolio performance (A) Diverse and quality tenant base The Initial Portfolio has a large tenant base of 431 tenants as at 28 February 2013 covering a wide variety of trade sectors, providing SPH REIT with trade diversification. SPH REITs top 10 tenants 1 in terms of Gross Rental Income contributed 23.7% of Gross Rental Income for the month of February 2013. No single trade sector accounted for more than 25.8% of Gross Rental Income in the same period. The Properties retail tenants include quality anchor tenants such as Marks & Spencer, Metro, MUJI, Paragon Market Place, BHG Department Store, FairPrice Finest and FoodFare. In addition, the Properties have a loyal tenant base with some of the major tenants, such as Cortina Watch, Dunhill, Ermenegildo Zegna, Guardian, Gucci, Marks & Spencer, Metro, Paragon Market Place and Salvatore Ferragamo, having been with Paragon for over 10 years. 52.0% of Paragons tenants, representing 63.0% of NLA at 28 February 2013, have been tenants of Paragon for over seven years and are in their third or later lease term. These longstanding quality tenants cater to certain repeat customers with strong brand loyalty and the longevity of those tenants in Paragon Mall highlights the appeal and success of the mall. (B) Stable and resilient portfolio performance Over the last ten years, Paragon Mall has achieved 100.0% Committed Occupancy and has delivered positive annual rental rate growth. The average gross rental rate per sq ft per month was S$20.5 in the financial year ended 31 August 2012, representing a CAGR of 7.0% from FY2003 to FY2012. This resilient performance was delivered in spite of economic shocks including the SARS epidemic in 2003 and the GFC as well as entry of new retail competition into the market including ION Orchard (2009), Orchard Central (2010) and 313@Somerset (2010).
In this context, SPH REITs top 10 tenants does not take into account one of the tenants which has not consented to the disclosure of its tenancy arrangements in this Prospectus. (See Business and Properties Certain Information on the Properties Profile of Top 10 Tenants for further details.)
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The following chart reflects data showing the stable and resilient performance of Paragon Mall for the period from FY2003 to FY2012:
Paragon Mall rent index and Committed Occupancy for the period from FY2003 to FY2012
Paragon Mall Committed Occupancy (100%) SARS
200
Paragon Mall rent index Global financial crisis
Orchard Road rent index
(2)
184
120.0%
100.0%
80.0%
100
100
100
(1)
60.0%
40.0%
20.0%
0.0%
FY2003
FY2004
FY2005
FY2006
FY2007
FY2008
FY2009
FY2010
FY2011
FY2012
Key asset enhancement initiatives to remain market relevant...

2002 to 2003: Amalgamation of Paragon with The Promenade 2006 to 2007: Addition of 1 floor of medical suite/office
Completion of ION Orchard (2009), Orchard Central (2010) and 313@Somerset (2010) (1,179,600 sq ft in total) 2012: External upgrading works, extension of plaza and addition of new taxi/coach bay and driveway
2008 to 2009: S$82m asset enhancement (i) Facade upgrading (ii) Expansion of prime retail space (11,000 sq ft in total) (iii) Addition of 2 floors of medical suite/office (29,000 sq ft in total)
Source: Appendix F, Independent Retail Property Market Research Report (1) (2) Orchard Road rent index reflects ground floor tenants only on a quarterly basis. Paragon Mall rent index reflects retail tenants on a monthly average basis.
Clementi Mall has enjoyed 100.0% Committed Occupancy, since its official opening in May 2011 and achieved an average gross rental rate of S$15.5 per sq ft per month in FY2012. The Manager believes that Paragon and Clementi Mall will continue to achieve positive rental reversions for new leases and from renewals of existing leases during the Forecast Period 2H FY2013 1 and Projection Year FY2014 2. For FY2012, less than 3.0% of the Initial Portfolios income was directly tied to tenants retail sales, with over 97.0% of total gross retail rent being derived from contracted base rent. The Initial Portfolio provides income stability with tenancy agreements generally fixed for a term of three years and lease expiries staggered across its expiry profile.
1 2
Forecast Period 2H FY2013 means 1 March 2013 to 31 August 2013. Projection Year FY2014 means 1 September 2013 to 31 August 2014.
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The following chart shows the lease expiry schedule of the Initial Portfolio by Gross Rental Income and NLA:
Lease Expiry Schedule of Initial Portfolio by Gross Rental Income
40.3% 32.1% 25.3%
Lease Expiry Schedule of Initial Portfolio by NLA

43.3%
25.9%
24.5%
4.7% 0.9%
FY2013 FY2014 FY2015 FY2016
1.4%
FY2017 and beyond FY2013 FY2014 FY2015
1.6%
FY2016 FY2017 and beyond
Of the leases expiring in FY2013 and FY2014, 100.0% and 48.1%, respectively by NLA, have pre-committed leases in place for the next lease term 1. (5) Attractive valuation metrics with an Initial Portfolio that delivers stable and consistent returns to investors The Offering Price Range of S$0.85 to S$0.90 per Unit represents a 0.9% premium to NAV per Unit. Based on the Offering Price Range, the distribution yield of SPH REIT is shown in the following table: Forecast Period 2H FY2013 2 Maximum Offering Price of S$0.90 Distribution yield Distribution yield (without income support) (6) 5.58% Minimum Offering Price of S$0.85 5.79% Projection Year FY2014 Maximum Offering Price of S$0.90 5.79% Minimum Offering Price of S$0.85 6.00%
5.35%
5.54%
5.58%
5.78%
Conservative capital structure SPH REIT has put in place a secured term loan facility of S$975.0 million with staggered loan maturities of three, five and seven year terms (the Facility ). The amount drawn upon the Listing Date will be between S$850 million (based on the Maximum Offering Price of S$0.90) and S$975 million (based on the Minimum Offering Price of S$0.85). The percentage of total borrowings and deferred payments (if any) to the value of the Deposited Property (as defined herein) ( Aggregate Leverage ) is 27.3% based on the Maximum Offering Price and 31.3% based on the Minimum Offering Price. Upon listing, the Manager intends to use fixed rate loans and/or interest rate swaps to effectively fix the interest rates for 50% of the Facility. For the purposes of the Forecast Period 2H FY2013 and Projection Year 2014, the Manager has
1 2
As at 31 May 2013. Distribution yield for the Forecast Period 2H FY2013 has been annualised.
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assumed that the effective interest rate will remain constant at 2.35% per annum, including the amortisation of upfront debt issuance costs. (See Profit Forecast and Profit Projection Assumptions for further details.) Appendix 6 of the Code on Collective Investment Schemes issued by the MAS ( CIS Code ) in relation to REITs (the Property Funds Appendix ) allows SPH REIT to borrow up to 35.0% of the value of the Deposited Property 1 without a credit rating and up to a maximum of 60.0% of the value of the Deposited Property if a credit rating from Fitch Inc., Moodys or Standard & Poors is obtained and disclosed to the public. (7) Experienced management team and committed Sponsor with a proven track record (A) Experienced and professional management team The Manager believes that Unitholders will benefit from the experience of key staff members of the Manager in the Singapore retail and office property market as well as the strengths and experience of the Property Manager in retail and mixed-use property management. The Manager employs experienced professionals who have prior experience in shopping centre management, property development and investment, project and property management, marketing, leasing and finance. The Property Manager comprises experienced professionals who have extensive track records in the management of retail and office space in Singapore. In addition, the Property Manager has been managing the Properties since they were acquired and/or completed and is extremely familiar with the property management, lease management and marketing aspects of managing the Properties. The Manager believes that the existing tenants of the Properties will continue to benefit from the level of service by the retention of the Property Manager. (B) Track record in commercial real estate development and management The Sponsor is Southeast Asias leading media organisation, with publications across multiple languages and platforms with its main businesses in newspapers, magazines and book publishing, internet and mobile, broadcasting, events and outdoor advertising and properties. Listed on the SGX-ST since 1984, the Sponsor has a market capitalisation of approximately S$6.7 billion as at 1 July 2013, being the latest practicable date prior to the lodgement of this prospectus with the MAS (the Latest Practicable Date ). For FY2012, the Sponsor had total assets of S$4.1 billion and generated operating revenue of S$1.3 billion. Sponsors asset enhancement track record The Sponsors track record as a retail mall developer and asset manager is exemplified by its track record with Paragon. Paragon is an integration of the buildings then known as Paragon by Sogo 2 and the Promenade 3 which were adjacent to each other 4.
Deposited Property means all the assets of SPH REIT, including the Properties and all the Authorised Investments (as defined in the Trust Deed) of SPH REIT for the time being held or deemed to be held in accordance with the Trust Deed. Located at former Lot 906X of Town Subdivision 27. Located at former Lot 982A of Town Subdivision 27. The said Lots 906X and 982A both of Town Subdivision 27 were subsequently amalgamated to form the current Lot 1139C of Town Subdivision 27 (being one of the land lots on which the present-day Paragon is located).
2 3 4
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Following the acquisition of Paragon by Sogo and Promenade in 1997 1, the Sponsor has extensively and continually upgraded the said two buildings which make up Paragon and optimised its tenancy mix. The Sponsor has implemented various key asset enhancement initiatives: (a) From 1998 to 1999, Paragon was extensively renovated, to create a more modern outward-looking mall, with a central atrium rising from level one to level six to introduce natural skylight into the mall. The mall layout was simplified to make it easy for shoppers to navigate around the seven retail floors ensuring line-of-sight for the retail units. A 14-storey medical tower was built on top of the retail podium, to offer elective HCS to the malls target customers. (b) From 2002 to 2003, the Sponsor carried out additional asset enhancement works which involved the tearing down of the former Promenade building to facilitate the construction of the present-day integrated building and the forming of a contiguous 136-metre frontage along Orchard Road. From 2008 to 2009, in keeping with evolving market demands, Paragon underwent an extensive asset enhancement program costing S$82 million which involved (i) the expansion of prime retail space of 11,000 sq ft fronting Orchard Road, (ii) the addition of two storeys of medical suite/office space totaling 29,000 sq ft on top of the Paragon retail podium and (iii) upgrading works which created a transparent facade and allowed several top international fashion brands to create five prominent duplex flagship stores fronting Orchard Road. Other smaller scale but more regular asset enhancements include the upgrading of internal spaces and toilets. More recently, external upgrading works undertaken include the development of a wider plaza on the Orchard Road frontage and the addition of a new taxi stand.
Proven track record in value creation
1 2
(c)
(d)
1
2 3 4
Pre-acquisition by Sponsor (pre 1997) Post-acquisition by Sponsor with new central atrium (1998) Amalgamation of Paragon and adjacent former Promenade building (2003) 11,000 sq ft expansion and introduction of duplex flagship stores (2009)
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O290, an indirect wholly-owned subsidiary of the Sponsor 1, has received several awards and commendations in connection with Paragon, including: (a) In 2007, Paragon won SRA awards for Shopping Centre Scorecard 2007 in two categories Best Efforts in Advertising & Promotions and Best Efforts in Tenant Relationships; In 2008, Paragon won SRA awards for Shopping Centre Scorecard 2008 in two categories Best Efforts in Advertising & Promotions and Mall Maintenance; In 2009, Paragon won SRA awards for Shopping Centre Scorecard 2009 in the category Best Efforts in Advertising & Promotions; In 2011, Paragon won SRA awards for Shopping Centre Scorecard 2011 in the category Best Efforts in Advertising & Promotions; and More recently in 2012, Paragon received the Singapore Service Class Certification from Spring Singapore.
(b)
(c)
(d)
(e)
(C) Alignment of interest between the Sponsor and Unitholders The Sponsor is committed to support and grow SPH REIT over the long-term. The Sponsor will, immediately following the completion of the Offering, be the largest Unitholder, directly or indirectly holding an aggregate of 72.2% of the total number of Units expected to be in issue (assuming the Over-Allotment Option is not exercised) or 70.0% of the total number of Units expected to be in issue (assuming the OverAllotment Option is exercised in full), demonstrating its alignment of interest with the Unitholders. The Sponsor and its subsidiaries, Times Properties and TPR Holdings Pte. Ltd. 2 ( TPR ), have each agreed to a lock-up arrangement during the period commencing from the Listing Date until the date falling six months after the Listing Date (both dates inclusive) (the Lock-up Period ) in respect of all of the Units which will be held by the Sponsor and any other entity which is wholly-owned by the Sponsor from the date on which such entity legally or beneficially owns the Units (including any Units returned to the Unit Lender pursuant to the Unit Lending Agreement (as defined herein)), (collectively, the Lock-up Units ). (See Plan of Distribution Lock-up Arrangements for further details.) To demonstrate its support towards the growth of SPH REIT, the Sponsor has granted the ROFR to SPH REIT, subject to certain conditions, which provides SPH REIT access to future acquisition opportunities of completed income-producing real estate which is used primarily for retail purposes in Asia Pacific. (See Certain Agreements Relating to SPH REIT and the Properties Right of First Refusal Agreement for further details.) The management fees are structured to align the interest of the Manager with that of the Unitholders. The management fees payable to the Manager have a performance-based element which is designed to align the interest of the Manager with those of the Unitholders, through incentivising the Manager to grow revenues and minimising operating costs. Under the Trust Deed, the Manager is entitled to receive a base fee of 0.25% per annum of the value of SPH REITs Deposited Property (the Base Fee ), as
1 2 O290 is a wholly-owned subsidiary of Times Properties, which is in turn a wholly-owned subsidiary of the Sponsor. TPR is a wholly-owned subsidiary of Times Properties, which is in turn a wholly owned subsidiary of the Sponsor.
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well as a performance fee of 5.0% per annum of Net Property Income of SPH REIT in the relevant financial year (the Performance Fee ). (See The Manager and Corporate Governance The Manager of SPH REIT Managers Fees for further details.) The Manager may elect to receive the Base Fee and Performance Fee in cash or Units or a combination of cash and Units (as it may in its sole discretion determine). For the Forecast Period 2H FY2013 and the Projection Year FY2014, the Manager has elected to receive 100.0% of the Base Fee and Performance Fee in the form of Units. By taking these actions, the interests of the Sponsor and the Manager are more closely aligned with those of other Unitholders. The property management fee payable to the Property Manager, an indirect, whollyowned subsidiary of the Sponsor, is also structured to align the interest of the Property Manager with those of the Unitholders. Such property management fee, which is pegged against Gross Revenue and Net Property Income in respect of each property of SPH REIT located in Singapore under its management, comprises the following: 2.0% per annum of Gross Revenue for the relevant property; 2.0% per annum of the Net Property Income for the relevant property (calculated before accounting for the property management fee in that financial period for the relevant property); and 0.5% per annum of the Net Property Income for the relevant property (calculated before accounting for the property management fee in that financial period for the relevant property) in lieu of leasing commissions otherwise payable to the Property Manager and/or third party agents.
The Manager may elect to pay the property management fee in cash or Units or a combination of cash and Units (as the Manager may in its sole discretion determine). By taking these actions, the interests of the Sponsor and the Property Manager are more closely aligned with those of other Unitholders.
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CERTAIN INFORMATION ON THE PROPERTIES The table below sets out certain information on the Properties as at 28 February 2013 (unless otherwise indicated), with independent valuations by the Independent Valuers, CBRE Pte. Ltd. ( CBRE ) and DTZ Debenham Tie Leung (SEA) Pte Ltd ( DTZ , and collectively with CBRE, the Independent Valuers ). Paragon Property type Retail and medical suite/office Overall Retail Medical suite/office NLA (sq ft) Overall Retail Medical suite/office Number of floors Year of completion Committed Occupancy (%) Car park lots Gross Revenue: Forecast Period 2H FY2013 (S$m) Gross Revenue: Projection Year FY2014 (S$m) Net Property Income: Forecast Period 2H FY2013 (S$m) Net Property Income: Projection Year FY2014 (S$m) CBRE independent valuation (S$m) (as at 28 February 2013) CBRE independent valuation without Income Support (S$m) (as at 28 February 2013) DTZ independent valuation (S$m) (as at 28 February 2013) DTZ independent valuation (S$m) without Income Support (as at 28 February 2013) Purchase consideration (S$m) Weighted average lease expiry by NLA (years) Weighted average lease expiry by Gross Rental Income (years) (4) Current Passing Rent (S$/sq ft/month) (4)(5) Number of tenants 1,017,707 737,142 280,565 706,690 483,690 223,000 22 2003
(1)
Clementi Mall Retail
Total/Average Retail and medical suite/office 1,307,584 1,027,019 280,565 898,779 675,779 223,000 100.0 585 96.9 201.4 70.4 146.7 3,070.0 3,050.0
GFA (sq ft)
289,877 289,877 192,089 192,089 7 2011 100.0 169 18.6 38.0 12.8 26.3 570.0 (3) 550.0
100.0 416 78.3 163.4 57.6 120.4 2,500.0 (2) 2,500.0 (2)
2,500.0 (2) 2,500.0 (2)
571.0 (3) 556.0
3,071.0 3,056.0
2,500.0 1.6 1.6 17.9 285
570.5 1.9 1.4 15.8 146
3,070.5 1.7 1.6 17.5 431
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Notes: (1) (2) (3) (4) (5) The completion of the enhancement works which involved the tearing down of the Promenade building to facilitate the construction of the present-day integrated building. Based on 99-year leasehold interest. The valuation takes into account the Income Support. For the one-month period ended 28 February 2013. Current Passing Rent means rental income generated from current tenancy agreements.
Income Support Arrangement Clementi Mall is a recently completed retail mall that received its second Temporary Occupation Permit ( TOP ) on 14 March 2011 with a significant proportion of its leases still in the first lease term. As the mall is still maturing in terms of shopper recognition, tenant performance and passing rents, the Vendor, CM Domain 1, will provide income support (the Income Support ) to SPH REIT for a period from the Listing Date to the day immediately preceding the fifth anniversary date of the Listing Date or the date when the aggregate amount paid out by CM Domain under the deed of income support reaches S$20 million 2 (the Deed of Income Support ). The provision of Income Support is to reflect a more stabilised level of income for the retail mall. Pursuant to the terms of the Deed of Income Support, in the event that Clementi Malls Net Property Income falls below the guaranteed Net Property Income of S$31 million per annum ( Guaranteed Income Amount ), the Vendor will pay to the Trustee an amount equivalent to the difference between the Guaranteed Income Amount and actual Net Property Income for each financial quarter/period together with any applicable taxes payable ( top-up payment ), provided that the aggregate top-up payments shall not in any event exceed S$20 million. The projected income support to be received for the Projection Year FY2014 amounts to S$4.7 million representing 18.1% of projected Net Property Income at Clementi Mall. The income support to be received by SPH REIT is expected to form a smaller percentage of the Net Property Income for subsequent financial years/periods as the malls performance stabilises. (See Certain Agreements Relating to SPH REIT and the Properties Description of the Agreements to Acquire the Properties Clementi Mall Deed of Income Support for further details.) Competitive Strengths The Manager believes that the Properties enjoy the following competitive strengths: Large trade areas and customer base Paragon is located in the premier shopping and tourist precinct of Singapore and Clementi Mall is located in an established high-density residential estate. The Properties locations are further enhanced by their accessibility and unique positioning.
CM Domain is a special purpose vehicle and Clementi Mall constitutes substantially the whole of its assets. CM Domain is a wholly owned subsidiary of SG Domain Pte. Ltd. which is in turn owned by each of Times Properties, NTUC Fairprice Co-Operative Ltd and NTUC Income Insurance Co-Operative Ltd which respectively hold 60.0%, 20.0% and 20.0% of the total number of ordinary shares issued by SG Domain Pte. Ltd. CM Domain will be providing security in the form of bankers guarantees and/or cash deposit in an escrow account for a sum of S$20,000,000 less the aggregate top-up payments paid out by CM Domain under the Deed of Income Support.
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Paragons customer base comprises residents from its vast trade area spanning the entire Singapore, tourists, visitors for medical purposes and workers in Orchard Road. Key highlights of Paragons catchment are set out below: Trade area spanning the entire Singapore According to Urbis, Paragon has a trade area spanning the entire Singapore population of 5.4 million 1. Its primary trade area of the central region of Singapore has a population of 1.6 million 2 and enjoys higher levels of income and retail spend per capita compared to other regions in Singapore. Significant catchment of tourists Tourists form an important market segment for most of the retail malls in Orchard Road, including Paragon. According to Urbis, in 2012, international visitor arrivals to Singapore totalled 14.4 million with an estimated tourist expenditure of S$7.8 billion. Tourists are estimated to contribute approximately 40.0% of Orchard Road retail sales. According to STBs Singapore Annual Report on Tourism Statistics 2010/2011 3, Orchard Road is the most visited tourist destination in Singapore. Important medical hub Paragon benefits from regular visitation by local patients and medical tourists and their accompanying relatives by virtue of Paragons immediately adjacent location to Mount Elizabeth Hospital and Mount Elizabeth Medical Centre, a renowned private hospital and specialist medical centre, respectively. In addition, Paragon houses Paragon Medical, comprising a 14-storey tower and another three-storey tower sitting on top of the retail podium, that hosts over 60 medical and dental specialist clinics and offices. Immediate catchment of workers in Orchard Road Paragon benefits from a meaningful catchment of workers in the Orchard Road vicinity. For 2013, Urbis estimates that there are currently around 62,200 workers in the Orchard Road vicinity.
Clementi Malls customer base primarily comprises residents from Clementi town, West Coast, Holland Village and Bukit Timah and students from key tertiary institutions such as National University of Singapore, Ngee Ann Polytechnic, Singapore Polytechnic and UniSIM. A key highlight of Clementi Malls catchment is set out below: Catchment area that covers the surrounding established residential estates Clementi Mall is strategically located in the heart of Clementi Town Centre with excellent transport connectivity due to its co-location with a bus interchange and connection to the Clementi MRT station. Urbis estimates that Clementi Mall serves over 180,000 residents from its primary and secondary trade areas including the surrounding Clementi town, West Coast, Holland Village and Bukit Timah residential estates. According to Urbis, there are more than 63,000 students from tertiary institutions in the area.
Source: Appendix F, Independent Retail Property Market Research Report, Section 2.5.2 (Resident Trade Area Definition). Relevant figures are estimated as of 2013. Due to Paragons location in Orchard Road, its very extensive retail offer and Singapores excellent public transportation system which makes Orchard Road very accessible, Paragon is able to draw customers from all over Singapore. Source: Appendix F, Independent Retail Property Market Research Report. Relevant figures are estimated as of 2013. Source: STB, Annual Report on Tourism Statistics 2010/2011. STB has not provided its consent, for the purposes of Section 249 of the SFA (read with Section 302(1) of the SFA), to the inclusion of the information extracted from the relevant report published by it and therefore is not liable for such information under Sections 253 and 254 of the SFA (both read with Section 302(1) of the SFA). While the Manager has taken reasonable actions to ensure that the information from the report published by STB is reproduced in its proper form and context, and that the information is extracted accurately and fairly from such report, none of the Manager, the Joint Bookrunners or any other party has conducted an independent review of the information contained in such report or verified the accuracy of the contents of the relevant information.
2 3
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Strong brand recognition among shoppers and retail tenants Paragon Mall is one of the most established and well-known retail malls located in Orchard Road. Paragon was first acquired by the Sponsor in 1997 1 and since then, the Sponsor has extensively and continually upgraded the mall and optimised its tenant mix in order to keep the property up-to-date with market preferences and expectations and to meet the needs of retailers. The mall has since gained a positive reputation amongst affluent shoppers for its extensive range of top international fashion brands, high street and diffusion brands, wide F&B offerings and gourmet supermarket. The mall is instantly recognisable due to its all-glass facade with 136 metres of prime Orchard Road frontage, showcasing duplex flagship stores of top international fashion brands like Gucci, Miu Miu, Prada, Salvatore Ferragamo and Tods. Since commencement of operations, Clementi Mall has quickly established itself as a popular destination for residents within its catchment area due to its excellent location, scale and transport connectivity. Clementi Mall is positioned as a contemporary and mid-market mall catering to families, executives and students living in its trade area. It is anchored by familiar brands such as BHG Department Store, FairPrice Finest and is well complemented by a variety of established F&B, fashion and childrens wear stores. Strategic locations The Properties are strategically located in the centre of their respective trade areas and are easily accessible via expressways, a network of major roads and public transportation including public buses and MRT trains, which enhance their ability to attract a high volume of their target visitors. Paragon is located at the heart of Orchard Road, Singapores premier shopping and tourist precinct which is a 2.2-km one-way boulevard flanked by 43 retail centres with approximately 7.3 million sq ft of NLA and over 10,600 guest rooms and serviced apartment units in the vicinity that provide a large catchment of tourists and business travellers. Paragon is well-served by the Central Expressway ( CTE ), bus routes, complimentary shuttle bus services with bus stops at key hotels areas in Singapore and is within walking distance to Orchard MRT Station and Somerset MRT Station. The property also has a spacious 416-lot car park with valet service which is appreciated by affluent customers who prefer to drive or be driven when out shopping. Paragon benefits from regular visitation by local patients and medical tourists and their accompanying relatives by virtue of Paragons location immediately adjacent to Mount Elizabeth Hospital and Mount Elizabeth Medical Centre, a renowned private hospital and specialist medical centre, respectively. In addition, Paragon houses Paragon Medical, comprising a 14-storey tower and another three-storey tower sitting on top of the retail podium that hosts over 60 medical and dental specialist clinics and offices. The specialist clinics at Paragon Medical provide medical services ranging from cardiology, orthopaedics, urology, dermatology, obstetrics, gynaecology, oncology, pediatrics, dentistry and anti-ageing to traditional Chinese medicine. Paragon Medical caters uniquely to patients and their accompanying relatives by providing the amenity of a shopping precinct, cafe and dining venue before or after the patients medical treatments. Clementi Mall is strategically located in the centre of Clementi town in the west of Singapore, a well-established residential area, and is well-served by the Pan Island Expressway ( PIE ) and Ayer Rajah Expressway ( AYE ), with direct linkages to both the Clementi bus interchange and the Clementi MRT Station.
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High and stable Committed Occupancy The Properties have maintained high and consistent Committed Occupancy reflecting the success and effectiveness of the asset management and leasing strategy of each Property. Paragon Mall has achieved Committed Occupancy of 100.0% for the last ten years. Clementi Mall also achieved Committed Occupancy of 100.0% upon its official opening in May 2011 and has maintained 100.0% Committed Occupancy in FY2012. Diverse and quality tenant base The Initial Portfolio has a large tenant base of 431 tenants, covering a wide variety of trade sectors, providing SPH REIT with trade diversification. SPH REITs top 10 tenants 1 in terms of Gross Rental Income contributed 23.7% of Gross Rental Income for the month of February 2013. No trade sector accounted for more than 25.8% of Gross Rental Income in the same period. The Properties have a high quality and loyal tenant base. The retail tenants include quality anchor tenants such as Marks & Spencer, Metro, MUJI, Paragon Market Place, BHG Department Store, FairPrice Finest, and FoodFare. These quality tenants provide income stability and enable SPH REIT to maintain a certain level of rental income for the term of the lease. Favourable lease profile with embedded organic growth potential The leases at Paragon are typically structured with three-year tenures comprising base rent, service charge, advertising and promotional charge and turnover rent. As at 28 February 2013, 33.0% of leases by NLA have step-up structures in the base rent component and more than 65.0% of leases by NLA have a base rent and turnover rent component. In addition, the Manager believes that Paragons balanced and staggered lease expiry profile with a weighted average lease expiry by NLA of 1.6 years provides SPH REIT income visibility and stability. The leases at Clementi Mall are also typically structured with three-year tenures comprising base rent, service charge, advertising and promotional charge and turnover rent. As at 28 February 2013, 39.0% of leases by NLA have step-up structures in the base rent component and more than 86.0% of leases by NLA have a base rent and turnover rent component. In addition, the Manager believes that Clementi Malls weighted average lease expiry by NLA of 1.9 years will allow it to further benefit from the expected growth in retail rents. Structure of SPH REIT SPH REIT Management Pte. Ltd. is the manager of SPH REIT. The Manager has general powers of management over the assets of SPH REIT. The Managers main responsibility is to manage SPH REITs assets and liabilities for the benefit of Unitholders. The Manager will set the strategic direction of SPH REIT and give recommendations to the Trustee on the acquisition, divestment, development and/or enhancement of assets of SPH REIT in accordance with its stated investment strategy. The Manager is a wholly-owned subsidiary of Times Properties, which is in turn a wholly-owned subsidiary of Singapore Press Holdings Limited, the sponsor of SPH REIT. (See the Sponsor for further details.)
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SPH Retail Property Management Services Pte. Ltd. is the property manager of SPH REIT. The Property Manager is responsible for providing property management, lease management, project management, marketing, property accounting services and administration of property tax services for the properties in SPH REITs portfolio. The following diagram illustrates the relationship between SPH REIT, the Trustee, the Property Manager, the Manager and the Unitholders following to acquisition of the Properties as set out below.
Unitholders
Ownership of Units
Distributions
Management Services SPH REIT Management Pte. Ltd. Manager Management Fees
Trustee Fees
SPH REIT
Acts on behalf of Unitholders Net Property Income
DBS Trustee Limited Trustee
Ownership of Assets
Paragon
The Properties
Clementi Mall
Property Management Fees
Property Management Services
SPH Retail Property Management Services Pte. Ltd. Property Manager
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CERTAIN FEES AND CHARGES The following is a summary of certain fees and charges payable by the Unitholders in connection with the subscription for the Units (so long as the Units are listed): Payable by the Unitholders directly (a) (b) (c) (d) Subscription fee or preliminary charge Realisation fee Switching fee Any other fee N.A. (1) N.A. (1) N.A. (1) Investors in the Placement Tranche may be required to pay brokerage of up to 1.0% of the Offering Price. For trading of the Units, investors will pay prevailing brokerage commissions (if applicable), The Central Depository (Pte) Limited ( CDP ) clearing fee at the rate of 0.04% of the transaction value (subject to a maximum of S$600.00 per transaction), a SGX-ST trading fee of 0.0075% of the transaction value and Goods and Services Tax ( GST ) chargeable on all of the above. An administration fee is payable for each application made through automated teller machines ( ATM ), the internet banking websites of the Participating Banks (as defined herein) or the mobile banking interface of DBS Bank Ltd.
Amount payable
Note: (1) As the Units will be listed and traded on the SGX-ST and Unitholders will have no right to request the Manager to redeem their Units while the Units are listed, no subscription fee, preliminary charge, realisation fee or switching fee is payable in respect of the Units.
The following is a summary of certain fees and charges payable by SPH REIT in connection with the establishment and on-going management and operation of SPH REIT: Payable by SPH REIT (a) Management fees (payable to the Manager or its nominee) Amount payable Base Fee 0.25% per annum of the value of SPH REITs Deposited Property. For the purposes of calculating the Base Fee only, where SPH REIT holds its investments through one or more special purpose vehicles (SPVs), the Deposited Property shall include all the assets of the relevant SPV, pro rated, if applicable, to the proportion of SPH REITs interest in the relevant SPV. Performance Fee 5.0% per annum of SPH REITs Net Property Income in the relevant financial year.
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Payable by SPH REIT
Amount payable Management fee to be paid in cash or Units The Manager may elect to receive the Base Fee and Performance Fee in cash or Units or a combination of cash and Units (as it may in its sole discretion determine). For the Forecast Period 2H FY2013 and Projection Year FY2014, the Manager has elected to receive 100.0% of the Base Fee and the Performance Fee in the form of Units. (See The Manager and Corporate Governance The Manager of SPH REIT Managers Fees for further details.)
(b)
Trustees fee
The Trustees fee is presently charged on a scaled basis of up to 0.02% per annum of the value of the Deposited Property, subject to a minimum of S$15,000 per month, excluding out-of-pocket expenses and GST. The actual fee payable will be determined between the Manager and the Trustee from time to time. Under the Trust Deed, the maximum fee which the Trustee may charge shall not exceed 0.1% per annum of the value of the Deposited Property. Any increase in the Trustees fee beyond the current scaled basis of up to 0.02% per annum of the value of the Deposited Property will be subject to agreement between the Manager and the Trustee. The Trustee will also be paid a one-time inception fee as may be agreed between the Manager and the Trustee, subject to a maximum of S$60,000.
(c)
Any other substantial fee or charge ( i.e. 0.1% or more of SPH REITs asset value) Payable to the Manager or its nominee (i) Acquisition fee 0.75% for acquisitions from Related Parties (1) and 1.0% for all other acquisitions of each of the following as is applicable (subject to there being no double-counting): in relation to an acquisition (whether directly or indirectly through one or more SPVs of SPH REIT) of any real estate, the acquisition price of any real estate purchased by SPH REIT, plus any other payments (2) in addition to the acquisition price made by SPH REIT or its SPVs to the vendor in connection with the purchase of the real estate ( pro-rated if applicable to the proportion of SPH REITs interest); (3) in relation to an acquisition (whether directly or indirectly through one or more SPVs of SPH REIT) of any SPVs or holding entities which holds real estate, the underlying value of any
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Payable by SPH REIT
Amount payable real estate which is taken into account when computing the acquisition price payable for the acquisition from the vendor of the equity interests of any vehicle holding directly or indirectly the real estate purchased by SPH REIT (plus any additional payments made by SPH REIT or its SPVs to the vendor in connection with the purchase of such equity interests) ( pro-rated if applicable to the proportion of SPH REITs interest); or the acquisition price of any investment by SPH REIT, whether directly or indirectly through one or more SPVs, in any debt securities of any property corporation or other SPV owning or acquiring real estate.
For the purpose of this acquisition fee, equity interests include all classes and types of equity securities relating to real estate which shall, for the avoidance of doubt, exclude any investment in debt securities of any property corporation or other SPV owning or acquiring real estate. The acquisition fee is payable to the Manager in the form of cash and/or Units (as the Manager may elect). Under the Property Funds Appendix, in respect of any acquisition of real estate assets from interested parties, such a fee should be in the form of Units issued by SPH REIT at prevailing market price(s). Such Units should not be sold within one year from the date of their issuance. Any payment to third party agents or brokers in connection with the acquisition of any assets of SPH REIT shall be paid by the Manager to such persons out of the Deposited Property of SPH REIT or the assets of the relevant SPV, and not out of the acquisition fee received or to be received by the Manager.
Notes: (1) Related Party refers to interested person as defined in the Listing Manual of the SGX-ST (the Listing Manual) and/or, as the case may be, an interested party as defined in the Property Funds Appendix. Other payments refer to additional payments to the vendor of the asset, for example, where the vendor has already made certain payments for enhancements to the asset, and the value of the asset enhancements is not reflected in the acquisition price as the asset enhancements are not completed, but other payments do not include stamp duty or other payments to third party agents and brokers. For the avoidance of doubt, no acquisition fee is payable in relation to the Initial Portfolio.
(2)
(3)
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Payable by SPH REIT (ii) Divestment fee
Amount payable 0.5% of each of the following as is applicable (subject to there being no double-counting): the sale price of any real estate sold or divested, whether directly or indirectly through one or more SPVs, by SPH REIT (plus any other payments(1) in addition to the sale price received by SPH REIT or its SPVs from the purchaser in connection with the sale or divestment of the real estate) (pro rated if applicable to the proportion of SPH REITs interest); in relation to a divestment (whether directly or indirectly through one or more SPVs of SPH REIT) of any SPVs or holding entities which holds real estate, the underlying value of any real estate which is taken into account when computing the sale price for the equity interests in any vehicle holding directly or indirectly the real estate, sold or divested, whether directly or indirectly through one or more SPVs, by SPH REIT (plus any additional payments received by SPH REIT or its SPVs from the purchaser in connection with the sale or divestment of such equity interests) ( pro rated if applicable to the proportion of SPH REITs interest); or the sale price of any investment by SPH REIT, whether directly or indirectly through one or more SPVs, in any debt securities of any property corporation or other SPVs owning or acquiring real estate.
For the purpose of this divestment fee, equity interests include all classes and types of equity securities relating to real estate which shall, for the avoidance of doubt, exclude any investment in debt securities of any property corporation or other SPV owning or acquiring real estate. The divestment fee is payable to the Manager in the form of cash and/or Units (as the Manager may elect). Under the Property Funds Appendix, in respect of any sale or divestment of real estate assets to interested parties, such a fee should be in the form of Units issued by SPH REIT at prevailing market price(s). Such Units should not be sold within one year from date of their issuance.
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Payable by SPH REIT
Amount payable Any payment to third party agents or brokers in connection with the disposal of any assets of SPH REIT shall be paid by the Manager to such persons out of the Deposited Property of SPH REIT, or the assets of the relevant SPV, and not out of the divestment fee received or to be received by the Manager.
Note: (1) Other payments refer to additional payments to SPH REIT or its SPVs for the sale of the asset, for example, where SPH REIT or its SPVs have already made certain payments for enhancements to the asset, and the value of the asset enhancements is not reflected in the sale price as the asset enhancements are not completed, but other payments do not include stamp duty or other payments to third party agents and brokers.
Payable to the Property Manager (iii) Property management fee The Property Manager is entitled to the following fees on each property of SPH REIT located in Singapore under its management: 2.0% per annum of Gross Revenue for the relevant property; 2.0% per annum of the Net Property Income for the relevant property (calculated before accounting for the property management fee in that financial period); and 0.5% per annum of the Net Property Income for the relevant property (calculated before accounting for the property management fee in that financial period) in lieu of leasing commissions otherwise payable to the Property Manager and/or third party agents.
The Manager may elect to pay the property management fee in cash or Units or a combination of cash and Units (as the Manager may in its sole discretion determine). (iv) Project management fee In relation to the development and redevelopment of a property located in Singapore (if not prohibited by the Property Funds Appendix or if otherwise permitted by the MAS), the refurbishment, retrofitting and renovation works on such a property. where the construction costs 1 equal or exceed S$100,000 but do not exceed S$500,000, a fee of 5.0% of the construction costs; where the construction costs exceed S$500,000 but do not exceed S$1,000,000, a fee of 2.0% of the construction costs;
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Payable by SPH REIT
Amount payable where the construction costs exceed S$1,000,000 but are below S$10,000,000, a fee of 1.5% of the construction costs; and where the construction costs equal or exceed S$10,000,000 but do not exceed S$25,000,000, a fee of 1.25% of the construction costs.
Where the construction costs are below S$100,000, no fee is payable. The Manager may elect to pay the project management fee in cash or Units or a combination of cash and Units (as the Manager may in its sole discretion determine).
Note: (1) constructions costs for the purpose of calculating the fees payable to the Property Manager means all construction costs and expenditure valued by the quantity surveyor engaged by the Trustee for the project, excluding development charges, differential premiums, statutory payments, consultants professional fees and GST.
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THE OFFERING
SPH REIT . . . . . . . . . . . . . . . . . . SPH REIT, a REIT established in Singapore and constituted by the Trust Deed. SPH REIT Management Pte. Ltd. Singapore Press Holdings Limited. DBS Trustee Limited, in its capacity as trustee of SPH REIT. 308,884,000 Units offered under the Placement Tranche and the Public Offer, subject to the Over-Allotment Option. 224,902,000 Units offered by way of an international placement to investors, including institutional and other investors in Singapore other than the Sponsor and the Cornerstone Investors, pursuant to the Offering. The Units have not been, and will not be, registered under the Securities Act and, accordingly, may not be offered or sold within the United States except in certain transactions exempt from, or not subject to, the registration requirements of the Securities Act. The Units are being offered and sold outside the United States in offshore transactions as defined in, and in reliance on, Regulation S. The Public Offer . . . . . . . . . . . . The Public Offer Units offered by way of a public offer in Singapore. 83,982,000 Units will be offered under the Public Offer. Clawback and Re-allocation . . The Units may be re-allocated between the Placement Tranche and the Public Offer at the discretion of the Joint Bookrunners (in consultation with the Manager), in the event of an excess of applications in one and a deficit in the other. Separate from the Offering, O290s nominees and CM Domains nominees will receive an aggregate of 1,941,110,999 Consideration Units at the Offering Price on the Listing Date in part satisfaction of the purchase price for Paragon and Clementi Mall.
The Manager . . . . . . . . . . . . . . . The Sponsor . . . . . . . . . . . . . . . The Trustee . . . . . . . . . . . . . . . . The Offering . . . . . . . . . . . . . . .
The Placement Tranche . . . . . .
Consideration Units . . . . . . . . .
Subscription by the Cornerstone Investors . . . . . . .
Concurrently with, but separate from the Offering, each of the Cornerstone Investors has entered into a subscription agreement to subscribe for an aggregate of 251,000,000 Units at the Offering Price, conditional upon the Underwriting Agreement having been entered into, and not having been terminated, pursuant to its terms on or prior to the date and time on which the Units are issued as settlement under the Offering (Settlement Date).
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(See Ownership of the Units Information on the Cornerstone Investors for further details.) Offering Price Range . . . . . . . . Price Determination . . . . . . . . . S$0.85 to S$0.90 per Unit. The Offering Price of between S$0.85 to S$0.90 per Unit will be determined following a book-building process by agreement between the Joint Bookrunners and the Manager on the Price Determination Date, which is expected to be and is subject to change. Among the factors that will be taken into account in determining the Offering Price are the demand for the Units under the Offering and the prevailing conditions in the securities markets. Notice of the actual Offering Price will be published in one or more major Singapore newspapers, such as The Straits Times , The Business Times and Lianhe Zaobao , no later than two calendar days after the Price Determination Date.
Subscription for Units in the Public Offer . . . . . . . . . . . . . . . .
Investors applying for Units by way of Application Forms or Electronic Applications (both as referred to in Appendix G, Terms, Conditions and Procedures for Application for and Acceptance of the Units in Singapore) in the Public Offer will pay the Offering Price on application, subject to a refund of the full amount or, as the case may be, the balance of the application monies (in each case, without interest or any share of revenue or other benefit arising therefrom) where: (i) (ii) an application is rejected or accepted in part only; or the Offering does not proceed for any reason.
For the purpose of illustration, an investor who applies for 1,000 Units by way of an Application Form or an Electronic Application under the Public Offer will have to pay which is subject to a refund of the full amount or the balance thereof (without interest or any share of revenue or other benefit arising therefrom), as the case may be, upon the occurrence of any of the foregoing events. The minimum initial subscription is for 1,000 Units. An applicant may subscribe for a larger number of Units in integral multiples of 1,000. Investors in Singapore must follow the application procedures set out in Appendix G, Terms, Conditions and Procedures for Application for and Acceptance of the Units in Singapore. Subscriptions under the Public Offer must be paid for in Singapore dollars. No fee is payable by applicants for the Units, save for an administration fee for each application made through ATMs and the internet banking websites of the Participating Banks or the mobile banking interface of DBS Bank Ltd.
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Unit Lender . . . . . . . . . . . . . . . . Over-Allotment Option . . . . . . .
TPR Holdings Pte. Ltd. In connection with the Offering, the Joint Bookrunners have been granted the Over-Allotment Option by the Unit Lender. The Over-Allotment Option is exercisable by the Stabilising Manager (or any of its affiliates or other persons acting on behalf of the Stabilising Manager), in consultation with the other Joint Bookrunners, in full or in part, on one or more occasions, only from the Listing Date but no later than the earliest of (i) the date falling 30 days from the Listing Date; or (ii) the date when the Stabilising Manager (or any of its affiliates or other persons acting on behalf of the Stabilising Manager) has bought, on the SGX-ST, an aggregate of 55,988,000 Units, representing 18.1% of the total number of Units in the Offering, to undertake stabilising actions to purchase up to an aggregate of 55,988,000 Units (representing 18.1% of the total number of Units in the Offering), at the Offering Price. Unless indicated otherwise, all information in this Prospectus assumes that the OverAllotment Option is not exercised. (See Plan of Distribution for further details.) The total number of Units in issue immediately after the close of the Offering will be 2,500,995,000 Units. The exercise of the Over-Allotment Option will not increase this total number of Units in issue. The total number of Units subject to the Over-Allotment Option will not exceed 18.1% of the total number of Units under the Placement Tranche and the Public Offer.
Lock-ups . . . . . . . . . . . . . . . . . .
The Sponsor, Times Properties and TPR have each agreed to a lock-up arrangement during the Lock-up Period in respect of the Lock-up Units, subject to certain exceptions. The Manager has also undertaken not to offer, issue, sell or contract to issue any Units, or make any announcements in connection with any of the foregoing transactions, during the Lock-up Period, subject to certain exceptions. (See Plan of Distribution Lock-up Arrangements for further details.)
Capitalisation . . . . . . . . . . . . . .
S$3,101 million based on the Minimum Offering Price or the Maximum Offering Price. (See Capitalisation for further details). See Use of Proceeds and Certain Agreements Relating to SPH REIT and the Properties for further details.
Use of Proceeds . . . . . . . . . . . .
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Listing and Trading . . . . . . . . .
Prior to the Offering, there was no market for the Units. Application has been made to the SGX-ST for permission to list on the Main Board of the SGX-ST: all the Units comprised in the Offering; the Sponsor Initial Unit; all the Consideration Units; all the Cornerstone Units; all the Units which may be issued to the Manager from time to time in full or part payment of the Managers fees (including Units issued to the Manager for the acquisition fees and divestment fees) (see The Manager and Corporate Governance The Manager of SPH REIT Managers Fees for further details); and all the Units which may be issued to the Property Manager from time to time in full or part payment of the Property Managers fees.
Such permission will be granted when SPH REIT is admitted to the Official List of the SGX-ST. The Units will, upon their issue, be listed and quoted on the SGX-ST and will be traded in Singapore dollars under the book-entry (scripless) settlement system of the CDP. The Units will be traded in board lot sizes of 1,000 Units. Stabilisation . . . . . . . . . . . . . . . In connection with the Offering, the Stabilising Manager (or any of its affiliates or other persons acting on behalf of the Stabilising Manager) may, in consultation with the other Joint Bookrunners and at its discretion, over-allot or effect transactions which stabilise or maintain the market price of the Units at levels which might not otherwise prevail in the open market. However, there is no assurance that the Stabilising Manager (or any of its affiliates or other persons acting on behalf of the Stabilising Manager) will undertake stabilising action. Such transactions may be effected on the SGX-ST and in other jurisdictions where it is permissible to do so, in each case in compliance with all applicable laws and regulations (including the SFA and any regulations thereunder).
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Such transactions may commence on or after the date of commencement of trading in the Units on the SGX-ST and, if commenced, may be discontinued at any time and shall not be effected after the earlier of (i) the date falling 30 days from the commencement of trading in the Units on the SGX-ST or (ii) the date when the Stabilising Manager (or any of its affiliates or other persons acting on behalf of the Stabilising Manager) has bought on the SGX-ST an aggregate of 55,988,000 Units representing not more than 18.1% of the total number of Units in the Offering, to undertake stabilising actions. (See Plan of Distribution Over-Allotment and Stabilisation for further details.) No Redemption by Unitholders . . . . . . . . . . . . . . . .
Unitholders have no right to request the Manager to redeem their Units while the Units are listed. Unitholders may only deal in their listed Units through trading on the SGX-ST. Listing of the Units on the SGX-ST does not guarantee a liquid market for the Units. Distributions from SPH REIT to Unitholders will be computed based on 100.0% of SPH REITs Specified Taxable Income (as defined herein) for the period from the Listing Date to Projection Year FY2014. Thereafter, SPH REIT will distribute at least 90.0% of its Specified Taxable Income on a quarterly basis. The first distribution, which will be in respect of the period from the Listing Date to 30 November 2013 ( First Distribution ), will be paid by the Manager on or before 27 February 2014. Distributions will be declared in Singapore dollars. (See Distributions for further details.) SPH REIT has been accorded the tax transparency treatment by the Inland Revenue Authority of Singapore ( IRAS ) on the following income derived by SPH REIT ( Specified Income ): (a) Singapore-sourced rental and other property related income from its business of property letting; Singapore-sourced interest income, discount or premium from placement of surplus cash as deposits with banks or investment in debt securities; and top-up payments from Income Support.
Distribution Policy . . . . . . . . . .
Tax Considerations . . . . . . . . . .
(b)
(c)
Under the tax transparency treatment, the Specified Income, net of allowable expenses and applicable tax allowances, ( Specified Taxable Income ) will not be assessed to tax in the hands of the Trustee to the extent of the amount distributed to Unitholders. Instead, Unitholders will be subject to tax on the distributions made out of the Specified Taxable Income ( Taxable Income Distributions ), either directly or by way of tax deduction at source, depending on their own tax status.
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For the purpose of applying for the tax transparency treatment, the Trustee and the Manager have given a joint undertaking to the IRAS to comply with certain conditions. One of those conditions requires SPH REIT to distribute at least 90.0% of its Specified Taxable Income to Unitholders in the same year in which the income is derived. (See Taxation for further details.) Termination of SPH REIT . . . . . SPH REIT can be terminated by either an Extraordinary Resolution (as defined herein) at a Unitholders meeting duly convened and held in accordance with the provisions of the Trust Deed or by the Manager or the Trustee under certain circumstances specified in the Trust Deed, for example, if SPH REIT is delisted permanently from the SGX-ST. (See The Formation and Structure of SPH REIT Termination of SPH REIT for further details.) The Trust Deed is governed by Singapore law.
Governing Law . . . . . . . . . . . . . Commission Payable by SPH REIT to the Joint Bookrunners . . . . . . . . . . . . . . . Risk Factors . . . . . . . . . . . . . . .
See Plan of Distribution Issue Expenses for further details. Prospective investors should carefully consider certain risks connected with an investment in the Units, as discussed under Risk Factors.
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INDICATIVE TIMETABLE
An indicative timetable for the Offering is set out below for the reference of applicants for the Units: Date and time Event : Opening date and time for the Public Offer. : Closing date and time for the Public Offer. : Balloting of applications under the Public Offer, if necessary. Commence returning or refunding of application monies to unsuccessful or partially successful applicants and commence returning or refunding of application monies to successful applicants for the amount paid in excess of the Offering Price, if necessary. : Completion of the acquisition of the Properties. : Commence trading on a ready basis. : Settlement date for all trades done on a ready basis on
The above timetable is indicative only and is subject to change. It assumes: that the closing of the list of applicants subscribing for Units which are the subject of the Public Offer (the Application List ) is that the Listing Date is compliance with the SGX-STs unitholding spread requirement; and that the Units will be issued and fully paid up prior to on .
All dates and times referred to above are Singapore dates and times. Trading in the Units through the SGX-ST on a ready basis will commence at on (subject to the SGX-ST being satisfied that all conditions necessary for the commencement of trading in the Units through the SGX-ST on a ready basis have been fulfilled). The completion of the acquisition of the Properties is expected to take place at or before on (see Certain Agreements Relating to SPH REIT and the Properties for further details). If SPH REIT is terminated by the Manager or the Trustee under the circumstances specified in the Trust Deed prior to, or the acquisition of the Properties is not completed by, on (being the time and date of commencement of trading in the Units through the SGX-ST), the Offering will not proceed and the application monies will be returned in full (without interest or any share of revenue or other benefit arising therefrom and at each applicants own risk and without any right or claim against SPH REIT, the Manager, the Trustee, the Global Coordinator, the Joint Bookrunners or the Sponsor).
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In the event of any early or extended closure of the Application List or the shortening or extension of the time period during which the Offering is open, the Manager will publicly announce the same: via SGXNET, with the announcement to be posted on the internet at the SGX-ST website: http://www.sgx.com; and in one or more major Singapore newspapers, such as The Straits Times , The Business Times and Lianhe Zaobao .
For the date on which trading on a ready basis will commence, investors should monitor SGXNET, the major Singapore newspapers, or check with their brokers. The Manager will provide details and results of the Public Offer through SGXNET and in one or more major Singapore newspapers, such as The Straits Times , The Business Times and Lianhe Zaobao . The Manager reserves the right to reject or accept, in whole or in part, or to scale down or ballot any application for Units, without assigning any reason, and no enquiry and/or correspondence on the decision of the Manager will be entertained. In deciding the basis of allotment, due consideration will be given to the desirability of allotting the Units to a reasonable number of applicants with a view to establishing an adequate market for the Units. Where an application is accepted or rejected in part only or if the Offering does not proceed for any reason, the full amount or the balance of the application monies, as the case may be, will be refunded (without interest or any share of revenue or other benefit arising therefrom) to the applicant, at his own risk, and without any right or claim against SPH REIT, the Manager, the Trustee, the Global Coordinator, the Joint Bookrunners or the Sponsor. Where an application is not successful, the refund of the full amount of the application monies (without interest or any share of revenue or other benefit arising therefrom) to the applicant, is expected to be completed, at his own risk within 24 hours after balloting (provided that such refunds in relation to applications in Singapore are made in accordance with the procedures set out in Appendix G, Terms, Conditions and Procedures for Application for and Acceptance of the Units in Singapore). Where an application is accepted in full or in part only, any balance of the application monies will be refunded (without interest or any share of revenue or other benefit arising therefrom) to the applicant, at his own risk, within 14 Market Days (as defined herein) after the close of the Offering (provided that such refunds in relation to applications in Singapore are made in accordance with the procedures set out in Appendix G, Terms, Conditions and Procedures for Application for and Acceptance of the Units in Singapore). Where the Offering does not proceed for any reason, the full amount of application monies (without interest or any share of revenue or other benefit arising therefrom) will, within three Market Days after the Offering is discontinued, be returned to the applicants at their own risk (provided that such refunds in relation to applications in Singapore are made in accordance with the procedures set out in Appendix G, Terms, Conditions and Procedures for Application for and Acceptance of the Units in Singapore).
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UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following table is only an extract from, and should be read together with, Unaudited Pro Forma Financial Information, the report set out in Appendix B, Reporting Auditors Report on the Unaudited Pro Forma Financial Information. UNAUDITED PRO FORMA BALANCE SHEETS (1) AS AT 31 AUGUST 2012 AND 28 FEBRUARY 2013 As at 31 August 2012 S$000 Non-current assets Plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investment properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intangible asset (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 765 3,053,000 17,500 3,071,265 Current assets Other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . 1,343 42,390 43,733 Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-current liabilities Loans and borrowings (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,114,998 As at 28 February 2013 S$000 765 3,053,000 17,500 3,071,265 1,343 43,569 44,912 3,116,177
840,892 32,521 873,413
840,892 32,754 873,646 10,815 10,815 884,461 2,231,716
Current liabilities Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,869 9,869
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net assets attributable to Unitholders . . . . . . . . . . . . . . . .

Notes: (1)
883,282 2,231,716
The Unaudited Pro Forma Balance Sheets as at 31 August 2012 and 28 February 2013 have been prepared assuming the issuance of 2,500,995,000 Units at the Maximum Offering Price of S$0.90 per Unit and assuming the Over-Allotment Option is fully exercised. Intangible asset relates to Income Support provided by the vendor of Clementi Mall pursuant to the Deed of Income Support. The amount carried as Investment Properties on the balance sheet excludes the Income Support at Clementi Mall. The income support is recognised as an intangible asset in accordance with FRS 38 Intangible Assets on the balance sheet. The sum of the intangible asset and the carrying amount of the Investment Properties recorded on the balance sheet is equivalent to the average of two independent valuations produced by the independent valuers. (See details in Certain Agreements Relating to SPH REIT and the Properties Description of the Agreements to Acquire the Properties Clementi Mall Deed of Income Support.) Comprises principal amount of borrowings of S$849,815,000, net of transaction costs of S$8,923,000. Such transaction costs refer to the upfront debt facility costs. If the Unaudited Pro Forma Balance Sheets had been prepared based on the Minimum Offering Price of S$0.85 per Unit, the net assets attributable to Unitholders would have been S$2,107,767,000 as at 31 August 2012 and 28 February 2013.
(2)
(3) (4)
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UNAUDITED PRO FORMA STATEMENTS OF TOTAL RETURN (1) FOR THE FINANCIAL YEARS ENDED 31 AUGUST 2010 (FY2010), 31 AUGUST 2011 (FY2011), 31 AUGUST 2012 (FY2012) AND EACH OF THE SIX-MONTH PERIODS ENDED 29 FEBRUARY 2012 AND 28 FEBRUARY 2013 (COLLECTIVELY REFERRED TO AS THE RELEVANT PERIOD)
Six-month period ended 29 February 2012 $000 93,257 (25,237) 68,020 2,935 (2,935) (7,296) (231) (900) 30 (9,985) Six-month period ended 28 February 2013 $000 97,395 (25,894) 71,501 2,469 (2,469) (7,470) (231) (900) 36 (9,985)
FY2010 $000 Gross revenue . . . . . . . . . . . . . Property operating expenses. . . Net Property Income . . . . . . . . Income support
(2)
FY2011 $000 162,740 (42,447) 120,293 1,667 (1,667) (13,805) (462) (1,800) 64 (19,971)
FY2012 $000 187,761 (50,146) 137,615 5,593 (5,593) (14,671) (462) (1,800) 67 (19,971)
132,582 (32,956) 99,626 (12,772) (462) (1,800) 96 (19,971)
...........
Amortisation of intangible asset(3) . . . . . . . . . . . . . . . . . . . Managers management fees(4) . . Trustees fee

(5)
.............
Other trust expenses . . . . . . . . Finance income . . . . . . . . . . . . Finance costs

(6)
............
Total return before income tax . . . . . . . . . . . . . . . . . . . . . . Tax expense . . . . . . . . . . . . . . . Total return for the year/period . . . . . . . . . . . . . . .
Notes: (1) (2) (3) (4)
64,717
84,319
100,778
49,638
52,951
64,717
84,319
100,778
49,638
52,951
The Unaudited Pro Forma Statements of Total Return have been prepared based on the Maximum Offering Price of S$0.90 per Unit and assuming the Over-Allotment Option is fully exercised. Income Support relates to the top-up payments from the vendor of Clementi Mall pursuant to the Deed of Income Support to achieve a guaranteed Net Property Income for Clementi Mall. Relates to the amortisation of intangible asset in relation to the income support received and receivable by SPH REIT. Please refer to Certain Agreements Relating to SPH REIT and the Properties for information on the Property Managers fees. Please refer to the Manager and Corporate Governance The Manager of SPH REIT Managers Fees for information on the management fees. Please refer to The Formation of Structure of SPH REIT for information on Trustees fees. Based on assumed average principal debt balance of S$849,815,000 in the Relevant Period. Had the Unaudited Pro Forma Statements of Total Return been prepared based on the Minimum Offering Price of S$0.85 per Unit, the total return for the year/period would be S$61,775,000, S$81,377,000, S$97,836,000, S$48,167,000 and S$51,480,000 for FY2010, FY2011, FY2012 and the six-month periods ended 29 February 2012 and 28 February 2013 respectively.
(5) (6) (7)
44
UNAUDITED PRO FORMA STATEMENTS OF CASH FLOWS (1) FOR FY2012 AND EACH OF THE SIX-MONTH PERIODS ENDED 29 FEBRUARY 2012 AND 28 FEBRUARY 2013 Six-month period ended 29 February 2012 S$000 49,638 7,296 38 (30) 9,985 2,935 69,862 (1,635) 2,629 70,856 Six-month period ended 28 February 2013 S$000 52,951 7,470 38 (36) 9,985 2,469 72,877 389 (3,455) 69,811
FY2012 S$000 Cash flow from operating activities Total return for the year/period . . . . . . Adjustments for: Managers fee paid/payable in units . . Depreciation of plant and equipment . Interest income . . . . . . . . . . . . . . . . . . Finance costs . . . . . . . . . . . . . . . . . . . Amortisation of intangible asset . . . . . .......... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,778 14,671 77 (67) 19,971 5,593 141,023 Changes in working capital: Trade and other receivables . . . . . . . . . . . . . . . . . . Trade and other payables . . . . . . . . . . . . . . . . . . . . Net cash from operating activities . . . . . . . . . . . Cash flow from investing activities Acquisition of the Properties and other assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capital expenditure on investment properties. . . . . Interest received . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash used in investing activities . . . . . . . . . Cash flows from financing activities Proceeds from issue of Units . . . . . . . . Issue expenses paid . . . . . . . . . . . . . . . Proceeds from bank borrowings . . . . . . Distributions to Unitholders . . . . . . . . . . Interest paid . . . . . . . . . . . . . . . . . . . . . (3,193) 5,404 143,234
(1,281,876) (10,986) 67 (1,292,795)
(1,281,876) (2,844) 30 (1,284,690)
(1,429) 36 (1,393)
. . . . .
. . . . .
. . . . .
. . . . .
. . . . .
. . . . .
. . . . .
. . . . .
. . . . .
503,896 (19,179) 840,892 (92,248) (13,512) 1,219,849 70,288 70,288
503,896 (19,179) 840,892 (30,423) (4,504) 1,290,682 76,848 76,848
(62,683) (9,008) (71,691) (3,273) 70,288 67,015
Net cash from/(used in) financing activities . . . . Net increase/(decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents at beginning of year/period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents at end of year/period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note: (1)
The Unaudited Pro Forma Statements of Cash Flows for FY2012 and each of the six-month periods ended 29 February 2012 and 28 February 2013 have been prepared assuming the issuance of 2,500,995,000 Units at the Maximum Offering price of S$0.90 per Unit and assuming the Over-Allotment Option is fully exercised.
45
PROFIT FORECAST AND PROFIT PROJECTION

The following is an extract from Profit Forecast and Profit Projection. Statements contained in the Profit Forecast and Profit Projection section that are not historical facts may be forwardlooking statements. Such statements are based on the assumptions set forth in Profit Forecast and Profit Projection and are subject to certain risks and uncertainties which could cause actual results to differ materially from those forecast and projected. Under no circumstances should the inclusion of such information herein be regarded as a representation, warranty or prediction with respect to the accuracy of the underlying assumptions by any of SPH REIT, the Manager, the Trustee, the Global Coordinator, the Joint Bookrunners, the Sponsor or any other person, or that these results will be achieved or are likely to be achieved. (See Forward-looking Statements and Risk Factors for further details.) Investors in the Units are cautioned not to place undue reliance on these forward-looking statements. None of SPH REIT, the Manager, the Trustee, the Global Coordinator, the Joint Bookrunners or the Sponsor guarantees the performance of SPH REIT, the repayment of capital or the payment of any distributions, or any particular return on the Units. The forecast and projected yields stated in the following table are calculated based on: the Minimum Offering Price and the Maximum Offering Price; and the assumption that the Listing Date is 1 March 2013.
Such yields will vary accordingly if the Listing Date is not on 1 March 2013, or for investors who purchase Units in the secondary market at a market price that differs from the Minimum Offering Price and Maximum Offering Price. Unitholders should note that in respect of the Forecast Period 2H FY2013, they will only be entitled to a pro rata share of distributions declared and paid for the period from Listing Date to 31 August 2013. The following table shows SPH REITs forecast and projected Statements of Total Return for the Forecast Period 2H FY2013 and Projection Year FY2014. The financial year end of SPH REIT is 31 August. The forecast and projected results for the Forecast Period 2H FY2013 and Projection Year FY2014 (the Profit Forecast and Profit Projection ) may be different to the extent that the actual date of issuance of Units is other than 1 March 2013, being the assumed date of the issuance of Units for the Offering. The Profit Forecast and Profit Projection are based on the assumptions set out in Profit Forecast and Profit Projection and have been examined by the Reporting Auditors, being KPMG LLP, and should be read together with the report set out in Appendix A, Reporting Auditors Report on the Profit Forecast and Profit Projection, as well as the assumptions and the sensitivity analysis set out in Profit Forecast and Profit Projection.
46
Forecast and Projected Statements of Total Return The forecast and projected statements of net income and distribution are as follows:
Forecast Period 2H FY2013 (1 March 2013 to 31 August 2013) Projection Year FY2014 (1 September 2013 to 31 August 2014)
Based on Based on Based on Based on Minimum Maximum Minimum Maximum Offering Price Offering Price Offering Price Offering Price of S$0.85 of S$0.90 of S$0.85 of S$0.90 S$000 Gross revenue . . . . . . . . . . . . . . . . . Property operating expenses . . . . . . . Net Property Income . . . . . . . . . . . . Income support(1) . . . . . . . . . . . . . . . Amortisation of intangible asset . . . . . Managers management fees . . . . . . . Trustees fees . . . . . . . . . . . . . . . . . . Other trust expenses . . . . . . . . . . . . . Finance costs . . . . . . . . . . . . . . . . . . Total return for the period/year before income tax . . . . . . . . . . . . . . Income tax expense . . . . . . . . . . . . . Total return for the period/year after income tax and before distribution . Add: Non-tax deductible items(2) . . . . . Income available for distribution to Unitholders . . . . . . . . . . . . . . . . . . . Weighted average number of Units outstanding at end of period/year (000) (3) . . . . . . . . . . . . . . . . . . . . . . Distribution rate . . . . . . . . . . . . . . . . Distribution per Unit (cents)(4) . . . . . . Illustrative offering price (S$/Unit) . . . . Distribution yield (5) . . . . . . . . . . . . . Distribution yield (without Income Support)(5) . . . . . . . . . . . . . . . . . . . .
Notes: (1) (2) Income support relates to the top-up payment from the vendor of Clementi Mall pursuant to the Deed of Income Support to achieve a guaranteed Net Property Income for Clementi Mall. Includes 100% of the Managers management fees paid in Units for the Forecast Period 2H FY2013 and Projection Year FY2014, amortisation of debt issuance costs and amortisation of intangible asset in relation to the income support received and receivable by SPH REIT. Includes the increase in number of Units in issue as a result of the assumed payment of 100% of the Managers management fees for the relevant period in the form of Units issued at the assumed Offering Price. Assuming a Listing Date of 1 March 2013. Distribution yield for the Forecast Period 2H FY2013 has been annualised.
S$000 96,890 (26,475) 70,415 2,674 (2,674) (7,451) (232) (900) (11,456)
S$000 201,442 (54,768) 146,674 4,749 (4,749) (15,188) (464) (1,800) (19,971)
S$000 201,442 (54,768) 146,674 4,749 (4,749) (15,186) (464) (1,800) (22,912)
96,890 (26,475) 70,415 2,674 (2,674) (7,452) (232) (900) (9,985)
51,846
50,376
109,251
106,312
51,846 11,103
50,376 11,247
109,251 21,891
106,312 22,177
62,949
61,623
131,142
128,489
2,505,135 100.0% 2.51 0.90 5.58 5.35
2,505,378 100.0% 2.46 0.85 5.79 5.54
2,517,712 100.0% 5.21 0.90 5.79 5.58
2,518,694 100.0% 5.10 0.85 6.00 5.78
(3) (4) (5)
47
RISK FACTORS
Prospective investors should consider carefully, together with all other information contained in this Prospectus, the factors described below before deciding to invest in the Units. This Prospectus also contains forward-looking statements (including profit forecasts and projections) that involve risks, uncertainties and assumptions. The actual results of SPH REIT could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks faced by SPH REIT as described below and elsewhere in this Prospectus. The risks set forth below are not an exhaustive list of the challenges currently facing SPH REIT or that may develop in the future. There may be additional risks not described below or not presently known to the Manager or that the Manager currently considers as immaterial that could turn out to be material, which may in the future have a material adverse effect on SPH REIT or the trading price of the Units. As an investment in a REIT is meant to produce returns over the long-term, investors should not expect to obtain short-term gains. Investors should be aware that the price of Units, and the income therefrom, may fall or rise. Investors should note that they may not get back their original investment. Before deciding to invest in the Units, prospective investors should seek professional advice from their relevant advisers about their particular circumstances. RISKS RELATING TO THE PROPERTIES SPH REIT is reliant on Paragon for a substantial portion of its Gross Revenue While the initial portfolio of SPH REIT will comprise two properties, SPH REIT will be reliant on Paragon for a substantial portion of its Gross Revenue. For the six-month period ended 28 February 2013, Paragon accounted for 80.8% of the Gross Revenue of SPH REIT. For Forecast Period 2H FY2013, Paragon is forecasted to account for 80.8% of the Gross Revenue of SPH REIT 1. Any circumstance which adversely affects the operations or business of Paragon, or its attractiveness to tenants, such as physical damage to the building due to fire or other causes, may reduce Paragons contribution to the Gross Revenue of SPH REIT. This in turn may adversely affect the financial condition and results of operations of SPH REIT, reducing the ability of SPH REIT to make distributions to Unitholders. The market values of the Properties may differ from their values as determined by the Independent Valuers Property valuations generally include a subjective determination of certain factors relating to the relevant properties, such as their relative market positioning, their financial and competitive strengths and their physical conditions. There can be no assurance that the assumptions relied on are accurate measures of the market. The market values of the Properties (which affect the NAV per Unit) may therefore differ from the values of the Properties as determined by the Independent Valuers.
Based on the forecast, together with the accompanying assumptions, as set out in the Profit Forecast and Profit Projection read with Appendix A, Reporting Auditors Report on the Profit Forecast and Profit Projection.
48
The values of the Properties (as determined by the Independent Valuers) are not an indication of, and do not guarantee, a sale price at that value at present or in the future. The price at which SPH REIT sells a Property may be lower than its value as determined by the Independent Valuers or its purchase price at the time of acquisition by SPH REIT. Clementi Mall which will be receiving Income Support may not achieve the same revenue once the Income Support expires The Vendor for Clementi Mall, CM Domain, has entered into a Deed of Income Support arrangement with the Trustee. The Income Support will start from the Listing Date and end on the day immediately preceding the fifth anniversary date of the Listing Date or the date when the aggregate amount paid out by CM Domain under the Deed of Income Support reaches S$20,000,000. Under the terms of the arrangement, if the Net Property Income of Clementi Mall for a relevant period is less than the applicable threshold specified in the Deed of Income Support for such period, CM Domain will be required to pay to the Trustee a sum equal to the difference in respect of that relevant period. (See Certain Agreements Relating to SPH REIT and the Properties Description of the Agreements to Acquire the Properties Clementi Mall Deed of Income Support for further details in respect of the Income Support arrangement.) There is no guarantee that Clementi Mall will be able to generate the same level of revenue once the Income Support arrangement ends. The Properties may require capital expenditure periodically beyond the Managers current estimates and SPH REIT may not be able to secure funding The Properties may require periodic capital expenditure beyond the Managers current estimate for refurbishment, renovation and improvements. SPH REIT may not be able to fund capital expenditure solely from cash generated from its operating activities and SPH REIT may not be able to obtain additional equity or debt financing on favourable terms or at all. If SPH REIT is not able to obtain such financing, the marketability of the Properties or the attractiveness of the Properties to new or existing tenants may be affected. Renovation work, repair and maintenance or physical damage to the Properties may disrupt the operations of SPH REIT and collection of rental income or otherwise result in an adverse impact on the financial condition of SPH REIT The quality and design of the Properties directly influence the rental rates of and the demand for space in the Properties. The Properties may need to undergo renovation works from time to time to retain their attractiveness to tenants and may also require ad hoc maintenance or repairs in respect of faults or problems that may develop or because of new planning laws or regulations. The costs of maintaining the Properties and the risk of unforeseen maintenance or repair requirements tend to increase over time as the Properties age. The business and operations of the Properties may suffer disruption as a result of renovation works and it may not be possible to collect the full rate of, or, as the case may be, any rental income on the space affected by such renovation works. Shopper traffic may also be affected by potential inconveniences resulting from such renovation works. Physical damage to the Properties resulting from fire or other causes may lead to a significant disruption to the business and operations of the Properties. Furthermore, some tenants may have the right to terminate their tenancies prematurely in the event that such physical damage (not caused by the tenants negligence or default) persists for an extended period of time. The foregoing may impose unbudgeted costs on SPH REIT and may result in an adverse impact on the financial condition and results of operations of SPH REIT and its ability to make distributions to Unitholders.
49
The Properties may be adversely affected if the Manager and Property Manager do not provide adequate management and maintenance Should the Manager and the Property Manager fail to provide adequate management and maintenance of the Properties, the value of the Properties might be adversely affected and this may result in a loss of tenants, and the resulting loss of rental income from the Properties will adversely affect the distributions to Unitholders. The due diligence exercise on the Properties, tenancies, buildings and equipment may not have identified all material defects, breaches of laws and regulations and other deficiencies The Manager believes that reasonable due diligence investigations with respect to the Properties have been conducted prior to their acquisitions. However, there is no assurance that the Properties will not have defects or deficiencies requiring repair or maintenance (including design, construction or other latent property or equipment defects in the Properties which may require additional capital expenditure, special repair or maintenance expenses) other than those disclosed in this Prospectus. Such undisclosed defects or deficiencies may require significant capital expenditures or obligations to third parties and involve significant and unpredictable patterns and levels of expenditure which may have a material adverse effect on SPH REITs earnings and cash flows. The experts reports that the Manager relies upon as part of its due diligence investigations of the Properties may be subject to inaccuracies and deficiencies. This may be because certain building defects and deficiencies are difficult or impossible to ascertain due to limitations inherent in the scope of the inspections, the technologies or techniques used and other factors. Due to the large number of tenancies, a limited due diligence exercise was conducted on selected lease agreements of the Properties. Given the limited scope of such due diligence exercise, not all issues in relation to the lease agreements have been identified. SPH REIT may incur financial or other obligations if there is any breach or non-compliance of the laws in respect of the lease agreements. The representations, warranties and indemnities granted in favour of SPH REIT by the vendors of the Properties are subject to limitations as to their scope and as to the amount and timing of claims which can be made. The Trustees rights to claim against the vendors for breach of such representations, warranties and indemnities are subject to a maximum aggregate liability in respect of all claims (but excluding claims relating to certain warranties relating to title) which shall not exceed 50.0% of the purchase price in relation to each of Paragon and Clementi Mall (see Certain Agreements Relating to SPH REIT and the Properties for further details). There is no assurance that SPH REIT would be entitled to be reimbursed under such representations, warranties and indemnities for any losses or liabilities suffered or incurred by it as a result of its acquisition of the Properties. SPH REIT may suffer material losses in excess of insurance proceeds or SPH REIT may not put in place or maintain adequate insurance in relation to the Properties and its potential liabilities to third parties The Properties face the risk of suffering physical damage caused by fire, acts of God such as natural disasters or other causes, as well as potential public liability claims, including claims arising from the operations of the Properties.
50
In addition, certain types of risks (such as risk of occurrence of war, terrorist acts and losses caused by the outbreak of contagious diseases, contamination or other environmental breaches) may be uninsurable or the cost of insurance may be prohibitive when compared to the risk. SPH REITs insurance policies for the Properties may not cover occurrence of wars, terrorist acts, outbreak of contagious diseases, contamination or other environmental breaches. Should an uninsured loss or a loss in excess of insured limits occur, SPH REIT could be required to pay compensation and/or suffer a loss of capital invested in the affected property as well as anticipated future revenue from that property as it may not be able to rent out or sell the affected property. SPH REIT will also be liable for any debt or other financial obligation related to that property. No assurance can be given that material losses in excess of insurance proceeds (if any) will not occur. This in turn may adversely affect the financial condition and results of operations of SPH REIT, reducing the ability of SPH REIT to make distributions to Unitholders. The Properties may be subject to possible damage as a result of surrounding construction works Ground movements from surrounding construction works may potentially cause damage to the buildings in the vicinity, including the Properties, notwithstanding any safety measures being put in place. Moreover, such activities may affect the shopper traffic at either of the Properties. Any expenditure required for the inspection, repair and maintenance of the Properties in the event of such damage, and the potential reduction in shopper traffic that may result in the event of such damage to the Properties or to buildings nearby, may have an adverse effect on SPH REITs financial condition and results of operations. Existing or planned amenities and transportation infrastructure near the Properties may be closed, relocated, terminated, delayed or not completed The proximity of amenities and transportation infrastructures, such as MRT stations and bus interchange, to the Properties provides convenient access to the Properties. There is no assurance that the amenities, transportation infrastructure and public transport will not be closed, relocated, terminated, delayed or left uncompleted in the future. Such closure, relocation, termination, delay or non-completion may adversely affect the accessibility of the Properties and may reduce the flow of shopper traffic to such Properties. This may then have an adverse effect on the attractiveness and marketability of the Properties to tenants and may adversely affect the financial position of SPH REIT. This in turn may adversely affect the financial condition and results of operations of SPH REIT, reducing the ability of SPH REIT to make distributions to Unitholders. SPH REIT may face increased competition from other properties Factors that affect the ability of commercial properties to attract or retain tenants include the attractiveness of the building and the surrounding areas to prospective tenants and their customers or clients and the quality of the buildings existing tenants. The Properties face competition from other commercial developments operating in the same or other areas. The income from, and market value of, the Properties will be dependent on the ability of the Properties to compete against other properties for tenants. Historical operating results of the Properties may not be indicative of future operating results and historical market values of the Properties may not be indicative of future market values of the Properties. If, after the Offering, competing properties are more successful in attracting and retaining tenants, the income from the Properties could be reduced thereby adversely affecting SPH REITs cash flow and the amount of funds available for distribution to Unitholders.
51
The President of the Republic of Singapore may, as lessor, re-enter Clementi Mall and terminate the State lease upon breach of terms and conditions of the State lease The land on which Clementi Mall is located is held by the HDB as lessee under a registered State lease issued by the President of the Republic of Singapore. The State lease contains terms and conditions commonly found in State leases in Singapore, including the President of the Republic of Singapores right as lessor to re-enter the land on which Clementi Mall is located and terminate the State lease (without compensation) in the event the lessee fails to observe or perform the terms and conditions of the State lease. The Housing and Development Board may, as lessor, re-enter Clementi Mall and terminate the Clementi Mall Lease upon breach of terms and conditions of the Clementi Mall Lease On completion of the sale of Clementi Mall, SPH REIT will hold Clementi Mall as lessee under a lease granted by the HDB as lessor (the Clementi Mall Lease ). The Clementi Mall Lease contains the right of the lessor to re-enter Clementi Mall and terminate the Clementi Mall Lease (without compensation) in the event the lessee fails to observe or perform the terms and conditions set out in the Clementi Mall Lease, or the lessee has a winding-up order made against it, is in receivership or makes an assignment for the benefit of its creditors or enters into an agreement or makes any arrangement with its creditors for liquidation of its debts by composition or otherwise. O290 as lessor may re-enter Paragon and terminate the Vendor Lease upon breach of terms and conditions of the Vendor Lease On completion of the sale of the 99-year leasehold interest in Paragon, such leasehold interest will be held by SPH REIT as lessee under the Vendor Lease (as defined herein) which is a lease of registered land made under the Land Titles Act, Chapter 157 of Singapore ( Land Titles Act ). Pursuant to Section 93 of the Land Titles Act, the lessor may re-enter Paragon and terminate the Vendor Lease in the event the lessee fails to observe or perform the terms and conditions set out in the Vendor Lease. The Properties or any part of them may be acquired compulsorily The Land Acquisition Act, Chapter 152 of Singapore (the Land Acquisition Act ) gives the Singapore Land Authority the power to acquire any land in Singapore: for any public purpose; where the acquisition is of public benefit or of public utility or in the public interest; or for any residential, commercial or industrial purposes.
In the event that any of the Properties (or any part thereof) is acquired compulsorily, the compensation to be awarded would be based on: the market value of the property as at the date of the publication in the Government Gazette of the notification of the likely acquisition of the land, provided that within six months from the date of such publication, a declaration of intention to acquire is subsequently made by publication in the Government Gazette; or the market value of the property as at the date of publication in the Government Gazette of the declaration of intention to acquire, in any other case.
52
The market value of a property (or part thereof) which is compulsorily acquired by the Singapore Land Authority may be less than the price which SPH REIT paid for acquisition of the relevant property. Failure to assign or to obtain temporary occupation licences (the TOLs) granted by the State or the cancellation or revocation of such TOLs in respect of Paragon may result in SPH REIT incurring financial costs for the removal of certain structures from the encroached lands and adversely affect the rental value of the tenants premises O290 currently holds TOLs granted by the State to occupy certain areas of State land adjoining Paragon 1. The States consent is required for the assignment of the TOLs or for a fresh issuance of TOLs in favour of SPH REIT. Each of the TOLs can be cancelled or revoked by the State at any time by the giving of written notice 2. Also, even if the State were to (i) allow TOLs to be assigned, or (ii) agree to issue fresh TOLs to SPH REIT, it should be noted that each of these TOLs is only granted for very short periods ranging from one to three years and the State may in the future decide not to renew any of these TOLs. Should any of the foregoing occur, SPH REIT will be required to vacate the areas occupied by it pursuant to the relevant TOL and remove all materials, buildings and structures to the satisfaction of the relevant authorities. Further, the provisions of the Paragon Sale Agreement provide that O290 will bear the costs for the removal and reinstatement of the relevant fittings or installations which encroach onto the adjoining State land. Some of the licensed areas serve as critical outdoor refreshment areas for certain F&B tenant(s) and where the TOL for such areas is revoked or not granted, this may result in the rental value of such tenants premises being adversely affected. Based on prior experience, the State will only process applications for the issuance of fresh TOLs after completion of the sale. The State may require O290 to surrender part of the land if the area offered under the Grant in Fee Simple No. 2967 is found to be different from the area determined by final survey Under the Grant in Fee Simple No. 2967 issued by the State in respect of the alienation of two of the lots comprising Paragon (namely, Lot 981T and Lot 1273N both of Town Subdivision 27), O290 is under an obligation to purchase any additional State land or surrender part of the land at the same rate offered for the alienation if the area offered (i.e. 561.0 sq m in respect of Lot 981T and 156.4 sq m in respect of Lot 1273N) is found to be different from the area determined by final survey except where the difference in area does not exceed 1% of the area offered. There is no confirmation that final survey has been carried out or whether the land area of these lots exceed, or is less than, the area offered under the Grant in Fee Simple No. 2967. In the absence of such confirmation, there is a possibility that the State may upon final survey enforce the aforesaid obligation in the future. In the event that any such enforcement takes place and O290 is required to surrender any part of the land, it should be noted that under the Vendor Lease entered into with O290, SPH REIT is required to yield up any such part of the land in its existing state and condition and SPH REIT shall not have any claim or demand against O290 for any costs, damages, compensation or otherwise (including, without limitation, for any refund of any part of the consideration paid by SPH REIT to O290 for Paragon).
O290 does not, and SPH REIT will not, have any legal title to the TOL areas which are the following: (a) that part of the aluminium canopy over the coach bay at Paragon which overhangs the adjoining State land (the area which is the subject of the TOL for this encroachment is approximately 22.91 sq m); (b) part of a canopy and outdoor refreshment area at Paragon which extends onto State land (the areas which are the subject of the TOL for this encroachment are approximately 23.37 sq m); and (c) a wayleave for a planting strip and walkway on adjoining State land for landscaping and pedestrian convenience between the boundary of Paragon and Bideford Road and no area has been specified in the TOL. The aggregate area affected in relation to the TOLs is negligible. The TOLs are contractual licences granted by the State which are for short term periods and are in any case terminable by the giving of written notice by the State at any time.
53
Clementi Mall is affected by various government gazette notifications in connection with the operation of the MRT system, and parts of Clementi Mall are within a railway protection zone and railway safety zone and are also affected by railway protection line, railway safety line and railway 1st reserve line, and certain activities may not be carried out within such parts of Clementi Mall unless the prior approval of the LTA of Singapore has been obtained The land on which Clementi Mall is located is affected by Gazette No. 960 dated 15 March 1985, Gazette No. 3100 dated 6 November 2001, Gazette No. 3623 dated 23 October 1988 and Gazette No. S52 dated 8 March 1988, which relate to various matters concerning the operation of the MRT system. In addition, certain parts of Clementi Mall are within the railway protection zone and railway safety zone such that SPH REIT would be required to obtain the prior approval of the LTA of Singapore before carrying out restricted activities within the railway protection zone and where applicable, the railway safety zone, and any restricted activity being carried out on the railway protection zone and the railway safety zone shall be subject to the regulations under the Rapid Transit Systems (Railway Protection, Restricted Activities) Regulations ( Railway Protection Regulations ). Such restricted activities include the use of any crane, piling equipment, excavator or any other mechanical equipment or vehicle, the storage of materials and the erection of temporary structures such as maintenance towers and hoardings or other similar temporary structures. In addition, as Clementi Mall is affected by a railway 1st reserve line, and given its proximity to the MRT railway, SPH REIT will not be allowed to carry out any restricted activity within six metres of the railway and any person contravening such restriction shall be guilty of an offence. In view of the aforesaid restrictions, any future asset enhancement or other redevelopment or rectification works in respect of Clementi Mall are required to be carefully planned and carried out under close supervision and diligence and in compliance with the Railway Protection Regulations, and to avoid damaging or affecting the MRT structures and the safety of railway operation. If the Manager intends to carry out any restricted activity within the railway protection zone or where applicable, the railway safety zone, there is no guarantee that the LTA would grant its permission. The LTA may impose terms and conditions as it thinks fit in granting its permission. This may affect the ability of SPH REIT to carry out asset enhancement or other development or rectification works in respect of Clementi Mall. Separately, the Independent Valuers have noted and considered the aforesaid gazette notifications and the various railway protection, safety and/or 1st reserve lines in their valuation of Clementi Mall. The Properties are affected by lines of road and tunnel road reserves Lines of road and/or tunnel road reserves indicate the extent of the safeguarded roads and tunnels that affect each Property (as the case may be) and could be applicable when there is a redevelopment of either Property or as and when required by the relevant authorities. The Independent Valuers have noted and considered such lines of road and/or tunnel road reserves in their valuation of the Properties. SPH REIT will be required to incur additional capital expenditure in respect of the plant and equipment at the Properties Mechanical and electrical consultants have recommended that: (a) in respect of Clementi Mall, rectification works be carried out over the next one to three years in respect of some of the plant and equipment of Clementi Mall with the estimated costs being in the region of S$368,000; and in respect of Paragon (i) the carrying out of additional preventive works and that the current maintenance programme for the plant and equipment at Paragon be stepped up, (ii) certain plant and equipment at Paragon be replaced or rectified as soon as possible, and (iii) as most 54
(b)
of the plant and equipment at Paragon are at the end of their economic useful lifespan, major overhauling, progressive replacement or upgrading be scheduled and budgeted for over the next five years with the estimated costs being in the region of S$12,200,000. In order to carry out the recommendations by the mechanical and electrical consultants, SPH REIT will be required to incur additional capital expenditure in respect of the plant and equipment at the Properties. CM Domain has already incurred a sum of S$80,000 for some of the rectification works recommended by the mechanical and electrical consultants thereby leaving a balance of S$288,000 for the carrying out of the remaining rectification works recommended by the mechanical and electrical consultants. SPH REIT has provided for capital expenditure costs of S$14,433,000 for FY2014 and the said sum of S$14,433,000 includes a sum of S$5,000,000 for the replacement of certain lifts and escalators at Paragon. RISKS RELATING TO SPH REITS OPERATIONS SPH REIT is exposed to economic and real estate market conditions (including uncertainties and instability in global market conditions and increased competition in the real estate market) The Properties are located in Singapore. As a result, SPH REITs Gross Revenue and results of operations depend on the performance of the Singapore economy. A decline in Singapores economy could adversely affect SPH REITs results of operations and future growth. The performance of SPH REIT may also be adversely affected by a number of real estate market conditions in Singapore and neighbouring countries including Indonesia, such as the competitiveness of competing medical and retail properties or an oversupply of or reduced demand for medical and retail properties. This could affect the number of shoppers (including tourists) visiting the Properties. In addition, Singapores economy is affected by global economic conditions. The global credit markets have experienced, and may continue to experience, volatility and liquidity disruptions which have resulted in the consolidation, failure or near failure of a number of institutions in the banking and insurance industries. In addition, global economic conditions affect the number of tourists visiting Singapore in a given year. These events could adversely affect SPH REIT insofar as they result in: a negative impact on the ability of the tenants to pay their rents in a timely manner or continuing their leases, thus reducing SPH REITs cash flow; an increase in counterparty risk; and/or an increased likelihood that one or more of (i) SPH REITs banking syndicates (if any), (ii) banks or insurers, as the case may be, providing bankers guarantees or performance bonds for the rental deposits or other types of deposits relating to or in connection with the Properties or SPH REITs operations or (iii) SPH REITs insurers, may be unable to honour their commitments to SPH REIT.
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SPH REIT is subject to the risk of non-renewal, non-replacement or early termination of leases If a large number of tenants in the Properties do not renew their leases at the end of a lease cycle or a significant number of early terminations occur, and replacement tenants cannot be found in a timely manner and on terms acceptable to the Manager, there is likely to be a material adverse effect on the Properties, which could materially and adversely affect the business, financial condition and results of operations of SPH REIT. Any loss of major tenants or any breach by major tenants of their obligations under the lease agreements could have an adverse effect on SPH REIT Based on the committed leases (including legally binding letters of offer which have been accepted) as at 28 February 2013, the top 10 tenants 1 of the Properties (in terms of their contributions to Gross Rental Income) accounted for approximately 23.7% of the Gross Rental Income of the Properties for the month of February 2013. The Manager expects that SPH REIT will continue to be dependent upon the major tenants for a significant portion of its Gross Rental Income. There is a risk that a major tenant prematurely terminates its lease or does not renew its lease at expiry. It may be difficult to secure replacement tenants at short notice or on similar tenancy terms. In addition, the amount of rent and the terms on which lease renewals and new leases are agreed may be less favourable than those of the current leases. The loss of major tenants in any one of the Properties or future properties acquired by SPH REIT could result in periods of vacancy, which could therefore adversely affect SPH REITs financial condition, results of operations and ability to make distributions to Unitholders. Furthermore, in the event that any major tenants of the Properties are unable to pay their rent or breach their obligations under the lease agreements, the level of distributable income may also be adversely affected. The performance of the major tenants other businesses could also have an impact on their ability to make rental payments to SPH REIT. Factors that affect the ability of such major tenants to meet their obligations include, but are not limited to: their financial position; the local economies in which they have business operations; the ability of such major tenants to compete with its competitors; in the instance where such major tenants have sub-leased the Properties, the failure of the sub-tenants to pay rent; and material losses in excess of insurance proceeds.
In this context, SPH REITs top 10 tenants does not take into account one of the tenants which has not consented to the disclosure of its tenancy arrangements in this prospectus. (See Business and Properties Certain Information on the Properties Profile of Top 10 Tenants for further details.)
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The amount that SPH REIT may borrow is limited, which may affect the operations of SPH REIT Under the Property Funds Appendix, SPH REIT is permitted to borrow up to 35.0% of the value of the Deposited Property at the time the borrowing is incurred, taking into account deferred payments (including deferred payments for assets whether to be settled in cash or in Units). However, the Property Funds Appendix also allows SPH REIT to borrow more than 35.0% (up to a maximum of 60.0%) of the value of the Deposited Property if a credit rating from Fitch, Moodys or Standard & Poors is obtained and disclosed to the public. As at the Listing Date, SPH REIT is expected to have an Aggregate Leverage of 31.3% (based on the Minimum Offering Price). (See Capitalisation Indebtedness for further details.) SPH REIT may, from time to time, require further debt financing to carry out its investment strategies. In the event that SPH REIT decides to incur additional borrowings in the future, SPH REIT may face adverse business consequences as a result of this limitation on future borrowings, and these may include: an inability to fund capital expenditure requirements in relation to the Initial Portfolio or in relation to SPH REITs acquisitions to expand its portfolio; a decline in the value of the Deposited Property which may cause the borrowing limit to be exceeded, thus affecting SPH REITs ability to make further borrowings; and cashflow shortages (including with respect to distributions) which SPH REIT might otherwise be able to resolve by borrowing funds.
SPH REIT may face risks associated with debt financing and the debt facilities and the debt covenants could limit or affect SPH REITs operations SPH REIT is subject to risks associated with the Facility, including the risk that its cash flow will be insufficient to meet the required payments of principal and interest under such financing or its inability to comply with or maintain certain financial covenants or security ratios under such debt facilities. SPH REIT is also exposed to fluctuations in interest rates in respect of the portion of the gross borrowings which are subject to floating interest rates, and any rise in the prevailing interest rates may increase the quantum of interest payable by SPH REIT. SPH REIT will distribute 100.0% of its Specified Taxable Income for the Forecast Period 2H FY2013 and Projection Year FY2014 and at least 90.0% of its Specified Taxable Income thereafter. As a result of this distribution policy, SPH REIT may not be able to meet all of its obligations to repay any future borrowings through its cash flow from operations. SPH REIT may be required to repay maturing debt with funds from additional debt or equity financing or both. There is no assurance that such financing will be available on acceptable terms or at all. If SPH REIT defaults under such debt facilities, the lenders may be able to declare an event of default requiring the immediate repayment of the outstanding amount under the debt facilities and initiate enforcement proceedings in respect of any security provided, and/or call upon any guarantees provided. If SPH REITs property is mortgaged, such property could be foreclosed by the lender or the lender could require a forced sale of the property and utilise the proceeds thereof to repay the principal and interest under the debt facilities, which will result in a loss of income and asset value to SPH REIT. (See Capitalisation Indebtedness for further details.)
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If principal amounts due for repayment at maturity cannot be refinanced, extended or paid with proceeds from other capital sources, such as new equity capital, SPH REIT will not be able to pay distributions at expected levels to Unitholders or to repay all maturing debt. SPH REIT may be subject to the risk that the terms of any refinancing undertaken will be less favourable than the terms of the original borrowings. SPH REIT may also be subject to certain covenants that may limit or otherwise adversely affect its operations and its ability to make distributions to Unitholders. Such covenants may also restrict SPH REITs ability to acquire properties or undertake other capital expenditure and may require it to set aside funds for maintenance or repayment of security deposits or require SPH REIT to maintain certain financial ratios (e.g. loan to value ratios). The triggering of any of such covenants may have an adverse impact on SPH REITs financial condition, results of operations and ability to make distributions to Unitholders. SPH REITs level of borrowings may rise to a higher level of gearing as compared to certain other types of unit trusts, such as non-specialised collective investment schemes which invest in equities and/or fixed income instruments. If prevailing interest rates or other factors at the time of refinancing (such as the possible reluctance of lenders to make commercial property loans) result in higher interest rates, the interest expense relating to such refinanced indebtedness would increase, thereby adversely affecting SPH REITs cash flow and the amount of funds available for distribution to the Unitholders. As a condition of the tax transparency treatment, SPH REIT is required to distribute at least 90.0% of its Specified Taxable Income (failing which the Specified Taxable Income will be assessed to tax in the hands of the Trustee) and may face liquidity constraints The Manager and the Trustee have jointly undertaken to distribute at least 90.0% of SPH REITs Specified Taxable Income to Unitholders in the same year in which the income is derived for the purpose of applying for tax transparency treatment. If SPH REITs Specified Taxable Income is greater than its cashflow from operations (for example, due to tax adjustments for non-deductible expenses), it may have to borrow to meet on-going cashflow requirements in order to distribute at least 90.0% of its Specified Taxable Income since it may not have any reserves to draw on. SPH REITs ability to borrow is, however, limited by the Property Funds Appendix. Failure to make distributions of at least 90.0% of SPH REITs Specified Taxable Income would result in a breach of the joint undertaking and consequently, the Specified Taxable Income would be assessed to tax in the hands of the Trustee, hence reducing the amount available for distribution. (See Taxation Income Tax Taxation of SPH REIT for further details.) Neither SPH REIT nor the Manager has a long established operating history SPH REIT was constituted on 9 July 2013, and the Manager was incorporated on 1 March 2013. Neither SPH REIT (as a REIT) nor the Manager (as the manager of SPH REIT) has sufficient operating histories by which their past performance may be judged. The lack of a long established operating history will make it more difficult for investors to assess SPH REITs future performance. There is no assurance that SPH REIT will be able to generate sufficient revenue from operations to make distributions or that such distributions will be in line with those set out in Profit Forecast and Profit Projection. The Manager may not be able to implement its investment strategy for SPH REIT There is no assurance that the Manager will be able to implement its investment strategy successfully or that it will be able to expand SPH REITs portfolio at any specified rate or to any specified size. The Manager may not be able to make acquisitions or investments on favourable terms or within a desired time frame.
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SPH REIT faces active competition in acquiring suitable properties. There may be significant competition for attractive investment opportunities from other property investors, including other REITs, commercial property development companies and private investment funds. There is no assurance that SPH REIT will be able to compete effectively against such entities. As such, SPH REITs ability to make new property acquisitions under its acquisition growth strategy may be adversely affected. Even if SPH REIT were able to successfully acquire property or investments, there is no assurance that SPH REIT will achieve its intended return on such acquisitions or investments. Since the amount of borrowings that SPH REIT can incur to finance acquisitions is limited by the Property Funds Appendix, such acquisitions may be affected by SPH REITs ability to raise equity capital. This may result in a dilution of Unitholders holdings. In the event that equity capital needs to be raised in order to finance an acquisition, potential vendors may view negatively the prolonged time frame and lack of certainty associated with the raising of equity capital to fund any such purchase. They may instead prefer other potential purchasers. SPH REITs external growth strategy and its asset selection process may not be successful and may not provide positive returns to Unitholders. Acquisitions may cause disruptions to SPH REITs operations and divert the Managers attention away from day-to-day operations. New Units issued in connection with any new acquisition could also be substantially dilutive to Unitholders. In addition, the acquisitions themselves may not be yield accretive to Unitholders. The Manager may not be able to implement its acquisition growth strategy due to the Sponsors limited pipeline The Sponsors pipeline of income-producing real estate which is used primarily for retail purposes is limited. Accordingly, in the event that the Manager is not able to independently source for future acquisition opportunities from third parties, the Manager may not be able to implement its acquisition growth strategy. The Managers strategy to initiate asset enhancement on some of the Properties from time to time may not materialise The Manager may from time to time initiate asset enhancement on some of the Properties. There is no assurance that such plans for asset enhancement will materialise, or in the event that they do materialise, they may not achieve their desired results or may incur significant costs to SPH REIT. Possible change of investment strategies, policies and capital structure may adversely affect the Unitholders investments in SPH REIT The Manager may from time to time amend the investment strategies of SPH REIT if it determines that such change is in the best interest of SPH REIT and its Unitholders without seeking Unitholders approval. In the event of a change of investment strategies, the Manager may, subject to the relevant laws, regulations and rules (including the Listing Manual), alter such investment strategies upon the expiry of three years from the Listing Date, provided that it has given not less than 30 days prior notice of the change to the Trustee and Unitholders by way of an announcement on the SGX-ST. The methods of implementing SPH REITs investment strategies may vary as new investment and financing techniques are developed or otherwise used. Any such changes may adversely affect the Unitholders investment in SPH REIT.
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There may be potential conflicts of interest which may arise in the future between SPH REIT and the Sponsor and its subsidiaries and related corporations (the Sponsor Group) The members of the Sponsor Group are engaged in the investment for the long term in, and the development and management of, among other things, real estate which is wholly or partially used for retail purposes. To demonstrate the commitment of the Sponsor and as a means to mitigate any potential conflict of interests which may arise in the future, the Sponsor has granted a ROFR to SPH REIT (see Certain Agreements Relating to SPH REIT and the Properties Right of First Refusal Agreement for further details.) If the Managers capital markets services licence for REIT management (CMS Licence) is cancelled or the authorisation of SPH REIT as a collective investment scheme under Section 286 of the SFA is suspended, revoked or withdrawn, the operations of SPH REIT will be adversely affected The CMS Licence issued to the Manager is subject to conditions unless otherwise cancelled by the MAS. If the CMS licence of the Manager is cancelled by the MAS, the operations of SPH REIT will be adversely affected, as the Manager would no longer be able to act as the manager of SPH REIT. SPH REIT was authorised as a collective investment scheme on and must comply with the requirements under the SFA and the Property Funds Appendix. In the event that the authorisation of SPH REIT is suspended, revoked or withdrawn, its operations will also be adversely affected. There is no assurance that SPH REIT will be able to leverage on the Sponsors experience in the operation of the Properties In the event that the Sponsor decides to transfer or dispose of its Units or its shares in the Manager, SPH REIT may no longer be able to leverage on: the Sponsors experience in the ownership and operation of commercial properties; or the Sponsors financial strength, market reach and network of contacts to further its growth.
In such an event, SPH REIT may not be able to benefit from the range of corporate services which are available to owners of properties managed by the Sponsor. This may have a material and adverse impact on SPH REITs results of operations and financial condition which may consequently affect its ability to make distributions to its Unitholders. SPH REIT will not have a right of first refusal to purchase the ROFR Properties if the Sponsor and/or any of its related corporations cease to be the controlling shareholder of the Manager The Sponsor has granted to SPH REIT the ROFR which covers any proposed offer by a Relevant Entity (as defined herein) to dispose of any interest in any Relevant Asset (as defined herein) which is owned by a Relevant Entity. Pursuant to the terms of the ROFR, the ROFR may be subject to consent from third parties. The Sponsor shall use its best endeavours to obtain the consent of the relevant third parties, failing which the ROFR will exclude such Relevant Assets. There can be no assurance that such third parties will give such consent. It should also be noted that the ROFR is subject to any prior overriding contractual obligations of the Relevant Entity.
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However, the ROFR will terminate in the event that (a) the Manager or any of its related corporations cease to remain as the manager of SPH REIT; (b) the Sponsor and/or any of its related corporations, alone or in aggregate, cease to remain as a controlling shareholder of the manager of SPH REIT; or (c) the Sponsor and/or any of its related corporations, alone or in aggregate, cease to remain as a controlling unitholder of SPH REIT. This may adversely affect SPH REITs pipeline of future acquisitions. (See Certain Agreements Relating to SPH REIT and the Properties Right of First Refusal Agreement for further details.) SPH REITs investment strategy may entail a higher level of risk as compared to other types of unit trusts that have a more diverse range of investments SPH REITs principal strategy of investing, directly or indirectly, in real estate will subject SPH REIT to risks inherent in concentrating in real estate. The level of risk could be higher as compared to other types of unit trusts that have a more diverse range of investments in other sectors. A concentration of investments in real estate exposes SPH REIT to the risk of a downturn in the real estate market in Singapore. Such downturns may lead to a decline in Committed Occupancy for properties or real estate-related assets in SPH REITs portfolio. This will affect SPH REITs Gross Revenue from the Properties, and/or result in a decline in the capital value of SPH REITs portfolio, which will have an adverse impact on distributions to the Unitholders and/or on the results of operations and the financial condition of SPH REIT. Occurrence of any acts of God, war, terrorist attacks and adverse weather conditions may adversely and materially affect the business and operations of the Properties Acts of God such as natural disasters are beyond the control of SPH REIT or the Manager and may materially and adversely affect the economy, infrastructure and livelihood of the local population. SPH REITs business and income available for distribution may be materially and adversely affected should such acts of God occur. There can be no assurance that any war, terrorist attack or other hostilities in any part of the world, potential, threatened or otherwise, and/or adverse weather conditions such as haze from forest fires will not, directly or indirectly, have a material and adverse effect on the operations of SPH REIT and hence SPH REITs income available for distribution to Unitholders. Epidemic diseases in Asia and elsewhere may adversely affect SPH REITs operations Several countries in Asia, have suffered from outbreaks of communicable diseases such as SARS and avian flu. A new and prolonged outbreak of such diseases may have a material adverse effect on SPH REITs business and financial condition and results of operations. Although the long-term effect of such diseases cannot be predicted, previous occurrences of SARS and avian flu had an adverse effect on the economies of those countries in which they were most prevalent. The outbreak of a communicable disease such as SARS or avian flu, together with any resulting restrictions on travel and/or imposition of quarantines could have a negative impact on the economy and business activities in Asia and would thereby adversely affect the revenues, results and financial conditions of SPH REIT. Decrease in demand for private HCS will affect SPH REIT indirectly The financial performance of the tenants in Paragon Medical is dependent on the demand for private HCS from both local and foreign patients. In the event that there is a decrease in demand for such services due to factors such as a general downturn in global, regional or local economy, the outbreak of an epidemic, restriction on travel imposed by governments, fears of terrorism in the region or the perception that public HCS or HCS in neighbouring countries are comparable or better in terms of quality of service and provided at comparable or cheaper rates, the financial 61
performance of the tenants in Paragon Medical will be adversely affected and consequently the ability of tenants in Paragon Medical to make rental payments to SPH REIT will be affected indirectly. SPH REIT depends on certain key personnel and the loss of any key personnel may adversely affect its operations SPH REITs performance depends, in part, upon the continued service and performance of executive officers of the Manager. These key personnel may leave the employment of the Manager. If any of the above were to occur, the Manager will need to spend time searching for a replacement and the duties which such executive officers are responsible for may be affected. The loss of any of these individuals could have a material adverse effect on SPH REITs operations and financial condition. SPH REIT may engage in interest rate hedging transactions, which can limit gains and increase costs SPH REIT may enter into interest rate hedging transactions to protect itself from the effects of interest rate on floating rate debt. Interest rate hedging activities may not have the desired beneficial impact on the operations or financial condition of SPH REIT. Interest rate hedging could fail to protect SPH REIT or adversely affect SPH REIT because among others: the party owing money in the hedging transaction may default on its obligation to pay; the credit quality of the party owing money on the hedge may be downgraded to such an extent that it impairs SPH REITs ability to sell or assign its side of the hedging transaction; and the value of the derivatives used for hedging may be adjusted from time to time in accordance with accounting rules to reflect changes in fair value. Such changes although unrealised, would reduce the NAV of SPH REIT if it is due to downward adjustments.
Interest rate hedging involves risks and transaction costs, which may reduce overall returns. SPH REITs investment objective of investing in Asia-Pacific retail properties with the Initial Portfolio in Singapore may entail a higher level of risk compared to unit trusts that have a more diverse range of investments The risk of investing in SPH REIT, which invests in Asia-Pacific retail properties with the Initial Portfolio located in Singapore, could be higher compared to unit trusts that have a more diverse range of investments. Until SPH REIT diversifies its portfolio sufficiently to include assets from other parts of the Asia-Pacific region, the concentration of investments in retail real estate assets located in Singapore exposes SPH REIT to both a downturn in the retail real estate market and the Singapore economy. Any economic slowdown in Singapore could adversely affect the performance of the retail real estate market in Singapore as well as the financial condition or success of tenants, thereby adversely affecting the financial condition, results of operations or cashflow of SPH REIT. A prolonged economic downturn may cause higher levels of non-renewals of leases or vacancies as a result of failures or defaults by tenants. There can be no assurance that the tenants of SPH REITs properties will renew their leases or that any new lease terms will be as favourable as the existing leases. In the event that a tenant does not renew its lease, a replacement tenant or tenants would need to be identified, which could subject SPH REITs properties to periods of vacancy and/or costly refittings, resulting in a reduction in rental income or increase in operating expenses. 62
RISKS RELATING TO INVESTING IN REAL ESTATE There are general risks attached to investments in real estate Investments in real estate and therefore the income generated from the Properties are subject to various risks, including but not limited to: adverse changes in political or economic conditions; adverse local market conditions (such as over-supply of properties or reduction in demand for properties in the market in which SPH REIT operates); the financial condition of tenants; competition among property owners for tenants which may lead to vacancies or an inability to rent space on favourable terms; ability to rent out properties on favourable terms; inability to renew leases or re-let space as existing leases expire; inability to collect rents from tenants on a timely basis or at all due to bankruptcy or insolvency of the tenants or otherwise; the attractiveness of SPH REITs properties to tenants; the availability of financing such as changes in availability of debt or equity financing, which may result in an inability by SPH REIT to finance future acquisitions on favourable terms or at all; changes in interest rates and other operating expenses; changes in environmental laws and regulations, zoning laws and other governmental laws, regulations and rules and fiscal policies (including tax laws and regulations); environmental claims in respect of real estate; changes in market rents; changes in energy prices; changes in the relative popularity of property types and locations leading to an oversupply of space or a reduction in tenant demand for a particular type of property in a given market; insufficiency of insurance coverage or increases in insurance premiums; increases in the rate of inflation; inability of the Property Manager to provide or procure the provision of adequate maintenance and other services; defects affecting the Properties which need to be rectified, or other required repair and maintenance of the Properties, leading to unforeseen capital expenditure; the relative illiquidity of real estate investments; 63
considerable dependence on cashflow for the maintenance of, and improvements to, the Properties; increased operating costs, including real estate taxes; any defects or illegal structures that were not uncovered by physical inspection or due diligence review; management style and strategy of the Manager; the cost of regulatory compliance; and power supply failure, acts of God, wars, terrorist attacks, uninsurable losses and other factors.
Many of these factors may cause fluctuations in occupancy rates, rental rates or operating expenses, causing a negative effect on the value of real estate and income derived from real estate. The annual valuation of the Properties will reflect such factors and as a result may fluctuate upwards or downwards. The capital value of SPH REITs real estate assets may be significantly diminished in the event of a sudden downturn in real estate market prices or the economy in Singapore, which may adversely affect the financial condition of SPH REIT. SPH REIT may be adversely affected by the illiquidity of real estate investments SPH REIT invests primarily in real estate and real estate-related assets. Real estate investments, particularly investments in high value properties such as those in which SPH REIT has invested or in which it intends to invest, are relatively illiquid. Such illiquidity may affect SPH REITs ability to vary its investment portfolio or liquidate a portion of its assets in response to changes in economic, real estate market or other conditions. For instance, SPH REIT may be unable to sell its assets on short notice or may be forced to give a substantial reduction in the price in order to ensure a quick sale. Moreover, SPH REIT may face difficulties in securing timely and commercially favourable financing in asset-based lending transactions secured by real estate due to the illiquid nature of real estate assets. These factors could have an adverse effect on SPH REITs financial condition and results of operations, with a consequential adverse effect on SPH REITs ability to make distributions to Unitholders. The Gross Revenue earned from and the value of, the Properties may be adversely affected by a number of factors The Gross Revenue earned from and the value of, the Properties may be adversely affected by a number of factors, including, but not limited to: the Property Managers ability to collect rent from the tenants on a timely basis or at all; the amount and extent to which SPH REIT is required to grant rental rebates to the tenants; defects affecting the Properties which could affect the operations of tenants resulting in the inability of such tenants to make timely payments of rent or at all; the tenants seeking the protection of bankruptcy or insolvency laws which could result in delays in the receipt of rent payments, inability to collect rental income or delays in the termination of the lease which could hinder or delay the re-letting of the space in question or the sale of the relevant property;
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the local and international economic climate and real estate market conditions (such as oversupply of, or reduced demand for space, changes in market rental rates and operating expenses for the Properties); retail market conditions as a portion of rental revenue is based on tenants turnover; vacancies following the expiry or termination of leases (with or without cause) that lead to reduced occupancy rates; terms agreed under new tenancies being less favourable than those under current tenancies; the Managers ability to provide adequate management and maintenance or to purchase or put in place adequate insurance; competition from other commercial properties for tenants; changes in laws and governmental regulations in relation to real estate, including those governing usage, zoning, taxes and government charges. Such revisions may lead to an increase in management expenses or unforeseen capital expenditure to ensure compliance. Rights related to the Properties may also be restricted by legislative actions, such as revisions to the laws relating to building standards or town planning laws, or the enactment of new laws related to condemnation and redevelopment; and acts of God, wars, terrorist attacks, riots, civil commotions, widespread communicable diseases, natural disasters and other events beyond the control of the Manager.
The Properties may be subject to increases in direct expenses and other operating expenses SPH REITs ability to make distributions to Unitholders apart from the several circumstances set out below could be adversely affected if direct expenses and other operating expenses increase (save for such expenses which SPH REIT is not responsible for pursuant to the lease agreements) without a corresponding increase in revenue. Factors which could lead to an increase in expenses include, but are not limited to, the following: increase in property tax assessments and other statutory charges; change in statutory laws, regulations or government policies which increase the cost of compliance with such laws, regulations or policies; change in direct or indirect tax policies; increase in sub-contracted service costs; increase in labour costs; increase in repair and maintenance costs; increase in the rate of inflation; defects affecting, or environmental pollution in connection with, SPH REITs properties which need to be rectified; increase in insurance premium; and increase in cost of utilities.
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RISKS RELATING TO AN INVESTMENT IN THE UNITS The sale or possible sale of a substantial number of Units by the Sponsor (following the lapse of any applicable lock-up arrangements or pursuant to applicable waivers) or the Cornerstone Investors in the public market could have adverse effects on the Unit price of SPH REIT Following the Offering, SPH REIT will have 2,500,995,000 issued Units, of which 1,806,685,000 Units will be held indirectly by the Sponsor assuming the Over-Allotment Option is not exercised and 251,000,000 Units will be held by the Cornerstone Investors. If any of the Sponsor and/or any of its transferees of the Units (following the lapse of the relevant respective lock-up arrangements, or pursuant to any applicable waivers) or any of the Cornerstone Investors sells or is perceived as intending to sell a substantial amount of its Units, or if a secondary offering of the Units is undertaken in connection with an additional listing on another securities exchange, the market price for the Units could be adversely affected (see Plan of Distribution Lock-up Arrangements and Ownership of the Units for further details). SPH REIT may not be able to make distributions to Unitholders or the level of distributions may fall The Net Property Income earned from real estate investments depends on, among other factors, the amount of rental income received, and the level of property, operating, financing and other expenses incurred. If the Properties do not generate sufficient Net Property Income, SPH REITs income, cash flow and ability to make distributions to Unitholders will be adversely affected. No assurance can be given as to SPH REITs ability to pay or maintain distributions to Unitholders. There is also no assurance that the level of distributions will increase over time, that there will be contractual increases in rent under the leases of the Properties or that receipt of incremental rental income in connection with expansion of the Properties or future acquisitions of properties will increase SPH REITs cash flow available for distribution to Unitholders. Market and economic conditions may affect the market price and demand for the Units Movements in domestic and international securities markets, economic conditions, foreign exchange rates and interest rates may affect the market price of, and demand for, the Units. In particular, an increase in market interest rates may have an adverse impact on the market price of the Units if the annual yield on the price paid for the Units gives investors a lower return compared to other investments. The NAV per Unit may be diluted if further issues are priced below the current NAV per Unit The Trust Deed contemplates future issues of new Units, the offering price for which may be above, at or below the then current NAV per Unit. Where new Units, including Units which may be issued to the Manager in payment of the Managers management fees, are issued at less than the current NAV per Unit, the NAV of each existing Unit may be diluted. The laws, regulations and accounting standards in Singapore may change SPH REIT may be affected by the introduction of new or revised legislation, regulations or accounting standards. Accounting standards in Singapore are subject to changes as accounting standards in the country are further aligned with international accounting standards. The financial statements of SPH REIT may be affected by the introduction of such revised accounting standards. The extent and timing of these changes in accounting standards are unknown and are subject to confirmation by the relevant authorities. There can be no assurance that these changes will not have a significant impact on the presentation of SPH REITs financial statements or on 66
SPH REITs results of operations. Such changes may adversely affect the ability of SPH REIT to make distributions to Unitholders. There can be no assurance that any such changes in laws, regulations and accounting standards will not have an adverse effect on the ability of the Manager to carry out SPH REITs investment strategy or on the operations and financial condition of SPH REIT. Foreign Unitholders may not be permitted to participate in future rights issues or entitlements offerings by SPH REIT The Trust Deed provides that in relation to any rights issue, the Manager may, in its absolute discretion, elect not to extend an offer of Units under a rights issue to those Unitholders whose addresses, as registered with CDP, are outside Singapore. The rights or entitlements to the Units to which such Unitholders would have been entitled will be offered for sale and sold in such manner, at such price and on such other terms and conditions as the Manager may determine, subject to such other terms and conditions as the Trustee may impose. The proceeds of any such sale will be paid to the Unitholders whose rights or entitlements have been so sold, provided that where such proceeds payable to the relevant Unitholders are less than S$10.00, the Manager is entitled to retain such proceeds as part of the Deposited Property. The holding of the relevant holder of the Units may be diluted as a result of such sale. The actual performance of SPH REIT and the Properties could differ materially from the forward-looking statements in this Prospectus This Prospectus contains forward-looking statements regarding, among other things, projected distribution levels. These forward-looking statements are based on a number of assumptions which are subject to significant uncertainties and contingencies, many of which are outside of the Managers control (see Profit Forecast and Profit Projection Assumptions for further details). In addition, SPH REITs revenue is dependent on a number of factors including the rent from the Properties, which may decrease for a number of reasons including the lowering of occupancy and rental rates, insolvency or delay in rent payment by tenants. This may adversely affect SPH REITs ability to achieve the projected distributions as some or all events and circumstances assumed may not occur as expected, or events and circumstances may arise which are not currently anticipated. Actual results may be materially different from the projections. No assurance can be given that the assumptions will be realised and that actual distributions will be as projected. Property yield on real estate to be held by SPH REIT is not equivalent to distribution yield on the Units Generally, property yield depends on Net Property Income and is calculated as the amount of revenue generated by the properties, less the expenses incurred in maintaining, operating, managing and leasing the properties compared against the current value of the properties. Distribution yield on the Units, however, depends on the distributions payable on the Units as compared with the purchase price of the Units. While there may be some correlation between these two yields, they are not the same and will vary accordingly for investors who purchase Units at a market price that differs from the price of the Units at the Offering. The Manager is not obliged to redeem Units Unitholders have no right to request the Manager to redeem their Units while the Units are listed on the SGX-ST. It is intended that Unitholders may only deal in their listed Units through trading on the SGX-ST. Accordingly, apart from selling their Units through trading on the SGX-ST, Unitholders may not be able to realise their investments in Units.
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The Units have never been publicly traded and the listing of the Units on the Main Board of the SGX-ST may not result in an active or liquid market for the Units Prior to the Offering, there was no public market for the Units and an active public market for the Units may not develop or be sustained after the Offering. While the Manager has received a letter of eligibility from the SGX-ST to have the Units listed and quoted on the Main Board of the SGX-ST, listing and quotation does not guarantee the development of a trading market for the Units or, if a market does develop, the liquidity of that market for the Units. Prospective Unitholders should view the Units as illiquid and should be prepared to hold their Units for an indefinite length of time. Further, it may be difficult to assess SPH REITs performance against either domestic or international benchmarks. There is no assurance that the Units will remain listed on the SGX-ST Although it is currently intended that the Units will remain listed on the SGX-ST, there is no guarantee of the continued listing of the Units. Among other factors, SPH REIT may not continue to satisfy any future listing requirements of the SGX-ST. Accordingly, Unitholders will not be able to sell their Units through trading on the SGX-ST if the Units are no longer listed on the SGX-ST. Certain provisions of the Singapore Code on Take-overs and Mergers (the Take-over Code) could have the effect of discouraging, delaying or preventing a merger or acquisition, which could adversely affect the market price of the Units Under the Take-over Code, an entity is required to make a mandatory offer for all the Units not already held by it and/or parties acting in concert with it (as defined by the Take-over Code) in the event that an increase in the aggregate unitholdings of it and/or parties acting in concert with it results in the aggregate unitholdings crossing certain specified thresholds unless it falls within certain exceptions. While the Take-over Code seeks to ensure an equality of treatment among Unitholders, its provisions could substantially impede the ability of Unitholders to benefit from a change in control and, as a result, may adversely affect the market price of the Units and the ability to realise any potential change of control premium. The price of the Units may decline after the Offering The Offering Price of the Units is determined by agreement between the Manager and the Joint Bookrunners and may not be indicative of the market price for the Units after the completion of the Offering. The Units may trade at prices significantly below the Offering Price after the Offering. The trading price of the Units will depend on many factors, including but not limited to: the perceived prospects of SPH REITs business and investments and the commercial real estate market; differences between SPH REITs actual financial and operating results and those expected by investors and analysts; changes in analysts recommendations or projections; changes in general economic or market conditions; the market value of SPH REITs assets; the perceived attractiveness of the Units against those of other equity or debt securities, including those not in the real estate sector; 68
the balance of buyers and sellers of the Units; the future size and liquidity of the Singapore REIT market; any future changes to the regulatory system, including the tax system, both generally and specifically in relation to Singapore REITs; the ability of the Manager to successfully implement its investment and growth strategies; foreign exchange rates; and broad market fluctuations, including weakness of the equity market and increases in interest rates.
The issue of Units under the Offering will be at a premium to SPH REITs NAV. On the Listing Date, there will be a premium of 0.9% to the NAV per Unit based on the Minimum Offering Price and the Maximum Offering Price. Units may trade at prices that are higher or lower than the NAV per Unit. To the extent that SPH REIT retains operating cash flow for investment purposes, working capital reserves or other purposes, these retained funds, while increasing the value of SPH REITs underlying assets, may not correspondingly increase the market price of the Units. Any failure to meet market expectations with regards to future earnings and cash distributions may adversely affect the market price for the Units. Where new Units are issued at less than the market price of Units, the value of an investment in Units may be affected. In addition, Unitholders who do not, or are not able to, participate in the new issuance of Units may experience a dilution of their interest in SPH REIT. The Units are not capital-safe products. There is no guarantee that Unitholders can regain the amount invested. If SPH REIT is terminated or liquidated, investors may lose a part or all of their investment in the Units. SPH REIT may be affected by the introduction of new or revised legislation, regulations, guidelines or directions affecting REITs SPH REIT may be affected by the introduction of new or revised legislation, regulations, guidelines or directions affecting REITs. There is no assurance that the MAS or any other relevant authority will not introduce new legislation, regulations, guidelines or directions which would adversely affect REITs generally or SPH REIT specifically. SPH REIT may not be able to comply with the conditions of the joint undertaking that the Trustee and the Manager have given to the IRAS for the purpose of applying for tax transparency treatment The IRAS has accorded the tax transparency treatment to SPH REIT subject to the joint undertaking given by the Trustee and the Manager to comply with certain conditions. One of the conditions of the joint undertaking requires the Trustee and the Manager to notify the IRAS in the event that SPH REIT is unable to meet any of the conditions of the joint undertaking and in such event, the tax transparency treatment accorded will cease to apply from the date of failure to meet the condition. Should the tax transparency treatment cease to apply, the Trustee will be subject to Singapore income tax on SPH REITs Specified Taxable Income and consequently distributions to all Unitholders will be made after tax. (See Appendix D, Independent Taxation Report for further details.)
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Unitholders may bear the effects of the rollover income adjustment mechanism under the tax transparency treatment Under the rollover income adjustment mechanism, any difference between SPH REITs actual Specified Taxable Income (i.e. amount agreed with the IRAS) for a financial year and the amount of Specified Taxable Income computed by the Manager for that financial year for the purpose of making distributions will be added to or deducted from, as the case may be, the amount of distributions subsequently made. The amount of distributions received by Unitholders may therefore be increased or reduced by the amount of such adjustment. Third parties may be unable to recover in claims brought against the Manager as the Manager is not an entity with significant assets Third parties, in particular, Unitholders, may in future have claims against the Manager in connection with the carrying on of its duties as manager of SPH REIT (including in relation to the Offering and this Prospectus). Under the terms of the Trust Deed, the Manager is indemnified from the Deposited Property against any actions, costs, claims, damages, expenses or demands to which it may be put as the manager of SPH REIT unless occasioned by the fraud, gross negligence, wilful default or breach of the Trust Deed by the Manager. In the event of any such fraud, gross negligence, wilful default or breach, only the assets of the Manager itself and not the Deposited Property would be available to satisfy a claim.
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USE OF PROCEEDS
The Manager intends to raise gross proceeds of between S$523 million (based on the Minimum Offering Price of S$0.85) and S$554 million (based on the Maximum Offering Price of S$0.90) from the Offering as well as the Cornerstone Units assuming that the Over-Allotment Option is fully exercised. The Manager also intends to draw down from the Facility an amount of between S$850 million (based on the Maximum Offering Price of S$0.90) and S$975 million (based on the Minimum Offering Price of S$0.85) on the Listing Date. The total proceeds raised from the Offering, the Consideration Units and the Cornerstone Units, as well as the amount drawn down from the Facility will be used towards the following: payment to the Vendors for the purchase price payable in relation to the acquisition of the Properties; payment of transaction costs incurred in relation to the Offering and the Facility; and payment for plant and equipment in relation to the Properties.
The following table, included for the purpose of illustration, sets out the intended sources and applications of the total proceeds from the Offering, and the Cornerstone Units as well as the Facility. Based on the Minimum Offering Price of S$0.85 and assuming that the Over-Allotment Option is fully exercised: Sources Offering Consideration Units Cornerstone Units Facility Total
Notes: (1) (2) Transaction costs include expenses incurred in relation to the Offering and the Facility, where applicable. (See Plan of Distribution Issue Expenses for further details.) Includes certain existing sculptures amounting to S$765,000. (See Certain Agreements Relating to SPH REIT and the Properties Description of the Agreements to Acquire the Properties Paragon Paragon Sale Agreement for further details.)
(S$000) 310,141 1,602,354 213,350 975,000 3,100,845
Applications Acquisition of the Properties Transaction costs

(1)
(S$000) 3,070,500 29,580 765
Plant and equipment (2)
Total
3,100,845
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Based on the Maximum Offering Price of S$0.90 and assuming that the Over-Allotment Option is fully exercised: Sources Offering Consideration Units Cornerstone Units Facility Total
Notes: (1) (2) Transaction costs include expenses incurred in relation to the Offering and the Facility, where applicable. (See Plan of Distribution Issue Expenses for further details.) Includes certain existing sculptures amounting to S$765,000. (See Certain Agreements Relating to SPH REIT and the Properties Description of the Agreements to Acquire the Properties Paragon Paragon Sale Agreement for further details.)
(S$000) 328,385 1,696,610 225,900 849,815 3,100,710
Applications Acquisition of the Properties Transaction costs (1) Plant and equipment
(2)
(S$000) 3,070,500 29,445 765
Total
3,100,710
LIQUIDITY As at the Listing Date, SPH REIT will have a cash balance of approximately S$43.6 million pertaining to security deposits. The Manager believes that this cash balance together with recurring rental receipts will be sufficient for SPH REITs working capital requirements over the next 12 months following the Listing Date.
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OWNERSHIP OF THE UNITS

EXISTING UNITS On 9 July 2013, upon the constitution of SPH REIT, one Unit was issued to TPR. The issue price of the Sponsor Initial Unit was S$1.00. No other Units have been issued. UNITS TO BE ISSUED TO THE VENDORS OF THE PROPERTIES On the Listing Date, separate from the Offering, O290s nominees and CM Domains nominees will receive, as part of the purchase price payable for the sale of Paragon and Clementi Mall respectively, an aggregate of 1,941,110,999 Consideration Units constituting 77.6% of the Units in issue on the Listing Date. PRINCIPAL UNITHOLDERS OF SPH REIT AND THEIR UNITHOLDINGS The total number of Units in issue immediately after completion of the Offering will be 2,500,995,000 Units. The following table sets out the principal Unitholders of SPH REIT and their unitholdings immediately upon completion of the Offering:
Units in issue immediately before the issue of the Offering Units, the Consideration Units and the Cornerstone Units (000) Sponsor Direct Deemed Total NTUC Fairprice Co-operative Ltd NTUC Income Insurance Co-operative Ltd Cornerstone Investors(2) Public and institutional investors
Notes: (1) The Sponsor is deemed to be interested in the one Unit held by TPR upon the constitution of SPH REIT and the 1,264,679,500 Units held by Times Properties and 542,005,500 Units held by TPR after the Offering. TPR is a wholly-owned subsidiary of Times Properties which is in turn a wholly-owned subsidiary of the Sponsor. None of the Cornerstone Investors individually hold 5.0% or more of the Units in issue after the Offering.
(1)
Units in issue after the Offering (assuming that the Over-Allotment Option is not exercised) (000) 1,806,685 1,806,685 67,213 67,213 251,000 308,884 (%) 72.2 72.2 2.7 2.7 10.0 12.4
Units in issue after the Offering (assuming that the Over-Allotment Option is exercised in full) (000) 1,750,697 1,750,697 67,213 67,213 251,000 364,872 (%) 70.0 70.0 2.7 2.7 10.0 14.6
(%) 100.0 100.0
1 1
(2)
LOCK-UPS The Sponsor, Times Properties and TPR have each agreed to a lock-up arrangement during the Lock-up Period in respect of its direct and indirect effective interest in the Lock-up Units, subject to certain exceptions. The Manager has also undertaken not to offer, issue, contract to issue any Units, or make any announcements in connection with any of the foregoing transactions, during the Lock-up Period, subject to certain exceptions. (See Plan of Distribution Lock-up Arrangements for further details.) 73
SUBSCRIPTION BY THE CORNERSTONE INVESTORS In addition, concurrently with, but separate from the Offering, each of the Cornerstone Investors has entered into separate subscription agreements with the Manager to subscribe for an aggregate of 251,000,000 Units at the Offering Price, conditional upon the Underwriting Agreement having been entered into, and not having been terminated, pursuant to its terms on or prior to Settlement Date. Information on the Cornerstone Investors Great Eastern Life Assurance Company Limited Great Eastern Life Assurance Company Limited is the oldest and most established life insurance group in Singapore and Malaysia, with S$61.0 billion in assets and approximately 4.0 million policyholders. The Company also operates in China, Indonesia, Vietnam, and Brunei. Great Eastern Life Assurance Company Limited has been assigned the financial strength and counterparty credit ratings of AA- by Standard & Poors since 2010, one of the highest among Asian life insurance companies. It was voted Life Insurer of the Year at the Asia Insurance Industry Awards 2011 by Asia Insurance Review. Hong Leong Asset Management Bhd Hong Leong Asset Management Bhd ( HLAM ) is a wholly-owned subsidiary of Hong Leong Capital Bhd ( HLGC ), which in turn is 81.33%-owned by Hong Leong Financial Group Bhd ( HLFG ). HLFG and HLGC are entities listed on Bursa Malaysia. HLAM provides asset management solutions covering the Asia-Pacific region to institutions, corporations and retail investors. Morgan Stanley Investment Management Company Morgan Stanley Investment Management Company is a company incorporated in Singapore and is ultimately wholly owned by Morgan Stanley. Morgan Stanley Investment Management Company manages and invests on behalf of client accounts of Morgan Stanley Investment Management Company and that of its affiliates. As at 31 March 2013, Morgan Stanley Investment Management Company and its affiliates worldwide managed and supervised US$314 billion in assets for institutional and retail investors globally. Newton Investment Management Newton Investment Management Limited ( Newton ) is a global investment management company incorporated in England and Wales which provides investment products and services to a broad spectrum of clients. Newton has assets under management of over 49.6 billion (as at 31 December 2012). Norges Bank Norges Bank manages the Norwegian Government Pension Fund Global ( Fund ). In its management of the Fund, Norges Bank works to safeguard and build financial wealth for Norways future generations. The Fund is invested globally in equity, fixed-income and real estate. It held assets worth 4,182 billion kroner at the end of March 2013. SUBSCRIPTION BY THE DIRECTORS The directors of the Manager may subscribe for Units under the Public Offer and/or the Placement Tranche. Save for the Managers internal policy which prohibits the directors of the Manager from dealing in the Units at certain times (see The Manager and Corporate Governance for further details), there is no restriction on the directors of the Manager disposing of or transferring all or any part of their unitholdings. 74
DISTRIBUTIONS
DISTRIBUTION POLICY SPH REITs distribution policy is to distribute 100.0% of SPH REITs Specified Taxable Income for the Forecast Period 2H FY2013 and Projection Year FY2014. Thereafter, SPH REIT will distribute at least 90.0% of its Specified Taxable Income. The actual level of distribution will be determined at the Managers discretion. The actual proportion of Specified Taxable Income distributed to Unitholders beyond the Projection Year FY2014 may be greater than 90.0% to the extent that the Manager believes it to be appropriate, having regard to SPH REITs funding requirements, other capital management considerations and the overall stability of distributions. Distributions will be declared in Singapore dollars. FREQUENCY OF DISTRIBUTIONS After SPH REIT is admitted to the Main Board of the SGX-ST, it will make distributions to Unitholders on a quarterly basis, with the amount calculated as at 31 August, 30 November, 28 February or 29 February (in the event of a leap year) and 31 May each year for the three-month period ending on each of the said dates. SPH REITs First Distribution after the Listing Date will be for the period from the Listing Date to 30 November 2013 and will be paid by the Manager on or before 27 February 2014. Subsequent distributions will take place on a quarterly basis. The Manager will endeavour to pay distributions no later than 90 days after the end of each distribution period. SPH REITs primary sources of liquidity for the funding of distributions, servicing of debt, payment of non-property expenses and other recurring capital expenditure will be the receipts of rental income and borrowings. Under the Property Funds Appendix, if the Manager declares a distribution that is in excess of profits, the Manager should certify, in consultation with the Trustee, that it is satisfied on reasonable grounds that, immediately after making the distribution, SPH REIT will be able to fulfil, from the Deposited Property, the liabilities of SPH REIT as they fall due. The certification by the Manager should include a description of the distribution policy and the measures and assumptions for deriving the amount available to be distributed from the Deposited Property. The certification should be made at the time the distribution is declared.
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CAPITALISATION
The following table sets forth the pro forma capitalisation of SPH REIT as at the Listing Date and after application of the total proceeds from the Offering, and the Cornerstone Units, based on the Maximum Offering Price and Minimum Offering Price. The information in the table below should be read in conjunction with Use of Proceeds. Based on Maximum Offering Price of S$0.90 (S$000) Borrowings . . . . . . . . . . . . . . . . . . . Units in issue . . . . . . . . . . . . . . . . . Total Capitalisation . . . . . . . . . . . INDEBTEDNESS Upon listing, SPH REIT will have in place the Facility, being a secured term loan facility of S$975.0 million obtained from DBS Bank Ltd. and Oversea-Chinese Banking Corporation Limited (the Lenders ) which will be drawn upon for an amount of between S$850 million (based on the Maximum Offering Price of S$0.90) and S$975 million (based on the Minimum Offering Price of S$0.85) on the Listing Date. The Facility has staggered loan maturities of three, five and seven year terms as described below: approximately one-third of the Facility repayable in three years; approximately one-third of the Facility repayable in five years; and approximately one-third of the Facility repayable in seven years. 849,815 2,250,895 3,100,710 Based on Minimum Offering Price of S$0.85 (S$000) 975,000 2,125,845 3,100,845
The Facility will be used to part finance the acquisition by SPH REIT of the Properties. The Facility will be secured, inter alia , by way of a first legal mortgage over Paragon ( Secured Property ), first legal charge over the tenancy account and sales proceeds account for the Secured Property, and an assignment of the insurances (save for any third party liability insurances) taken in relation to the Secured Property. The Facility agreement contains covenants which are typical for financing of such nature including covenants which require, inter alia , that: (i) SPH REITs Aggregate Leverage shall not be more than (i) 35.0% if SPH REIT is unrated; and (ii) 60.0% if SPH REIT is rated; SPH REITs minimum interest coverage ratio shall be 1.5 times; and
(ii)
(iii) SPH REIT shall remain listed. In addition, the Facility agreement contains two change of control provisions, as set out below: (i) the Sponsor shall directly and/or indirectly own no less than 30.0% of the units of SPH REIT; and the Sponsor shall directly and/or indirectly own no less than 100.0% of the Manager. In the event that the Manager is not a wholly-owned subsidiary of the Sponsor, the Lenders are entitled to require a repayment of the entire Facility.
(ii)
Upon listing, the Manager intends to use fixed rate loans and/or interest rate swaps to effectively fix the interest rates for 50% of the Facility. 76

The Manager is unable to include the latest three financial years of Clementi Mall in the pro forma financial information of SPH REIT in this Prospectus as: Clementi Mall, which comprises approximately 18.5% of the Initial Portfolio (based on Net Property Income of the Properties for the FY2012), was available for full occupation when it received its second TOP on 14 March 2011. Accordingly, historical financial information for Clementi Mall prior to the second TOP would not be representative of SPH REITs performance. The Manager intends to include Clementi Malls historical financial information from March 2011 in the pro forma financial information of SPH REIT in the Prospectus, which represents 2 years from March 2011 to February 2013. Paragon represents approximately 81.5% of the Initial Portfolio (based on Net Property Income of the Properties for the FY2012). Given the substantial contribution of Paragon to the Initial Portfolio, the period of availability of historical financials for Paragon would be more representative of the pro forma historical financial information of SPH REIT.
For the reasons stated above, the SGX-ST has granted SPH REIT a waiver from the requirement to include the latest three financial years of Clementi Mall in the pro forma financial information of SPH REIT in the Prospectus, subject to inclusion of the following in this Prospectus: pro forma historical statements of total return of the Initial Portfolio for a period of three years from 1 September 2009 to 31 August 2012 and for each of the six-month periods ended 29 February 2012 and 28 February 2013, save that such financial information will only cover, in respect of Clementi Mall, financial information from the time when Clementi Mall received the second TOP on 14 March 2011; unaudited pro forma balance sheets as at 31 August 2012 and as at 28 February 2013; unaudited cash flows statements for the FY2012 and for each of the six-month periods ended 29 February 2012 and 28 February 2013; a profit forecast for the financial period from 1 March 2013 to 31 August 2013 and a profit projection for the financial year from 1 September 2013 to 31 August 2014; and full disclosure on the reasons why the full three-year pro forma financial information of SPH REIT only incorporates historical financial information of Clementi Mall from March 2011.
The unaudited pro forma financial information of SPH REIT ( Unaudited Pro Forma Financial Information ) have been prepared for illustrative purpose only and on the basis of the assumptions and accounting policies set out in Appendix C, Unaudited Pro Forma Financial Information, respectively, and may not give a true picture of the actual returns and financial position of SPH REIT. The Unaudited Pro Forma Financial Information should be read together with these assumptions and accounting policies.
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UNAUDITED PRO FORMA BALANCE SHEETS(1) AS AT 31 AUGUST 2012 AND 28 FEBRUARY 2013 As at 31 August 2012 S$000 Non-current assets Plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investment properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intangible asset (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 765 3,053,000 17,500 3,071,265 Current assets Other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . 1,343 42,390 43,733 Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-current liabilities Loans and borrowings (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . 840,892 32,521 873,413 Current liabilities Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,869 9,869 Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net assets attributable to Unitholders . . . . . . . . . . . . . . . .
Notes: (1) The Unaudited Pro Forma Balance Sheets as at 31 August 2012 and 28 February 2013 have been prepared assuming the issuance of 2,500,995,000 Units at the Maximum Offering Price of S$0.90 per Unit and assuming the Over-Allotment Option is fully exercised. Intangible asset relates to Income Support provided by the vendor of Clementi Mall pursuant to the Deed of Income Support. The amount carried as Investment Properties on the balance sheet excludes the Income Support at Clementi Mall. The Income Support is recognised as an intangible asset in accordance with FRS 38 Intangible Assets on the balance sheet. The sum of the intangible asset and the carrying amount of the Investment Properties recorded on the balance sheet is equivalent to the average of two independent valuations produced by the independent valuers. (See details in Certain Agreements Relating to SPH REIT and the Properties Description of the Agreements to Acquire the Properties Clementi Mall Deed of Income Support) Comprises principal amount of borrowings of S$849,815,000, net of transaction cost of S$8,923,000. Such transaction costs refer to the upfront debt facility costs. If the Unaudited Pro Forma Balance Sheets had been prepared based on the Minimum Offering Price of S$0.85 per Unit, the net assets attributable to Unitholders would have been S$2,107,767,000 as at 31 August 2012 and 28 February 2013.
As at 28 February 2013 S$000
765 3,053,000 17,500 3,071,265
1,343 43,569 44,912 3,116,177
3,114,998
840,892 32,754 873,646
10,815 10,815 884,461 2,231,716
883,282 2,231,716
(2)
(3) (4)
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UNAUDITED PRO FORMA STATEMENTS OF TOTAL RETURN (1) FOR THE RELEVANT PERIOD Six-month period ended 29 February 2012 S$000 93,257 (25,237) 68,020 2,935 (2,935) (7,296) (231) (900) 30 (9,985) Six-month period ended 28 February 2013 S$000 97,395 (25,894) 71,501 2,469 (2,469) (7,470) (231) (900) 36 (9,985)
FY2010 S$000 Gross revenue . . . . . . . . . Property operating expenses . . . . . . . . . . . . . Net Property Income . . . Income support
(2)
FY2011 S$000 162,740 (42,447) 120,293 1,667 (1,667) (13,805) (462) (1,800) 64 (19,971)
FY2012 S$000 187,761 (50,146) 137,615 5,593 (5,593) (14,671) (462) (1,800) 67 (19,971)
132,582 (32,956) 99,626 (12,772) (462) (1,800) 96 (19,971)
.......
Amortisation of intangible asset (3) . . . . . . . . . . . . . . . Managers management fees (4) . . . . . . . . . . . . . . . . Trustees fee
(5)
.........
Other trust expenses . . . . Finance income . . . . . . . . Finance costs

(6)
........
Total return before income tax . . . . . . . . . . . Tax expense . . . . . . . . . . . Total return for the year/period . . . . . . . . . . .
Notes: (1) (2) (3) (4)
64,717
84,319
100,778
49,638
52,951
64,717
84,319
100,778
49,638
52,951
The Unaudited Pro Forma Statements of Total Return have been prepared based on the Maximum Offering Price of S$0.90 per Unit and assuming the Over-Allotment Option is fully exercised. Income Support relates to the top-up payments from the vendor of Clementi Mall pursuant to the Deed of Income Support to achieve a guaranteed Net Property Income for Clementi Mall. Relates to the amortisation of intangible asset in relation to the Income Support received and receivable by SPH REIT. Please refer to Certain Agreements Relating to SPH REIT and the Properties for information on the Property Managers fees. Please refer to the Manager and Corporate Governance The Manager of SPH REIT Managers Fees for information on the management fees. Please refer to The Formation of Structure of SPH REIT for information on Trustees fees. Based on assumed average principal debt balance of S$849,815,000 in the Relevant Period. If the Unaudited Pro Forma Statements of Total Return had been prepared based on the Minimum Offering Price of S$0.85 per Unit, the total return for the year/period would be S$61,775,000, S$81,377,000, S$97,836,000, S$48,167,000 and S$51,480,000 for FY2010, FY2011, FY2012 and the six-month periods ended 29 February 2012 and 28 February 2013 respectively.
(5) (6) (7)
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UNAUDITED PRO FORMA STATEMENTS OF CASH FLOWS (1) FOR FY2012 AND EACH OF THE SIX-MONTH PERIODS ENDED 29 FEBRUARY 2012 AND 28 FEBRUARY 2013 Six-month period ended 29 February 2012 S$000 49,638 7,296 38 (30) 9,985 2,935 69,862 (1,635) 2,629 70,856 Six-month period ended 28 February 2013 S$000 52,951 7,470 38 (36) 9,985 2,469 72,877 389 (3,455) 69,811
FY2012 S$000 Cash flow from operating activities Total return for the year/period . . . . . . Adjustments for: Managers fee paid/payable in units . . Depreciation of plant and equipment . Interest income . . . . . . . . . . . . . . . . . . Finance costs . . . . . . . . . . . . . . . . . . . Amortisation of intangible asset . . . . . .......... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,778 14,671 77 (67) 19,971 5,593 141,023 Changes in working capital: Trade and other receivables . . . . . . . . . . . . . . . . . . Trade and other payables . . . . . . . . . . . . . . . . . . . . Net cash from operating activities . . . . . . . . . . . Cash flow from investing activities Acquisition of the Properties and other assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capital expenditure on investment properties. . . . . Interest received . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash used in investing activities . . . . . . . . . Cash flows from financing activities Proceeds from issue of Units . . . . . . . . Issue expenses paid . . . . . . . . . . . . . . . Proceeds from bank borrowings . . . . . . Distributions to Unitholders . . . . . . . . . . Interest paid . . . . . . . . . . . . . . . . . . . . . (3,193) 5,404 143,234
(1,281,876) (10,986) 67 (1,292,795)
(1,281,876) (2,844) 30 (1,284,690)
(1,429) 36 (1,393)
. . . . .
. . . . .
. . . . .
. . . . .
. . . . .
. . . . .
. . . . .
. . . . .
. . . . .
503,896 (19,179) 840,892 (92,248) (13,512) 1,219,849 70,288 70,288
503,896 (19,179) 840,892 (30,423) (4,504) 1,290,682 76,848 76,848
(62,683) (9,008) (71,691) (3,273) 70,288 67,015
Net cash from/(used in) financing activities . . . . Net increase/(decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents at beginning of year/period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents at end of year/period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note: (1)
The Unaudited Pro Forma Statements of Cash Flows for FY2012 and each of the six-month periods ended 29 February 2012 and 28 February 2013 have been prepared assuming the issuance of 2,500,995,000 Units at the Maximum Offering Price of S$0.90 per Unit and assuming the Over-Allotment Option is fully exercised.
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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the Unaudited Pro Forma Financial Information and notes thereto included elsewhere in this Prospectus. Statements contained in this Managements Discussion and Analysis of Financial Condition and Results of Operations that are not historical facts may be forward-looking statements. Such statements are subject to certain risks, uncertainties and assumptions which could cause actual results to differ materially from those forecasted and projected. Under no circumstances should the inclusion of such information herein be regarded as a representation, warranty or prediction with respect to the accuracy of the underlying assumptions by the Manager or any other person, nor that these results will be achieved or are likely to be achieved (see Forward-looking Statements and Risk Factors for further details). Recipients of this Prospectus and all prospective investors in the Units are cautioned not to place undue reliance on these forward-looking statements. The Unaudited Pro Forma Financial Information of SPH REIT, which comprises the Unaudited Pro Forma Balance Sheets as at 31 August 2012 and 28 February 2013, the Unaudited Pro Forma Statements of Total Returns for the Relevant Period, and the Unaudited Pro Forma Statements of Cash Flows for FY2012 and each of the six-month periods ended 29 February 2012 and 28 February 2013, have been prepared for illustrative purposes only, and are based on certain assumptions after making certain adjustments to show what: (i) the Unaudited Pro Forma Balance Sheets as at 31 August 2012 and 28 February 2013 would have been if the Offering, the acquisition of the Properties and the fee arrangements of the Property Manager, the Manager and the Trustee as set out in Overview Certain Fees and Charges (the Fee Arrangements ) had occurred on or were effective on 31 August 2012 and 28 February 2013 respectively; the Unaudited Pro Forma Statements of Total Return for the Relevant Period, would have been if the Offering, the acquisition of Paragon and the Fee Arrangements had occurred on or were effective on 1 September 2009 and the acquisition of Clementi Mall had occurred on 14 March 2011 (which is the date it received its second TOP); and
(ii)
(iii) the Unaudited Pro Forma Statements of Cash Flows for FY2012 and each of the six-month periods ended 29 February 2012 and 28 February 2013, would have been if the Offering, the acquisition of the Properties and the Fee Arrangements had occurred on or were effective on 1 September 2011. The Unaudited Pro Forma Financial Information of SPH REIT is not necessarily indicative of the financial position or the results of the operations that would have been attained had the Offering, the acquisition of the Properties and the Fee Arrangements actually occurred in the Relevant Period. The Unaudited Pro Forma Financial Information, because of its nature, may not give a true or accurate picture of SPH REITs actual financial position or total returns. The following discussion and analysis of the financial condition and results of operations is based on and should be read in conjunction with the Unaudited Pro Forma Financial Information, and related notes thereto, which are included elsewhere in this Prospectus. (See Appendix B, Reporting Auditors Report on the Unaudited Pro Forma Financial Information for further details.)
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OVERVIEW General Background SPH REIT is a Singapore-based REIT established principally to invest, directly or indirectly, in a portfolio of income-producing real estate which is used primarily for retail purposes in Asia-Pacific, as well as real estate-related assets. The Managers key objective for SPH REIT is to provide Unitholders with regular and stable distributions, and sustainable long-term growth in DPU and NAV per Unit, while maintaining an appropriate capital structure. SPH REITs Initial Portfolio As at the Listing Date, the Initial Portfolio of SPH REIT comprises two high quality and well located commercial properties in Singapore totalling 898,779 sq ft NLA with an aggregate appraised value of S$3,070.5 million after taking the Income Support into account. The Initial Portfolio consists of: a 99-year leasehold interest in Paragon, a premier upscale retail mall and medical suite/office property located in the heart of Orchard Road, Singapores most famous shopping and tourist precinct. Paragon consists of a six-storey retail podium and one basement level with 483,690 sq ft of retail NLA (Paragon Mall) with a 14-storey tower and another three-storey tower sitting on top of the retail podium with a total 223,000 sq ft of medical suite/office NLA (Paragon Medical). The development is strategically located in the heart of Orchard Road shopping and tourist precinct and is very well known for its upscale mall housing many luxury brands; and Clementi Mall , a mid-market suburban mall located in the centre of Clementi town, an established residential estate in the west of Singapore. The retail mall, which also houses a public library, is part of an integrated mixed-use development that includes HDB residential blocks and a bus interchange. The property is connected to the Clementi MRT station. Clementi Mall consists of a five-storey retail podium and one basement level with approximately 192,089 sq ft of retail NLA. Due to its location and strong transport connectivity, Clementi Mall enjoys high visitation with over 27.1 million visitors in 2012.
FACTORS AFFECTING SPH REITS RESULTS OF OPERATIONS General Economic Conditions and Demand and Supply Conditions of Retail and Office Property Sectors The retail and medical suite/office sectors in Singapore are competitive and are affected by, among other things, the demand for and supply of, real estate space in Singapore which are in turn affected by general economic conditions in Singapore. The principal competitive factors comprise lease rental rates, quality and location of properties, supply of comparable space and evolving needs of tenants. The accessibility of, and trade mix within, a retail property, are also major factors in attracting shoppers and tenants.
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Gross Revenue SPH REITs Gross Revenue comprises: Gross Rental Income; car park income; and other income earned from the Properties, including advertising and promotion income attributable to the operation of the Properties.
SPH REITs Gross Revenue is affected by a number of factors including (i) rental rates for the Properties, (ii) Committed Occupancy and lease renewal rates and (iii) general macro-economic and supply/demand trends affecting the real estate market, in particular, the retail and medical suite/office property sectors in Singapore. Rental rates, Committed Occupancy and lease renewal rates are also affected by competition from other properties. (See Business and Properties Certain Information on the Properties Competition for further details.) The following table sets out details of SPH REITs pro forma Gross Revenue for the Relevant Period. Six-month period ended 29 February 28 February 2012 2013 S$000 S$000 89,481 2,867 909 93,257 92,715 3,786 894 97,395
FY2010 S$000 Gross Rental Income Car park income Other income Total Gross Revenue Gross Rental Income Gross Rental Income consists of: 125,497 4,576 2,509 132,582
FY2011 S$000 156,714 5,255 771 162,740
FY2012 S$000 180,127 5,919 1,715 187,761
Fixed rent which includes (i) base rent (after rent rebates, refunds, credits or discounts and rebates for rent-free periods, where applicable, but excluding turnover rent), (ii) service charges payable by tenants to cover the operation and property maintenance expenses of the respective Properties and (iii) advertising and promotion charges payable by tenants for advertising and promotional activities for the respective Properties ( Fixed Rent ); and Turnover rent which is generally calculated as a percentage of the tenants gross turnover. In some cases, turnover rent may be subject to certain thresholds before it is payable ( Turnover Rent ).
Car Park Income Car park income is derived from the car parks owned by Paragon and Clementi Mall. Other Income Other income comprises licence fees for the rental of atrium and common areas, advertising and promotion revenue relating to the rental of banner and poster space and other miscellaneous income attributable to the operation of the Properties. 83
Property Operating Expenses SPH REITs property operating expenses comprise mainly: property taxes; property management fees; and other property operating expenses such as marketing expenses, utilities, maintenance, and other reimbursement expenses.
SPH REITs property operating expenses are affected by a number of factors including, but not limited to (i) fee arrangements for property management services, (ii) the age and condition of the Properties, (iii) changes in the rate of inflation, (iv) changes in charges such as utilities tariffs, (v) changes in annual value of the Properties and (vi) the number of properties in the portfolio. SPH REITs property operating expenses may not be affected to the same degree as its Gross Revenue by the general macro-economic trends affecting the property market in Singapore (which may impact Committed Occupancy and rental rates) as a substantial portion of its property operating expenses are fixed expenses. The following table sets out details of SPH REITs pro forma property operating expenses for the Relevant Period. Six-month period ended 29 February 28 February 2012 2013 S$000 S$000 8,244 8,270
FY2010 S$000 Property taxes Property management fees and reimbursements Other property operating expenses Total property operating expenses Property Taxes 10,545
FY2011 S$000 14,865
FY2012 S$000 16,268
7,100 15,311 32,956
8,721 18,861 42,447
10,015 23,863 50,146
4,840 12,153 25,237
5,033 12,591 25,894
Since July 2001, the property tax for commercial properties, including retail and office properties, has been computed at 10.0% of the annual value of such properties. Annual value is determined by the tax authorities by estimating the annual rent a property would command if rented out and computed by comparing rents of similar properties in the vicinity of the property. Property Management Fees The Property Manager will receive from SPH REIT, a property management fee of 2.0% of Gross Revenue and 2.0% of Net Property Income (before deduction of the property management fee) and 0.5% of Net Property Income (before deduction of the property management fee) in lieu of leasing commissions.
84
Other Property Operating Expenses Other property operating expenses comprise marketing expenses, reimbursable staff costs, statutory and professional fees, utilities and maintenance expenses, depreciation expense as well as other miscellaneous expenses in relation to the Properties. Income Support Income Support relates to the top-up payment from the vendor of Clementi Mall pursuant to the Deed of Income Support to achieve a guaranteed Net Property Income for Clementi Mall. Trust Expenses SPH REITs trust expenses comprise mainly (i) the Managers management fees; (ii) the Trustees fees; (iii) finance costs; and (iv) other trust expenses. The following table sets out details of SPH REITs pro forma trust expenses for the Relevant Period. Six-month period ended 29 February 28 February 2012 2013 S$000 S$000 7,296 231 9,955 900 18,382 7,470 231 9,949 900 18,550
FY2010 S$000 Managers management fees Trustees fees Finance costs (net of finance income) Other trust expenses Total trust expenses 12,772 462 19,875 1,800 34,909
FY2011 S$000 13,805 462 19,907 1,800 35,974
FY2012 S$000 14,671 462 19,904 1,800 36,837
Managers Management Fees Under the Trust Deed, the Manager is entitled to a management fee comprising: a Base Fee of 0.25% per annum of the value of the Deposited Property; and a Performance Fee of 5.0% per annum of SPH REITs Net Property Income.
Any increase in the rate or any change in the structure of the Managers management fee must be approved by an Extraordinary Resolution of Unitholders passed at a Unitholders meeting duly convened and held in accordance with the provisions of the Trust Deed. Trustees Fees For the purpose of the Unaudited Pro Forma Statements of Total Return, it has been assumed that the Trustees fees will be charged in accordance to terms set out in the Trust Deed. Based on the current agreement between the Manager and the Trustee, the Trustees fee is charged on a scaled basis of up to 0.02% per annum of the value of the Deposited Property, subject to a minimum of S$15,000 per month excluding out-of-pocket expenses and GST. Under the Trust Deed, the maximum fee which the Trustee may charge shall not exceed 0.1% per annum
85
of the value of the Deposited Property. Any increase in the Trustees fee beyond the current scaled basis of up to 0.02% per annum of the value of the Deposited Property will be subject to agreement between the Manager and the Trustee. (See The Formation and Structure of SPH REIT The Trustee for further details.) For the purposes of computing property management fees, Managers management fees and Trustees fees, Deposited Property includes the intangible asset recognised in connection with the income support received for Clementi Mall, while Gross Revenue and Net Property Income exclude the income support recognised in the statement of total return in each of the relevant periods, where applicable. Finance Costs Finance costs consist of interest expense and amortisation of debt issuance costs. For the purpose of the Unaudited Pro Forma Statements of Total Return, it has been assumed that the effective interest rate will remain constant at 2.35% per annum, including upfront debt issuance costs. Other Trust Expenses For the purpose of the Unaudited Pro Forma Statements of Total Return, other trust expenses include recurring trust expenses such as annual listing fees, valuation fees, legal fees, registry and depository charges, accounting, audit and tax advisers fees, postage, printing and stationery costs, costs associated with the preparation of annual reports, investor communications costs and other miscellaneous expenses. Gross Rental Income Trends The table below sets out the Gross Rental Income derived from each of the Properties for the Relevant Period. Six-month period ended 29 February 28 February 2012 2013 S$000 S$000 58,601 13,355 17,525 89,481 60,598 14,245 17,872 92,715
FY2010 S$000 Paragon Mall Paragon Medical Clementi Mall Total Gross Rental Income
Note: (1)
FY2011 S$000 114,327 26,678 15,709 156,714
FY2012 S$000 118,093 26,892 35,142 180,127
100,598 24,899
(1)
125,497
Clementi Mall only commenced operations in FY2011. Clementi Mall received its 1st and 2nd TOP on 31 December 2010 and 14 March 2011, respectively.
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Committed Occupancy Trends The table below sets out the average Committed Occupancy rates derived from each of the Properties for the Relevant Period. Six-month period ended 29 February 28 February 2012 2013 % % 100 100 100 100 100 100 100 100
FY2010 % Paragon Mall Paragon Medical Clementi Mall Average Committed Occupancy rate (2)
Notes: (1) (2)
FY2011 % 100 100 100 100
FY2012 % 100 100 100 100
100 100 (1)
100
Clementi Mall only commenced operations in FY2011. Clementi Mall received its 1st and 2nd TOP on 31 December 2010 and 14 March 2011, respectively. The property management team does not use letters of intent (binding or non-binding).
Paragon achieved 100% Committed Occupancy rate for the past 3 years. Clementi Mall has achieved 100% Committed Occupancy rate since its commencement of operations in 2011. Net Property Income The table below sets out the Net Property Income derived from each of the Properties for the Relevant Period. Six-month period ended 29 February 28 February 2012 2013 S$000 S$000 55,452 12,568 68,020 58,470 13,031 71,501
FY2010 S$000 Paragon Clementi Mall Net Property Income

Note: (1)
FY2011 S$000 109,043 11,250 120,293
FY2012 S$000 112,208 25,407 137,615
99,626
(1)
99,626
Clementi Mall only commenced operations in FY2011. Clementi Mall received its 1st and 2nd TOP on 31 December 2010 and 14 March 2011, respectively.
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COMPARISON OF FY2011 WITH FY2010 Gross Revenue Gross Revenue increased by 22.7% to S$162.7 million for FY2011 from S$132.6 million for FY2010. Gross Rental Income Gross Rental Income increased by 24.9% to S$156.7 million for FY2011 from S$125.5 million for FY2010. The increase was mainly attributable to commencement of operations at Clementi Mall in 2011, which contributed S$15.7 million to Gross Rental income for FY2011. In addition, there were higher contributions from Paragon Malls operations and Paragon Medical due to rental reversions, higher base rent from certain tenants arising from the faade enhancement work and asset enhancement works that added three storeys of medical suite/office space on top of the Paragon retail podium, respectively. Car Park Income Car park income increased by 14.8% to S$5.3 million for FY2011 from S$4.6 million for FY2010. The increase is largely due to the commencement of operations at Clementi Mall in 2011, which contributed S$0.4 million to car park income. Other Income Other income earned from the Properties decreased by 69.3% or S$1.7 million for FY2011 as compared to FY2010 as the previous year included liquidated damages imposed on a contractor, which was not repeated in FY2011. Property Operating Expenses Property operating expenses increased by 28.8% to S$42.4 million for FY2011 from S$33.0 million for FY2010. The increase is due to higher property taxes of S$4.3 million, increase in property management fees of S$1.6 million and other property operating expenses of S$3.5 million. Property Taxes Property taxes increased 41.0% from S$10.5 million in FY2010 to S$14.9 million in FY2011, due mainly to increase in base rental achieved in Paragon and commencement of operations at Clementi Mall, which recorded S$1.4 million of property taxes during its first year of operations. Property Management Fees and Reimbursements Property management fees and reimbursements increased by 22.8% to S$8.7 million for FY2011 from S$7.1 million for FY2010. The increase was in line with the growth in Gross Revenue and Net Property Income as a result of the higher base rent in Paragon and commencement of operations at Clementi Mall. Other Property Operating Expenses Other property operating expenses increased by 23.2% to S$18.9 million for FY2011 from S$15.3 million for FY2010. The increase was mainly due to higher utilities and maintenance expenses incurred by Paragon in line with the increase in space following the completion of asset enhancement works, and operating expenses incurred by Clementi Mall during its first year of operations. 88
Net Property Income As a result of the above factors, SPH REITs Net Property Income increased by 20.7% to S$120.3 million for FY2011 from S$99.6 million for FY2010. Trust Expenses Total trust expenses increased from S$34.9 million for FY2010 to S$36.0 million for FY2011. Total Returns For The Year SPH REITs total returns for FY2011 was S$84.3 million as compared to S$64.7 million for FY2010. COMPARISON OF FY2012 WITH FY2011 Gross Revenue Gross Revenue increased by 15.4% to S$187.8 million for FY2012 from S$162.7 million for FY2011. Gross Rental Income Rental Income increased by 14.9% to S$180.1 million for FY2012 from S$156.7 million for FY2011. The increase was attributable mainly to the full year contribution of rental income earned by Clementi Mall in 2012, having commenced its operations the previous year. In FY2012, Clementi Mall recorded a Gross Rental Income of S$35.1 million, as compared to S$15.7 million in FY2011. Gross Rental Income achieved from Paragon also increased by S$4.0 million, representing an increase of 2.8%. Car Park Income Car park income increased by 12.6% from S$5.3 million for FY2011 to S$5.9 million for FY2012, primarily due to Clementi Malls full year contribution in FY2012. Other Income Other income earned from the Properties increased by 112.4% or S$0.9 million from S$0.8 million in FY2011 to S$1.7 million in FY 2012. This was due mainly to an increase in miscellaneous advertising and promotion income earned from Paragon, and the full year contribution from Clementi Mall. Property Operating Expenses Property operating expenses increased by 18.1% to S$50.1 million for FY2012 from S$42.4 million for FY2011. This is attributed mainly by an increase in property taxes of S$1.4 million, an increase in property management fees of S$1.3 million and an increase in other property operating expenses of S$5.0 million. Property Taxes Property taxes increased 9.4% from S$14.9 million in 2011 to S$16.3 million in 2012, arising from the full years operation of Clementi Mall during 2012.
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Property Management Fees and Reimbursements Property management fees and reimbursements increased by 14.8% to S$10.0 million for FY2012 from S$8.7 million for FY2011. The increase was in line with the growth in Gross Revenue and Net Property Income as a result of the higher base rent secured. Other Property Operating Expenses Other property operating expenses in FY2012 increased 26.5% to S$23.9 million, as compared to S$18.9 million in FY2011. The increase was mainly due to higher utilities, maintenance and marketing expenses incurred arising from the full years operations of Clementi Mall, as well as increase in other property operating expenses in Paragon. Net Property Income As a result of the above factors, SPH REITs Net Property Income increased by 14.4% to S$137.6 million for FY2012 from S$120.3 million for FY2011. Trust Expenses Total trust expenses increased from S$36.0 million for FY2011 to S$36.8 million for FY2012. Total Returns For The Year SPH REITs total returns for FY2012 was S$100.8 million as compared to S$84.3 million for FY2011. COMPARISON OF THE SIX-MONTH PERIOD ENDED 28 FEBRUARY 2013 WITH THE SIXMONTH PERIOD ENDED 29 FEBRUARY 2012 Gross Revenue Gross Revenue increased by 4.4% to S$97.4 million for the six-month period ended 28 February 2013 from S$93.3 million for the six-month period ended 29 February 2012. Gross Rental Income Gross Rental Income increased by 3.6% to S$92.7 million for the six-month period ended 28 February 2013 from S$89.5 million for the six-month period ended 29 February 2012. The increase was mainly attributable to the increase in base rent and service charges achieved from Paragon. Car Park Income Car park income increased by 32.1% to S$3.8 million for the six-month period ended 28 February 2013 from S$2.9 million for the six-month period ended 29 February 2012. This was due mainly to an increase in car park income derived from Paragon from an increase in rates charged. Property Operating Expenses Property operating expenses increased by 2.6% to S$25.9 million for the six-month period ended 28 February 2013 from S$25.2 million for the six-month period ended 28 February 2012.
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Property Management Fees and Reimbursements Property management and reimbursements fees increased by 4.0% to S$5.0 million for the six-month period ended 28 February 2013 from S$4.8 million for the six-month period ended 29 February 2012. Other Property Operating Expenses Other property operating expenses increased from S$12.2 million for the six-month period ended 29 February 2012 to S$12.6 million for the six-month period ended 28 February 2013, contributed by slightly higher utilities and maintenance expenses. Net Property Income As a result of the above factors, SPH REITs Net Property Income increased by 5.1% to S$71.5 million for the six-month period ended 28 February 2013 from S$68.0 million for the six-month period ended 29 February 2012. Trust Expenses Total trust expenses remained relatively stable for the six-months periods ended 28 February 2012 and 28 February 2013 at S$18.4 million and S$18.6 million respectively. Total Returns For The Period SPH REITs total returns for the six-month period ended 28 February 2013 was S$53.0 million as compared to S$49.6 million for the six-month period ended 29 February 2012. LIQUIDITY AND CAPITAL RESOURCES The principal sources of funding for the original acquisition or development and any subsequent improvement works at the Properties have historically been from internally generated funds, Unitholders funds and bank borrowings. A summary of SPH REITs pro forma cash flow for FY2012 and for each of the six-month periods ended 29 February 2012 and 28 February 2013 is set out below: Six-month period ended 29 February 28 February 2012 2013 S$000 S$000 70,856 (1,284,690) 1,290,682 76,848 69,811 (1,393) (71,691) 67,015
FY2012 S$000 Net cash from operating activities Net cash used in investing activities Net cash from/(used in) financing activities Cash and cash equivalents at the end of the year/period 143,234 (1,292,795) 1,219,849 70,288
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Analysis of cash flows for FY2012 Net cash generated from operating activities was S$143.2 million for FY2012. Operating cash flow before working capital changes was S$141.0 million. Decrease in trade and other receivables was S$3.2 million, and increase in trade and other payables was S$5.4 million. Net cash used in investing activities was S$1,292.8 million. This was mainly due to net payments of S$1,281.9 million for the acquisition of the Properties, plant and equipment and other assets and liabilities at the establishment of SPH REIT and S$11.0 million for capital expenditure on the Properties during the year. Net cash generated from financing activities was S$1,219.8 million. This was mainly due to the net proceeds of S$503.9 million raised from the issuance of new Units, proceeds from borrowings of S$840.9 million, distributions to Unitholders of S$92.2 million and interest paid of S$13.5 million. Comparison between six-month period ended 28 February 2013 and the six-month period ended 29 February 2012 Net cash generated from operating activities was S$69.8 million for the six-month period ended 28 February 2013 as compared to S$70.9 million for the period ended 29 February 2012. Net cash used in investing activities was S$1.4 million for the six-month period ended 28 February 2013 as compared to S$1,284.7 million for the period ended 29 February 2012 due to payments of S$1,281.9 million for the acquisition of the Properties, plant and equipment and assets and liabilities at the establishment of SPH REIT in the corresponding period last year. Net cash used in financing activities for the six-month period ended 28 February 2013 was S$71.7 million, as compared to net cash generated of S$1,290.7 million for the six-month period ended 29 February 2012. This was mainly due to the net proceeds of S$503.9 million raised from the issuance of new Units, net proceeds from borrowings of S$840.9 million, distributions to Unitholders of S$30.4 million during the six-month period ended 29 February 2012, as compared to the six-month period ended 28 February 2013, which recorded mainly Distribution to Unitholders of S$62.7 million. ACCOUNTING POLICIES For a discussion of the principal accounting policies of SPH REIT, please see Appendix C, Unaudited Pro Forma Financial Information.
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PROFIT FORECAST AND PROFIT PROJECTION

Statements contained in the Profit Forecast and Profit Projection section that are not historical facts may be forward-looking statements. Such statements are based on the assumptions set forth in this section of this Prospectus and are subject to certain risks and uncertainties which could cause actual results to differ materially from those forecast and projected. Under no circumstances should the inclusion of such information herein be regarded as a representation, warranty or prediction with respect to the accuracy of the underlying assumptions by any of SPH REIT, the Manager, the Trustee, the Global Coordinator, the Joint Bookrunners, the Sponsor or any other person, or that these results will be achieved or are likely to be achieved. (See Forward-looking Statements and Risk Factors for further details.) Investors in the Units are cautioned not to place undue reliance on these forward-looking statements which are made only as of the date of this Prospectus. None of SPH REIT, the Manager, the Trustee, the Global Coordinator, the Joint Bookrunners or the Sponsor guarantees the performance of SPH REIT, the repayment of capital or the payment of any distributions, or any particular return on the Units. The forecast and projected yields stated in the following table are calculated based on: the Minimum Offering Price and Maximum Offering Price; and the assumption that the Listing Date is 1 March 2013.
Such yields will vary accordingly if the Listing Date is not on 1 March 2013, or for investors who purchase Units in the secondary market at a market price that differs from the Minimum Offering Price and Maximum Offering Price. Unitholders should note that in respect of the Forecast Period 2H FY2013, they will only be entitled to a pro rata share of distributions declared and paid for the period from Listing Date to 31 August 2013. The following table shows SPH REITs forecast and projected Statements of Total Return for the Forecast Period 2H FY2013 and the Projection Year FY2014. The financial year end of SPH REIT is 31 August. The Profit Forecast and Profit Projection may be different to the extent that the actual date of issuance of Units is other than on 1 March 2013, being the assumed date of the issuance of Units for the Offering. The Profit Forecast and Profit Projection are based on the assumptions set out below and have been examined by the Reporting Auditors, being KPMG LLP, and should be read together with the report Reporting Auditors Report on the Profit Forecast and Profit Projection set out in Appendix A, as well as the assumptions and the sensitivity analysis set out in this section of this Prospectus.
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Forecast and Projected Statements of Total Return The forecast and projected statements of net income and distribution are as follows:
Forecast Period 2H FY2013 (1 March 2013 to 31 August 2013) Projection Year FY2014 (1 September 2013 to 31 August 2014)
Based on Based on Based on Based on Minimum Maximum Minimum Maximum Offering Price Offering Price Offering Price Offering Price of S$0.85 of S$0.90 of S$0.85 of S$0.90 (S$000) Gross revenue . . . . . . . . . . . . . . . . . Property operating expenses . . . . . . . Net Property Income . . . . . . . . . . . . Income support(1) . . . . . . . . . . . . . . . Amortisation of intangible asset . . . . . Managers management fees . . . . . . . Trustees fees . . . . . . . . . . . . . . . . . . Other trust expenses . . . . . . . . . . . . . Finance costs . . . . . . . . . . . . . . . . . . Total return for the period/year before income tax . . . . . . . . . . . . . . Income tax expense . . . . . . . . . . . . . Total return for the period/year after income tax and before distribution . Add: Non-tax deductible items(2) . . . . . Income available for distribution to Unitholders . . . . . . . . . . . . . . . . . . . Weighted average number of Units outstanding at end of period/year (000) (3) . . . . . . . . . . . . . . . . . . . . . . Distribution rate . . . . . . . . . . . . . . . . Distribution per Unit (cents)(4) . . . . . . Illustrative offering price (S$/Unit) . . . . Distribution yield (5) . . . . . . . . . . . . . Distribution yield (without Income Support)(5) . . . . . . . . . . . . . . . . . . . .
Notes: (1) (2) Income support relates to the top-up payment from the vendor of Clementi Mall pursuant to the Deed of Income Support to achieve a guaranteed Net Property Income for Clementi Mall. Includes 100% of the Managers management fees paid in Units for the Forecast Period 2H FY2013 and Projection Year FY2014, amortisation of debt issuance costs and amortisation of intangible asset in relation to the income support received and receivable by SPH REIT. Includes the increase in number of Units in issue as a result of the assumed payment of 100% of the Managers management fees for the relevant period in the form of Units issued at the assumed Offering Price. Assuming a Listing Date of 1 March 2013. Distribution yield for the Forecast Period 2H FY2013 has been annualised.
(S$000) 96,890 (26,475) 70,415 2,674 (2,674) (7,451) (232) (900) (11,456)
(S$000) 201,442 (54,768) 146,674 4,749 (4,749) (15,188) (464) (1,800) (19,971)
(S$000) 201,442 (54,768) 146,674 4,749 (4,749) (15,186) (464) (1,800) (22,912)
96,890 (26,475) 70,415 2,674 (2,674) (7,452) (232) (900) (9,985)
51,846
50,376
109,251
106,312
51,846 11,103
50,376 11,247
109,251 21,891
106,312 22,177
62,949
61,623
131,142
128,489
2,505,135 100.0% 2.51 0.90 5.58 5.35
2,505,378 100.0% 2.46 0.85 5.79 5.54
2,517,712 100.0% 5.21 0.90 5.79 5.58
2,518,694 100.0% 5.10 0.85 6.00 5.78
(3) (4) (5)
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ASSUMPTIONS The Manager has prepared the Profit Forecast for the Forecast Period 2H FY2013 and Profit Projection for the Projection Year FY2014 based on the following assumptions. The Manager considers these assumptions to be appropriate and reasonable as at the date of this Prospectus. However, investors should consider these assumptions as well as the Profit Forecast and Profit Projection and make their own assessment of the future performance of SPH REIT. Gross Revenue and Net Property Income Contribution of Each Property The forecast and projected contributions of Paragon and Clementi Mall to Gross Revenue are as follows: Forecast Period 2H FY2013 S$000 Paragon . . . . . . . . . . . . . . . . . . . . . . . . . Clementi Mall . . . . . . . . . . . . . . . . . . . . . Gross Revenue . . . . . . . . . . . . . . . . . . . 78,330 18,560 96,890 (%) 80.8 19.2 100.0 Projection Year FY2014 S$000 163,377 38,065 201,442 (%) 81.1 18.9 100.0
Contribution to Gross Revenue
The forecast and projected contributions of Paragon and Clementi Mall to Net Property Income are as follows: Forecast Period 2H FY2013 S$000 Paragon . . . . . . . . . . . . . . . . . . . . . . . . . Clementi Mall . . . . . . . . . . . . . . . . . . . . . Net Property Income . . . . . . . . . . . . . . Gross Revenue Gross Revenue comprises: Gross Rental Income; Car park income; and Other income earned from the Properties, including advertising and promotion income attributable to the operation of the Properties. 57,589 12,826 70,415 (%) 81.8 18.2 100.0 Projection Year FY2014 S$000 120,423 26,251 146,674 (%) 82.1 17.9 100.0
Contribution to Net Property Income
Gross Rental Income Gross Rental Income consists of: Fixed Rent which includes (i) base rent (after rent rebates, refunds, credits or discounts and rebates for rent-free periods, where applicable, but excluding turnover rent), (ii) service charges payable by tenants to cover the operation and property maintenance expenses of the respective Properties and (iii) advertising and promotion charges payable by tenants for advertising and promotional activities for the respective Properties; and 95
Turnover Rent which is generally calculated as a percentage of the tenants gross turnover. In some cases, turnover rent may be subject to certain thresholds before it is payable.
Paragon contributes S$75.6 million and S$157.0 million to Gross Rental Income for the Forecast Period 2H FY2013 and Projection Year FY2014, respectively. The average Passing Rent (per sq ft per month) at Paragon for the Forecast Period 2H FY2013 and Projection Year FY2014 is S$17.8 and S$18.5, respectively. Clementi Mall contributes S$17.9 million and S$36.6 million to Gross Rental Income for the Forecast Period 2H FY2013 and Projection Year FY2014, respectively. The average Passing Rent (per sq ft per month) at Clementi Mall for the Forecast Period 2H FY2013 and Projection Year FY2014 is S$15.6 and S$15.9, respectively. Base Rent The Manager has assumed the following in arriving at the forecast base rent for the tenancies of the Properties for the Forecast Period 2H FY2013 and Projection Year FY2014: (i) rents payable under committed tenancies for the Forecast Period 2H FY2013 and Projection Year FY2014; and expiring tenancies in the Forecast Period 2H FY2013 and Projection Year FY2014 are assumed to be renewed based upon: (a) negotiated rates (including negotiated increases in base rent over the course of an existing tenancy agreement); the Managers assumed renewal rates for certain leases that have not been negotiated (taking into account, the location and size of each lettable area, the effect of competing properties, assumed tenant retention rates on lease expiry, likely market conditions, inflation levels and tenant demand levels); with remaining tenancies assumed to be renewed at rental rates increasing from the prior contracted base rate at CAGRs of 3.0% for Paragon and 2.5% for Clementi Mall, respectively. Expiring tenancies are assumed to renew or be leased to new tenants with a typical three year lease. These growth assumptions reflect the Managers assessment of rental growth rates for Paragon and Clementi Mall over the Forecast Period 2H FY2013 and Projection Year FY2014 having regard to the rental growth rates used in the valuation of the Properties prepared by the Independent Valuers, the estimated rate of consumer price inflation in Singapore, the outlook for the general economy including GDP growth rates 1, the demand level for tenancies at each of the Properties and the outlook for retail sales in Singapore.
(ii)
(b)
(c)
Turnover Rent Based on an analysis of historical turnover rent figures, the Manager has forecast turnover rent for Paragon at 2.0% of Paragon Gross Revenue for the Forecast Period 2H FY2013 and Projection Year FY2014. For Clementi Mall, the Manager has forecast turnover rent of 3.3% of Clementi Mall Gross Revenue for the Forecast Period 2H FY2013. The Manager has assumed turnover rent for Projection Year FY2014 to be in line with historical performance.
Source: Urbis. See Appendix F, Independent Retail Property Market Research Report.
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Lease Renewals, Vacancy Allowance and Committed Occupancy For Paragon and Clementi Mall leases expiring in the Forecast Period 2H FY2013 and Projection Year FY2014, the Manager assumed an average renewal rate of 90.0% by number of leases. The remaining 10.0% of expiring leases are assumed to be leased with new tenants and subject to a one month rent-free period. For Paragon, the renewal rates by NLA in FY2010, FY2011, FY2012 and six-month period ended February 2013 are 68.7%, 83.4%, 92.1% and 89.7%, respectively. See Business and Properties Certain Information on the Properties Paragon Expiries and Renewals for further details Expiring leases are assumed to be renewed or be leased to new tenants with a three year lease, consistent with the usual market practice for retail and medical suite/office spaces in Singapore. The average Committed Occupancy for the Forecast Period 2H FY2013 and Projection Year FY2014 for the Properties are estimated as follows: Forecast Period 2H FY2013 100% 100% Projection Year FY2014 100% 99.5%
Committed Occupancy Paragon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Clementi Mall . . . . . . . . . . . . . . . . . . . . . . . . . . . Car Park Income
Car park income is derived from the car parks owned by Paragon and Clementi Mall. The Manager has forecast car park income for Paragon and Clementi Mall for the Forecast Period 2H FY2013 and Projection Year FY2014 to be in line with historical performance. Other Income Other income comprises licence fees for the rental of atrium and common areas, advertising and promotion revenue relating to the rental of banner and poster space, and other miscellaneous income attributable to the operation of the Properties. Property Operating Expenses Property operating expenses consist of (i) property taxes, (ii) property management fee and (iii) other property operating expenses (such as marketing expenses, utilities, maintenance and other reimbursement expenses). A summary of the assumptions which have been used in calculating property operating expenses is set out below. (i) Property Taxes The Manager has assumed that property taxes will remain at 10.0% of base rent, turnover rent and car park income, and that no property tax rebate will be given by the tax authorities.
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(ii)
Property Management Fee The Property Manager is entitled to a property management fee for each property of SPH REIT under its management which comprises the following: 2.0% per annum of Gross Revenue; 2.0% per annum of the Net Property Income for the relevant property (calculated before accounting for the property management fee in that financial period); and 0.5% per annum of the Net Property Income for the relevant property (calculated before accounting for the property management fee in that financial period) in lieu of leasing commissions otherwise payable to the Property Manager and/or third party agents.
The property management fee amounts to approximately 3.9% of gross revenue for both the Forecast Period 2H FY2013 and Projection Year FY2014. (iii) Other Property Operating Expenses Other property operating expenses comprise marketing expenses, reimbursable staff costs, statutory and professional fees, utilities and property maintenance expenses, depreciation expense as well as other miscellaneous expenses in relation to the Properties. The Manager has assumed an increase in reimbursable staff costs of 4.0% per annum, and 3.0% per annum for all other property operating expenses (excluding depreciation) for the Forecast Period 2H FY2013 and Projection Year FY2014, respectively. Income Support The Vendor of Clementi Mall, CM Domain Pte Ltd, will provide Income Support to SPH REIT for a period of 5 years from Listing Date. Pursuant to the terms of the income support, in the event that Clementi Malls Net Property Income falls below the Guaranteed Income Amount, the Vendor will pay to the Trustee an amount equivalent to the difference between the Guaranteed Income Amount and actual Net Property Income for each financial quarter/period together with any applicable taxes, provided that the aggregate top-up payments shall not in any event exceed S$20 million. The aggregate top-up payments (including applicable taxes) for the Forecast Period 2H FY2013 and Projection Year FY2014 amount to S$2.7 million and S$4.7 million, respectively. Capital Expenditure Capital expenditure is expected to be capitalised as part of the Deposited Property. The following table sets out the capital expenditure for the Forecast Period 2H FY2013 and Projection Year FY2014. Forecast Period 2H FY2013 (S$000) Paragon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Clementi Mall . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,600 1,700 6,300 Projection Year FY2014 (S$000) 13,333 1,100 14,433
Capital Expenditure
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Capital expenditure for the Properties for the Forecast Period 2H FY2013 and Projection Year FY2014 comprise primarily expense for tenancy reconfiguration, mechanical and electrical and security and car park improvements. Managers Management Fees Pursuant to the Trust Deed, the Manager is entitled to a Base Fee of 0.25% per annum of the value of SPH REITs Deposited Property and a Performance Fee of 5.0% per annum of SPH REITs Net Property Income. The Manager has elected to receive 100.0% of the Base Fee and Performance Fee in the form of Units for Forecast Period 2H FY2013 and Projection Year FY2014. Management fees payable in the form of Units shall be payable quarterly in arrears and the Manager has assumed that such Units are issued at the Offering Price. (See The Manager and Corporate Governance The Manager of SPH REIT Managers Fees for further details.) Trustees Fees The Trustees fees are currently charged on a scaled basis of up to 0.02% per annum of the value of the Deposited Property, subject to a minimum of S$15,000 per month, excluding out-of-pocket expenses and GST. The fees are accrued and paid monthly in arrears in accordance with the Trust Deed. Under the Trust Deed, the maximum fee which the Trustee may charge shall not exceed 0.1% per annum of value of the Deposited Property. Any increase in the Trustees fees beyond the current scaled basis of up to 0.02% per annum of the value of the Deposited Property and not exceeding the maximum fee under the Trust Deed will be subject to agreement between the Manager and the Trustee. (See The Formation and Structure of SPH REIT The Trustee for further details). Other Trust Expenses Other trust expenses of SPH REIT include recurring trust expenses such as annual listing fees, valuation fees, legal fees, registry and depository charges, accounting, audit and tax advisers fees, postage, printing and stationery costs, costs associated with the preparation of annual reports, investor communications costs and other miscellaneous expenses. Finance Costs Finance costs consist of interest expense and amortisation of debt issuance costs. SPH REIT has put in place the initial debt facility of S$975 million with staggered loan maturities of three, five and seven year terms. Assuming a Maximum Offering Price of S$0.90 per Unit, the amount drawn upon the Listing Date will be S$850 million. Assuming a Minimum Offering Price of S$0.85 per Unit, the amount drawn upon the Listing Date will be S$975 million. The Manager has assumed the effective interest rate for the Forecast Period 2H FY2013 and Projection Year FY2014 will remain constant at 2.35% per annum, including debt issuance costs. The upfront debt issuance costs incurred in relation to the initial debt facility is assumed to be amortised over the term of the initial debt facility and has been included as part of the finance costs. The Manager has assumed that any hedging arrangements entered into with respect to the initial debt facility remain in place for the Forecast Period 2H FY2013 and Projection Year FY2014. (See Strategy Key Strategies Capital and Risk Management Strategy and Capitalisation Indebtedness for further details). 99
Properties The aggregate value of the Properties as at 28 February 2013 was S$3,070.5 million 1, based on the average of the two independent valuations undertaken for each Property. For the purposes of the Profit Forecast and Profit Projection, the Manager has assumed that there is no change in the valuation of the Properties, other than any incremental increase in valuations associated with capital expenditure capitalised. Accounting Standards The Manager has assumed no changes in applicable accounting standards or other financial reporting requirements that may have a material effect on the Profit Forecast and Profit Projection. Significant accounting policies adopted by the Manager in the preparation of the Forecast and Projection are set out in Appendix C, Unaudited Pro Forma Financial Information. Other Assumptions The Manager has made the following additional assumptions in preparing the Profit Forecast and Profit Projection: that the Initial Portfolio of SPH REIT remains unchanged for the Forecast Period 2H FY2013 and Projection Year FY2014; that no further capital will be raised during the Forecast Period 2H FY2013 and Projection Year FY2014; that there will be no change in the applicable tax legislation or other applicable legislation for the Forecast Period 2H FY2013 and Projection Year FY2014; the Tax Ruling remains in force and the terms and conditions of the Tax Ruling are compiled with; that all leases as at 28 February 2013 are enforceable and will be performed in accordance with their terms during the Forecast Period 2H FY2013 and Projection Year FY2014; that there will be no pre-termination of any committed leases; and that 100.0% of SPH REITs Specified Taxable Income is distributed for the Forecast Period 2H FY2013 and Projection Year FY2014.
Sensitivity Analysis The forecast and projected distributions included in this Prospectus are based on a number of assumptions that have been outlined above. The forecast and projected distributions are also subject to a number of risks as outlined in the section Risk Factors. The base case shown in the sensitivity analysis below is based on the Profit Forecast and Profit Projection and the assumptions outlined above, unless otherwise indicated ( Base Case ).
This takes into account the Income Support.
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Investors should be aware that future events cannot be predicted with any certainty and deviations from the figures forecast or projected in this Prospectus are to be expected. To assist investors in assessing the impact of these assumptions on the Profit Forecast and Profit Projection, a series of tables demonstrating the sensitivity of the DPU yield to changes in the principal assumptions are set out below. The sensitivity analysis is intended only as a guide. Variations in actual performance could exceed the ranges shown. Movement in other variables may offset or compound the effect of a change in any variable beyond the extent shown. Gross Revenue Changes in Gross Revenue will impact the Net Property Income of SPH REIT and consequently, the DPU. The assumptions for Gross Revenue have been set out earlier in this section. The effect of variations in the Gross Revenue on DPU yield is set out below: DPU yield sensitivity analysis for Gross Revenue Forecast Period 2H FY2013 (1) Projection Year FY2014
Maximum Minimum Maximum Minimum Offering Price Offering Price Offering Price Offering Price of S$0.90 of S$0.85 of S$0.90 of S$0.85 5.0% below Base Case. . . . . Base Case . . . . . . . . . . . . . . 5.0% above Base Case . . . .
Note: (1) Distribution yield for the Forecast Period 2H FY2013 has been annualised.
5.15% 5.58% 6.01%
5.33% 5.79% 6.24%
5.34% 5.79% 6.23%
5.53% 6.00% 6.47%
Property Operating Expenses Changes in property operating expenses will impact the Net Property Income of SPH REIT and consequently, the DPU. The assumptions for property operating expenses have been set out earlier in this section. The effect of variations in the property operating expenses on DPU yield is set out below: DPU yield sensitivity analysis for Property Operating Expenses Forecast Period 2H FY2013 (1) Projection Year FY2014
Maximum Minimum Maximum Minimum Offering Price Offering Price Offering Price Offering Price of S$0.90 of S$0.85 of S$0.90 of S$0.85 5.0% below Base Case. . . . . Base Case . . . . . . . . . . . . . . 5.0% above Base Case . . . .
5.70% 5.58% 5.47%
5.91% 5.79% 5.66%
5.91% 5.79% 5.67%
6.13% 6.00% 5.87%
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Income Support The provision of Income Support from the Vendor of Clementi Mall, CM Domain, will impact the Net Property Income of SPH REIT and consequently, the DPU. The assumptions for such provision of Income Support have been set out earlier in this section. The effect of Income Support on DPU yield is set out below: DPU yield sensitivity analysis (assuming Base case) Forecast Period 2H FY2013 (1) Projection Year FY2014
Maximum Minimum Maximum Minimum Offering Price Offering Price Offering Price Offering Price of S$0.90 of S$0.85 of S$0.90 of S$0.85 With Income Support . . . . . . Without Income Support . . . .
5.58% 5.35%
5.79% 5.54%
5.79% 5.58%
6.00% 5.78%
Borrowing Costs Changes in finance costs will impact the distributable income of SPH REIT and consequently, the DPU. The effect of variations in the applicable interest rate of the initial debt facility on DPU yield is set out below: DPU yield sensitivity analysis for Borrowing Costs Forecast Period 2H FY2013 (1) Projection Year FY2014
Maximum Minimum Maximum Minimum Offering Price Offering Price Offering Price Offering Price of S$0.90 of S$0.85 of S$0.90 of S$0.85 50 basis points increase in the applicable interest rate . . Base Case . . . . . . . . . . . . . . 50 basis points decrease in the applicable interest rate . .
5.40% 5.58% 5.77%
5.56% 5.79% 6.02%
5.60% 5.79% 5.98%
5.77% 6.00% 6.23%
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Fees of the Manager Payable in Units The Manager has assumed, for the Forecast Period 2H FY2013 and Projection Year FY2014, that 100.0% of the Managers management fees will be paid in Units. The effect of variations in the percentage of the Managers management fees payable in Units on the distribution yield is set out below. DPU yield sensitivity analysis for form of the payment of the Management Fees Forecast Period 2H FY2013 (1) Projection Year FY2014
Maximum Minimum Maximum Minimum Offering Price Offering Price Offering Price Offering Price of S$0.90 of S$0.85 of S$0.90 of S$0.85 Base Case (100% of management fees payable in Units) . . . . . . . . . . . . . . . . . 50% of management fees payable in Units . . . . . . . . . . . 0% of management fees payable in Units . . . . . . . . . . .
5.58% 5.26% 4.93%
5.79% 5.44% 5.10%
5.79% 5.47% 5.15%
6.00% 5.67% 5.33%
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STRATEGY
INVESTMENT STRATEGY SPH REIT is a Singapore-based REIT established principally to invest, directly or indirectly, in a portfolio of income-producing real estate which is used primarily for retail purposes in Asia-Pacific, as well as real estate-related assets. Under the Listing Manual, the investment strategy of SPH REIT must be adhered to for at least three years following the Listing Date, unless otherwise approved by Unitholders by way of an Extraordinary Resolution. KEY OBJECTIVE The Managers key objective for SPH REIT is to provide Unitholders with regular and stable distributions, and sustainable long-term growth in DPU and NAV per Unit, while maintaining an appropriate capital structure. Property Management Philosophy The Manager believes that the key factors in successfully managing a mall are: consistency and clarity in its market positioning, which guides and determines the choice and mix of tenants as well as execution of all promotion events and campaigns; staying relevant to its customers by the selection of tenants; and continually refreshing its physical environment and tenant mix to keep ahead of customer demands.
The Managers strategy is to manage its properties for sustainable financial returns. In line with this, the Manager treats the relationship with tenants as a partnership. To achieve a mutually beneficial relationship between landlord and tenant requires a good understanding of tenants trading cycles, appreciation of their business plans and operations and actively working with tenants to help promote their businesses in the mall. For an upscale mall like Paragon Mall, with top international fashion brands, the Manager needs to understand the brand positioning of individual brands, and to continually keep abreast of the ever evolving fashion scenes in Europe, U.S. and Asia. The consistent growth in Paragons performance over the last 10 years is strong testimony to this management approach. Paragon Mall has enjoyed full Committed Occupancy for more than 10 years, despite severe fluctuations in the global and Singapore economies, and the heightened competition on Orchard Road. For example, when more than 1.2 million sq ft of net lettable retail space (opening of three new malls) was added in 2009 and 2010, Paragon Mall continued to generate positive rental growth. Non-retail assets such as medical suites and offices in Paragon complement well with the positioning of Paragon and offer exclusive and convenient medical services to Paragons target customers. The Manager will continue to enhance and fine-tune the medical services offered by the medical practitioners occupying the medical suites.
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The Manager will adopt the same management approach for the other malls in SPH REIT, with adaptation to suit the individual malls positioning. The Manager believes that retailers and F&B operators support this management approach which is evidenced by the fact that Clementi Mall achieved 100.0% Committed Occupancy when it was officially opened in May 2011. KEY STRATEGIES The Manager plans to achieve its objective through the following key strategies: Proactive asset management and asset enhancement strategy The Manager will take an active role in managing and enhancing SPH REITs properties. The Managers strategy for organic growth will be to actively optimise the tenant mix of SPH REITs properties and to provide proactive property management services to tenants while also undertaking periodic refurbishment of SPH REITs properties, as appropriate. Through active asset management, the Manager seeks to ensure that the interests of all stakeholders, including tenants, shoppers and Unitholders, are protected while keeping SPH REITs properties at the forefront of evolving retail mall trends and relevant to the changing demands of consumers. Investments and acquisition growth strategy The Manager intends to assess acquisition opportunities in line with SPH REITs investment objective. SPH REIT will benefit from the ROFR Properties which could potentially be acquired from the Sponsor if the Sponsor chooses to divest them. The Sponsor has granted a ROFR over the ROFR Properties to the Trustee for as long as: the Manager or any of its related corporations remains the manager of SPH REIT; SPHL and/or any of its related corporations, alone or in aggregate, remains as a controlling shareholder of the manager of SPH REIT; and SPHL and/or any of its related corporations, alone or in aggregate, remains as a controlling unitholder of SPH REIT.
Currently, there is one applicable ROFR Property, The Seletar Mall, which if acquired by SPH REIT will enhance SPH REITs portfolio. The Sponsor will consider and participate in retail development opportunities where appropriate, which may increase the number of ROFR Properties. Capital and risk management strategy The Manager will seek to manage and source capital so as to maximise overall returns for Unitholders. This may include accessing various capital markets to source appropriately priced and structured debt and equity, monitoring and implementing hedging arrangements as well as assessing alternative forms of capital and other capital management strategies where appropriate. The Manager may use fixed rate loans or financial instruments such as interest rate swaps to hedge certain financial risk exposures. With respect to debt financing, the Manager intends to diversify, stagger and extend debt maturities as the Manager deems appropriate, and mitigate interest rate volatility, so as to optimise risk-adjusted returns to Unitholders. Proactive Asset Management and Asset Enhancement Strategy The Managers strategy for organic growth is to continue to strengthen strong business relationships with existing tenants, especially those who are major contributors to the Properties success whether through rental returns or through their unique offerings while also continually revitalising the tenant mix of the Properties. While seeking to maintain high tenant retention and 105
Committed Occupancy levels along with stable rental growth, the Manager will also proactively respond to the appetite for freshness amongst consumers via continual tenant mix optimisation and asset enhancement initiatives, as appropriate. The Manager intends to meet its objective of maximising returns from its property portfolio through the following key strategies. Continually optimise the tenant mix of the Properties The Manager will work closely with the Property Manager to continue the partnership model that has been established with existing tenants while continually exploring the market for prospective tenants to further refine and enhance the tenant mix of the Properties. Due to evolving consumer demands, especially in the fashion and lifestyle areas, close tracking and monitoring of market trends will be necessary to establish a strong pipeline of potential retailers and to anticipate the loss or reduction of relevance of an existing tenants offering. Deliver high quality services to tenants The Manager intends to continue providing high quality services to tenants and to become the landlord of choice in the Singapore retail real estate space through: providing high quality asset management services to maintain high retention rates; active monitoring of tenants sales performance to review sustainability and take proactive actions to help tenants improve turnover; facilitating relocation or expansion of tenants according to their operational requirements; improving responsiveness to tenants feedback and enquiries; and providing additional value-added services for tenants.
Implement asset enhancement initiatives The Manager will work closely with the Property Manager to improve the rental income and value of the portfolio by undertaking asset enhancement initiatives. To the extent possible and permitted by law and regulations, the Manager may: seek to optimise the use of space, expand lettable area, identify sub-optimal and ancillary areas that can be converted for higher returns and improve building efficiency; and undertake retrofitting and refurbishments of the Properties to stay relevant and to keep abreast of market expectations to remain competitive.
The Manager will undertake asset enhancement initiatives subject to the improvements satisfying projected levels of feasibility and profitability. (See Business and Properties for further details.)
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Implement pro-active marketing plans The Manager intends to develop appropriate advertising and promotional campaigns to reinforce the brand positioning of the Properties, especially for Paragon Mall and increase brand awareness as a top-of-mind recall for their target market shoppers, both locally and overseas. Tactical promotional activities to improve tenants profile will also be undertaken, to increase shopper spend. Rationalise operating costs The Manager intends to rationalise operating costs through the following: working closely with the Property Manager to manage and reduce the property operating expenses (without compromising the quality of maintenance and services). Some cost management initiatives include constant review of workflow process to boost productivity, lower operational costs and foster close partnerships with services providers to control costs and potential escalation; and exploiting the economies of scale associated with operating a portfolio of properties by, for example, cross implementation of successful cost-saving programmes.
Given SPH REITs organic earnings growth potential, the Managers initial strategy following the completion of the Offering is to focus on optimising the operational performance of SPH REITs Initial Portfolio, by increasing Gross Revenue and rationalising costs. Nonetheless, moving forward, the Manager intends to actively explore acquisition opportunities that will add value to SPH REIT and enhance returns to Unitholders. The Managers intention is to hold assets on a long-term basis. Investments and Acquisition Growth Strategy The Manager will pursue acquisition opportunities that will add value to SPH REITs portfolio and improve returns to Unitholders relative to SPH REITs average cost of capital. In evaluating future acquisition opportunities, the Manager will seek acquisitions that may enhance the diversification of the portfolio by location and tenant profile, and optimise risk-adjusted returns to Unitholders. The management teams industry knowledge, relationships and access to market information provide a competitive advantage with respect to identifying and acquiring commercial real estate and real estate-related assets. The Manager intends to hold the properties it acquires on a long-term basis. However, in the future, where the Manager considers that any property has reached a stage that offers limited scope for further growth, the Manager may consider selling the property and using the proceeds for alternative investments in properties that meet its investment criteria. Investment Criteria In evaluating acquisition opportunities for SPH REIT, the Manager will focus primarily on the following investment criteria in relation to the property under consideration: Yield requirements The Manager will seek to acquire properties with the ability to provide attractive long-term cash flows and yields above SPH REITs weighted average cost of capital, as well as with the potential for net asset growth with the expectation to maintain or enhance SPH REITs returns to Unitholders;
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Location The Manager will assess each propertys location and the potential for business growth in its market, as well as its impact on the overall geographic diversification of its asset portfolio. The Manager will also evaluate a range of location-related criteria, including but not limited to, ease of access, proximity and connectivity to major business, tourist and transportation hubs such as major highways and thoroughfares, MRT stations and other public transportation networks; Asset enhancement potential The Manager may seek to acquire properties which have the potential to increase investment returns and create value through active property management such as selective capital expenditure and/or other asset enhancement initiatives; Building and facilities specification The Manager will endeavour to conduct thorough property due diligence and adhere strictly to the relevant legal and zoning regulations as well as quality specifications, with due consideration given to the size and age of the buildings, with respect to potential properties to be acquired by SPH REIT. The properties will be assessed by independent experts relating to repairs, maintenance and capital expenditure requirements in the short to medium term; and Tenant mix The Manager will seek to acquire properties with opportunities to increase rental and tenant retention rates relative to competing properties in their respective micro-property markets. The properties should have (i) tenants with good credit quality, (ii) diverse sector mix for multi-tenanted properties and (iii) established and reputable tenants.
Acquisition opportunities in respect of the ROFR Properties In addition, SPH REITs acquisition strategy is complemented by the ROFR granted by the Sponsor over the ROFR Properties, providing SPH REIT with access to future acquisition opportunities of completed income-producing real estate located in Asia-Pacific which is used primarily for retail purposes. Currently there is one applicable ROFR Property, The Seletar Mall, which if acquired by SPH REIT after stabilisation is expected to be accretive to Unitholders and will enhance SPH REITs portfolio. The Sponsor will consider and participate in retail development opportunities where appropriate which may increase the number of ROFR Properties. The table below sets out the information of The Seletar Mall 1 which is currently owned by The Seletar Mall Pte. Ltd. 2 and which is presently subject to the ROFR 3. Completion Date December 2014
Name The Seletar Mall
Location Singapore
Description Suburban lifestyle
GFA (sq ft) 283,854
Land Tenure 99 years from 18 April 2012
1 2
The construction of The Seletar Mall is managed by The Seletar Mall Pte. Ltd. The Seletar Mall Pte. Ltd., which is owned by Moon Holdings Pte. Ltd. and United Engineers Developments Pte Ltd respectively holding 70.0% and 30.0% of the total number of ordinary shares issued by The Seletar Mall Pte. Ltd. Moon Holdings Pte. Ltd. is a wholly-owned subsidiary of Times Properties, which is in turn a wholly-owned subsidiary of the Sponsor. United Engineers Developments Pte Ltd is a wholly-owned subsidiary of United Engineers Limited. United Engineers Limited has not given a ROFR to the Sponsor as the ROFR to be given by the Sponsor to the Trustee would be applicable only when the Sponsor intends to dispose of The Seletar Mall. Pursuant to the terms of the ROFR granted by the Sponsor, the Sponsor shall procure that The Seletar Mall be offered to SPH REIT prior to any sale of The Seletar Mall to a third party. See Certain Agreements relating to SPH REIT and the Properties Right of First Refusal Agreement for further details.
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The Seletar Mall is a six-storey mall under development located in Sengkang estate, a growing residential estate area in north-eastern Singapore. The mall is expected to be completed in December 2014. The Seletar Mall will be highly accessible via the Sengkang North East Line MRT, bus routes connecting to the Sengkang bus interchange and two main expressways, Tampines Expressway and CTE and will also benefit from a strong catchment of 320,000 residents living in HDB public housing flats, private condominiums and landed homes located within a 3.0 km radius of the mall. The mall will be positioned as a family-friendly mall mainly focusing on the mid-tier customer market. The Seletar Malls tenant base is expected to include a quality supermarket and/or department store anchor and what is expected to be the only cinema in Sengkang as well as a variety of F&B offerings and specialty stores which will appeal to the young population base in its primary catchment area. Capital and Risk Management Strategy The Manager will endeavour to: maintain a strong balance sheet; employ an appropriate mix of debt and equity in financing acquisitions; diversify its funding sources to access both financial institutions and capital markets; optimise its cost of debt financing; and adopt appropriate interest rates hedging strategies to minimise exposure to market volatility.
The Manager intends to achieve the above by pursuing the following strategies: Optimal capital structure strategy The Manager aims to optimise the capital structure and cost of capital, within the borrowing limits set out in the Property Funds Appendix. The Manager will endeavour to employ an optimal capital structure, comprising an appropriate mix of debt and equity in financing the acquisition of properties and asset enhancement activities of its properties. The Managers capital management strategy involves adopting and maintaining appropriate aggregate leverage levels to ensure optimal returns to Unitholders, while maintaining flexibility in respect of future expenditure or acquisitions. In the event that SPH REIT incurs any future borrowings, the Manager will periodically review SPH REITs capital management policy with respect to its Aggregate Leverage and modify its strategy in the light of prevailing market conditions. The Manager will endeavour to match the maturity of SPH REITs indebtedness with the maturity of SPH REITs investment assets, and to employ long-term, fixed-rate debt to the extent practicable in view of market conditions in existence from time to time. As and when appropriate, the Manager may consider diversifying its sources of debt financing in the future, including by way of accessing the public debt capital markets through the issuance of investment grade bonds to further enhance the debt maturity profile of SPH REIT. Nevertheless, the Manager intends to maintain a prudent level of borrowings while maximising returns for Unitholders. As of the Listing Date, SPH REIT is expected to have borrowings of S$850 million based on the Maximum Offering Price to S$975 million based on the Minimum Offering Price, representing Aggregate Leverage of 27.3% to 31.3%, respectively (see Capitalisation Indebtedness for further details).
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Proactive interest rate management strategy The Manager intends to adopt an active interest rate management policy to manage the risks associated with changes in interest rates on the facilities while also seeking to ensure that SPH REITs on-going cost of debt capital remains competitive. The Manager also endeavours to utilise interest rate hedging strategies where appropriate to optimise risk-adjusted returns to investors. Other financing strategy The Manager will, in the future, consider other opportunities to raise additional equity capital for SPH REIT through the issue of new Units, provided that SPH REIT has an appropriate use for such proceeds. The decision to raise equity will also take into account the stated strategy of maintaining an optimal capital structure.
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BUSINESS AND PROPERTIES

Unless otherwise specified, all information relating to the Properties in the Prospectus are as at 28 February 2013. SPH REIT is a Singapore-based REIT established principally to invest, directly or indirectly, in a portfolio of income-producing real estate which is used primarily for retail purposes in Asia-Pacific, as well as real estate-related assets. The Initial Portfolio comprises two properties located in Singapore: Paragon is a premier upscale retail mall and medical suite/office property located in the heart of Orchard Road, Singapores most famous shopping and tourist precinct. Paragon consists of a six-storey retail podium and one basement level with 483,690 sq ft of retail NLA with a 14-storey tower and another three-storey tower sitting on top of the retail podium with a total 223,000 sq ft of medical suite/office NLA. Paragon Mall is Singapores premier upscale retail mall with designer fashion and luxury boutiques, sports and lifestyle shops, restaurants and cafes. Paragon Mall is positioned as an upscale mall targeting affluent shoppers. Paragon benefits from a regular catchment of patients, both local and medical tourists, and their accompanying relatives by virtue of Paragons location immediately adjacent to Mount Elizabeth Hospital and Mount Elizabeth Medical Centre, a renowned private hospital and its specialist medical centre, respectively. Paragon Medical is ideally positioned to capitalise on growing medical tourists in Singapore, robust demand for quality HCS, undersupply of medical suite/office and resilient medical suite/office rents. Paragon has received awards and accolades from independent third party agencies in Singapore: (a) In 2007, Paragon won SRA awards for Shopping Centre Scorecard 2007 in two categories Best Efforts in Advertising & Promotions and Best Efforts in Tenant Relationships; In 2008, Paragon won SRA awards for Shopping Centre Scorecard 2008 in two categories Best Efforts in Advertising & Promotions and Mall Maintenance; In 2009, Paragon won SRA awards for Shopping Centre Scorecard 2009 in the category Best Efforts in Advertising & Promotions; In 2011, Paragon won SRA awards for Shopping Centre Scorecard 2011 in the category Best Efforts in Advertising & Promotions; and More recently in 2012, Paragon received the Singapore Service Class Certification from Spring Singapore Paragon is an integration of the buildings then known as Paragon by Sogo1 and the Promenade2 which were adjacent to each other3. Following the acquisition of Paragon by Sogo and Promenade in 19974, the Sponsor has extensively and continually upgraded the said two buildings which make up Paragon and optimised its tenancy mix. The Sponsor has implemented various key asset enhancement initiatives: (i) From 1998 to 1999, Paragon was extensively renovated, to create a more modern outward-looking mall, with a central atrium rising from level one to level six to
(b) (c) (d) (e)
1 2 3 4
Located at former Lot 906X of Town Subdivision 27. Located at former Lot 982A of Town Subdivision 27. The said Lots 906X and 982A both of Town Subdivision 27 were subsequently amalgamated to form the current Lot 1139C of Town Subdivision 27 (being one of the land lots on which the present-day Paragon is located). Times Properties acquisition of interests in the property owning companies that owned Paragon by Sogo and Promenade. The remaining shares in the property owning companies which Times Properties did not own were acquired in 2001.
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introduce natural skylight into the mall. The mall layout was simplified to make it easy for shoppers to navigate around the seven retail floors ensuring line-of-sight for the retail units. A 14-storey medical tower was built on top of the retail podium, to offer elective HCS to the malls target customers. (ii) From 2002 to 2003, the Sponsor carried out additional asset enhancement works which involved the tearing down of the former Promenade building to facilitate the construction of the present-day integrated building and the forming of a contiguous 136-metre frontage along Orchard Road.
(iii) From 2008 to 2009, in keeping with evolving market demands, Paragon underwent an extensive asset enhancement program costing S$82 million which involved (i) the expansion of prime retail space of 11,000 sq ft fronting Orchard Road, (ii) the addition of two storeys of medical suite/office space totaling 29,000 sq ft on top of the Paragon retail podium and (iii) upgrading works which created a transparent facade and allowed several top international fashion brands to create five prominent duplex flagship stores fronting Orchard Road. (iv) Other smaller scale but more regular asset enhancements include the upgrading of internal spaces and toilets and the make-over of interior finishes. More recently, external upgrading works undertaken include the development of a wider plaza on the Orchard Road frontage and the addition of a new taxi stand. With the completion of the latest asset enhancement program, Paragon has secured an even stronger positioning as an upscale retail mall with a diverse mix of international high fashion and high street brands appealing to its target shopper market. Paragon Mall is a mature and well established retail mall with distinct market positioning that is well-positioned to capitalise on the growing retail spending, continued rejuvenation of Orchard Road and tourism growth. Clementi Mall consists of a five-storey retail podium and one basement level totalling approximately 192,089 sq ft of retail NLA. The retail mall is part of the first mixed-use development in Singapore with commercial, bus interchange and public housing (388 HDB public housing units) components. The mall is strategically located in the heart of Clementi town, a well-established residential area, and has direct access to the Clementi bus interchange and is connected to the Clementi MRT station at level three. Clementi Mall is positioned as a family-oriented mall with strong F&B and fashion offerings. Clementi Mall has a catchment area covering West Coast, Holland Village and Bukit Timah, including key tertiary institutions such as National University of Singapore, Ngee Ann Polytechnic, Singapore Polytechnic and UniSIM. The mall is well-positioned to capitalise its high accessibility, limited direct competition, captive trade area and significant walk up population. COMPETITIVE STRENGTHS The Manager believes that the Properties enjoy the following competitive strengths: Large trade areas and customer base Paragon is located in the premier shopping and tourist precinct of Singapore; and Clementi Mall is located in an established high-density residential estate. The Properties locations are further enhanced by their accessibility and unique positioning. Paragons strategic location and reputation allow it to attract customers from all over Singapore. It also appeals to tourists.
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Paragons customer base comprises residents from its trade area spanning the entire Singapore, tourists, visitors for medical purposes and workers in Orchard Road. Key highlights of Paragons catchment are set out below: Trade area spanning the entire Singapore According to Urbis, Paragon has a trade area spanning the entire Singapore population of 5.4 million 1. Its primary trade area of the central region of Singapore has a population of 1.6 million 2 and enjoys higher levels of income and retail spend per capita compared to other regions in Singapore. Significant catchment of tourists Tourists form an important market segment for most of the retail malls in Orchard Road including Paragon. According to Urbis, in 2012, international visitor arrivals to Singapore totalled 14.4 million with an estimated tourist expenditure of S$7.8 billion. Tourists are estimated to contribute approximately 40.0% of Orchard Road retail sales. According to STBs Singapore Annual Report on Tourism Statistics 2010/2011 3, Orchard Road is the most visited tourist destination in Singapore. Important medical hub Paragon benefits from regular visitation by local patients and medical tourists and their accompanying relatives by virtue of Paragons immediately adjacent location to Mount Elizabeth Hospital and Mount Elizabeth Medical Centre, a renowned private hospital and its specialist medical centre, respectively. In addition, Paragon houses Paragon Medical, comprising a 14-storey tower and another three-storey tower sitting on top of the retail podium, that hosts over 60 medical and dental specialist clinics and offices. Immediate catchment of workers in Orchard Road Paragon benefits from a meaningful catchment of workers in the Orchard Road vicinity. For 2013, Urbis estimates that there are currently around 62,200 workers in the Orchard Road vicinity.
Clementi Malls customer base primarily comprises residents from Clementi town, West Coast, Holland Village and Bukit Timah and students from key tertiary institutions such as National University of Singapore, Ngee Ann Polytechnic, Singapore Polytechnic and UniSIM. A key highlight of Clementi Malls catchment is set out below: Clementi Malls catchment and trade area Catchment area that covers the surrounding established residential estates Clementi Mall is strategically located in the heart of Clementi Town Centre with excellent transport connectivity due to its co-location with a bus interchange and connection to the Clementi MRT station. Urbis estimates that the mall serves over 180,000 residents from its primary and secondary trade areas including the surrounding Clementi town, West Coast, Holland Village and Bukit Timah residential estates. According to Urbis, there are more than 63,000 students from tertiary institutions in the area.
Source: Appendix F, Independent Retail Property Market Research Report, Section 2.5.2 (Resident Trade Area Definition). Relevant figures are estimated as of 2013. Due to Paragons location in Orchard Road, its very extensive retail offer and Singapores excellent public transportation system which makes Orchard Road very accessible, Paragon is able to draw customers from all over Singapore. Source: Appendix F, Independent Retail Property Market Research Report. Relevant figures are estimated as of 2013. Source: STB, Annual Report on Tourism Statistics 2010/2011. STB has not provided its consent, for the purposes of Section 249 of the SFA (read with Section 302(1) of the SFA), to the inclusion of the information extracted from the relevant report published by it and therefore is not liable for such information under Sections 253 and 254 of the SFA (both read with Section 302(1) of the SFA). While the Manager has taken reasonable actions to ensure that the information from the report published by STB is reproduced in its proper form and context, and that the information is extracted accurately and fairly from such report, none of the Manager, the Joint Bookrunners or any other party has conducted an independent review of the information contained in such report or verified the accuracy of the contents of the relevant information.
2 3
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Strong brand recognition among shoppers and retail tenants Paragon Mall is one of the most established and well-known retail malls located in Orchard Road. Paragon was first acquired by the Sponsor in 1997 1 and since then, the Sponsor has extensively and continually upgraded the mall and optimised its tenant mix in order to keep the property up-to-date with market preferences and expectations and to meet the needs of retailers. The mall has since gained a positive reputation amongst affluent shoppers for its extensive range of top international fashion brands, high street and diffusion brands, wide F&B offerings and gourmet supermarket. The mall is instantly recognisable due to its all-glass facade with 136 metres of prime Orchard Road frontage, showcasing duplex flagship stores of top international fashion brands like Gucci, Miu Miu, Prada, Salvatore Ferragamo and Tods. Since commencement of operations, Clementi Mall has quickly established itself as a popular destination for residents within its catchment area due to its excellent location, scale and transport connectivity. Clementi Mall is part of an integrated mixed-use development that has injected new life into a mature town, and has optimised land use by turning an old bus interchange site into a modern mixed development that is well integrated with its surroundings and transport nodes. Strategic locations The Properties are well located in their respective trade areas and are easily accessible via expressways, a network of major roads and public transportation including public buses and MRT trains, which enhances their ability to attract high volumes of their target visitors. Paragon is located at the heart of Orchard Road, Singapores premier shopping and tourist precinct which is a 2.2-km one-way boulevard flanked by 43 retail centres with approximately 7.3 million sq ft of NLA and over 10,600 guest rooms and serviced apartment units in the vicinity that provide a large catchment of tourists and business travellers. Paragon is well-served by the CTE and the property has a spacious 416-lot car park with valet service which is appreciated by affluent customers who prefer to drive or be driven when out shopping. The property is also served by complimentary shuttle bus services with bus stops at key hotel areas in Singapore and is within walking distance to Orchard MRT Station and Somerset MRT Station. Other forms of public transport to Paragon include the bus network and taxi services, with a taxi pick up/drop off point located immediately outside of the mall. Paragon benefits from regular visitation by local patients and medical tourists and their accompanying relatives by virtue of Paragons location immediately adjacent to Mount Elizabeth Hospital and Mount Elizabeth Medical Centre, a renowned private hospital and specialist medical centre, respectively. In addition, Paragon houses Paragon Medical, comprising a 14-storey tower and another three-storey tower sitting on top of the retail podium, that hosts over 60 medical and dental specialist clinics and offices. The specialist clinics at Paragon Medical provide medical services ranging from cardiology, orthopaedics, urology, dermatology, obstetrics, gynaecology, oncology, pediatrics, dentistry and anti-ageing to traditional Chinese medicine. Paragon Medical caters uniquely to patients and their accompanying relatives by providing the amenity of a shopping precinct, cafe and dining venue before or after the patients medical treatments. Clementi Mall is strategically located in the centre of Clementi town in the west of Singapore, a well-established residential area, and is well-served by the PIE and AYE, bus routes via the Clementi bus interchange with direct access to the mall and the Clementi MRT Station which is linked directly to the third level of the mall.
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High and stable Committed Occupancy The Properties have maintained high and consistent Committed Occupancy reflecting the success and effectiveness of the asset management and leasing strategy of each Property. Paragon Mall achieved Committed Occupancy of 100.0% for the last ten years. Clementi Mall also achieved Committed Occupancy of 100.0% upon its official opening in May 2011 and has maintained 100.0% Committed Occupancy in FY2012. Diverse and quality tenant base The Initial Portfolio has a large tenant base comprising 431 tenants. These tenants cover a wide variety of trade sectors, providing SPH REIT with trade diversification. SPH REITs top 10 tenants 1 in terms of Gross Rental Income contributed 23.7% of Gross Rental Income for the month of February 2013. No trade sector accounted for more than 25.8% of Gross Rental Income in the same period. The Properties retail tenants include quality anchor tenants such as Marks & Spencer, Metro, MUJI, Paragon Market Place, BHG Department Store, FairPrice Finest and FoodFare. Additionally, the Properties have a loyal tenant base where some major tenants have been with Paragon Mall for over 10 years such as Marks & Spencer, Metro, Paragon Market Place, Gucci, Salvatore Ferragamo, Dunhill, Ermenegildo Zegna and Cortina Watch. 52.0% of Paragons tenants, representing 63.0% of NLA at 28 February 2013, have been tenants of Paragon for over seven years and are in their third or later lease term. These longstanding tenants provide income stability and enable SPH REIT to maintain a certain level of rental income. Favourable lease profile with embedded organic growth potential The leases at Paragon are typically structured with three-year tenures comprising base rent, service charge, advertising and promotional charge and turnover rent. As at 28 February 2013, 33.0% of leases by NLA have step-up structures in the base rent and more than 65.0% of leases by NLA have a base rent and turnover rent component. In addition, the Manager believes that Paragons balanced and staggered lease expiry profile with a weighted average lease expiry by NLA of 1.6 years provides SPH REIT income visibility and stability. The leases at Clementi Mall are also typically structured with three-year tenures comprising base rent, service charge, advertising and promotional charge and turnover rent. As at 28 February 2013, 39.0% of leases by NLA have step-up structures in the base rent and more than 86.0% of leases by NLA have a base rent and turnover rent component. In addition, the Manager believes that Clementi Malls weighted average lease expiry by NLA of 1.9 years will allow it to further benefit from the expected growth in retail rents. CERTAIN INFORMATION ON THE PROPERTIES The Properties have a total NLA of 898,779 sq ft comprising 675,779 sq ft of retail NLA and 223,000 sq ft of medical suite/office NLA. The table below sets out certain key information on the Properties as at 28 February 2013 (unless otherwise indicated), with independent valuations by the Independent Valuers, CBRE and DTZ.
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Paragon Property type Retail and medical suite/office Overall Retail Medical suite/office NLA (sq ft) Overall Retail Medical suite/office Number of floors Year of completion Committed Occupancy (%) Car park lots Gross Revenue: Forecast Period 2H FY2013 (S$m) Gross Revenue: Projection Year FY2014 (S$m) Net Property Income: Forecast Period 2H FY2013 (S$m) Net Property Income: Projection Year FY2014 (S$m) CBRE independent valuation (S$m) (as at 28 February 2013) CBRE independent valuation without Income Support (S$m) (as at 28 February 2013) DTZ independent valuation (S$m) (as at 28 February 2013) DTZ independent valuation without Income Support (S$m) (as at 28 February 2013) Purchase consideration (S$m) Weighted average lease expiry by NLA (years) Weighted average lease expiry by Gross Rental Income (years) (4) Current Passing Rent (4) (S$/sq ft/month) Number of tenants 1,017,707 737,142 280,565 706,690 483,690 223,000 22 2003 (1) 100.0 416 78.3 163.4 57.6 120.4 2,500.0 (2)
Clementi Mall Retail
Initial Portfolio Retail and medical suite/office 1,307,584 1,027,019 280,565 898,779 675,779 223,000 100.0 585 96.9 201.4 70.4 146.7 3,070.0
GFA (sq ft)
289,877 289,877 192,089 192,089 7 2011 100.0 169 18.6 38.0 12.8 26.3 570.0 (3)
2,500.0 (2)
550.0
3,050.0
2,500.0 (2)
571.0 (3)
3,071.0
2,500.0 (2)
556.0
3,056.0
2,500.0 1.6 1.6
570.5 1.9 1.4
3,070.5 1.7 1.6
17.9 285
15.8 146
17.5 431
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Notes: (1) (2) (3) (4) The completion of the enhancement works which involved the tearing down of the Promenade building to facilitate the construction of the present-day integrated building. Based on a 99-year leasehold interest. The valuation takes into account the Income Support. For the one-month period ended 28 February 2013.
Initial Portfolio Pro Forma Gross Revenue and Net Property Income The charts below provide a breakdown of Gross Revenue and Net Property Income of the Initial Portfolio by Property for the six-month period ended 28 February 2013:
Initial Portfolio Gross Revenue Breakdown Clementi Mall S$18.7 million 19.2% Initial Portfolio Net Property Income Breakdown Clementi Mall S$13.0 million 18.2%
Paragon S$78.7 million 80.8%
Paragon S$58.5 million 81.8%
Property Type Analysis The charts below provide a breakdown of valuation of the Initial Portfolio by the various property types as at 28 February 2013:
Initial Portfolio Valuation Breakdown
Clementi Mall S$570.5 million 18.6%
Paragon S$2,500.0 million 81.4%
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Initial Portfolio Committed Occupancy The table below sets out the historical average Committed Occupancy (1) of the Properties for each in FY2010, FY2011 and FY2012: FY2010 Paragon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Clementi Mall (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . Initial Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes: (1) (2) Average Committed Occupancy is computed based on the average monthly occupied NLA over average NLA of the Properties for that period. Information on historical average Committed Occupancy in respect of Clementi Mall for FY2010 was not available as Clementi Mall only became available for full occupation when it received its second TOP on 14 March 2011.
FY2011 100.0% 100.0% 100.0%
FY2012 100.0% 100.0% 100.0%
100.0% 100.0%
Profile of Top 10 Tenants The top 10 tenants (1) of the Properties (by Gross Rental Income for the month of February 2013) are, in alphabetical order: Burberry (S) Distribution Company Pte Ltd, Coach Singapore Pte Ltd, Cold Storage Singapore (1983) Pte Ltd, Ferragamo Singapore Pte Ltd, FJ Benjamin (Singapore) Pte Ltd, Metro (Private) Ltd, Pacific Healthcare Holdings Ltd, Prada Singapore Pte Ltd, Tods Singapore Pte Limited and Wing Tai Retail Management Pte Ltd. The table below sets out selected information about the top 10 tenants (1) of the Properties (based on Gross Rental Income for the month of February 2013): Percentage of the Gross Rental Income of the Properties (%) 5.6 3.7 3.0
No. 1. 2. 3.
Tenant (2) Tenant A Tenant B Tenant C
Trade Sector Luxury brands, jewellery, watches Departmental stores & supermarket Luxury brands, jewellery, watches Medical & Office
Lease Expiry Date (3) 2nd Half 2014 2nd Half 2017 Between 2nd Half 2014 and 2nd Half 2016 Between 1st Half 2014 and 1st Half 2016 2nd Half 2016 2nd Half 2015 1st Half 2016
4.
Tenant D
2.6
5. 6. 7.
Tenant E Tenant F Tenant G
Luxury brands, jewellery, watches Luxury brands, jewellery, watches Departmental stores & supermarket
1.8 1.5 1.4
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No. 8. 9. 10.
Tenant (2) Tenant H Tenant I Tenant J
Trade Sector Luxury brands, jewellery, watches Luxury brands, jewellery, watches Fashion, handbags, shoes and accessories
Lease Expiry Date (3) 1st Half 2015 2nd Half 2015 Between 1st Half 2014 and 2nd Half 2016
Percentage of the Gross Rental Income of the Properties (%) 1.4 1.4 1.3
Total
Notes: (1) (2) (3)
23.7
The list of top 10 tenants above does not take into account one of the tenants which has not consented to the disclosure of its tenancy arrangements in the prospectus. The names of the tenants cannot be matched to the information set out above for confidentiality reasons. Some of the tenants above have signed more than one tenancy agreement and this has resulted in more than one tenancy expiry date for such tenants.
The tenancy profile of the Properties is reasonably diversified, with no single tenant accounting for more than 5.6% of the Gross Rental Income. Trade Sector Analysis for the Initial Portfolio The following chart provides a breakdown by Gross Rental Income and NLA of the different trade sub-sectors represented in the Properties as at 28 February 2013:
Initial Portfolio Trade Mix by Gross Rental Income Departmental stores & supermarket 9.1% Initial Portfolio Trade Mix by NLA Departmental stores & supermarket 17.4%
Medical suite/ office 15.4% Non-retail services 3.1%
Medical suite/ office 24.8%
Lifestyle 17.0%
Luxury brands, jewellery & watches 25.8%
Non-retail services 5.3%
Luxury brands, jewellery & watches 8.5% Fashion, handbags, shoes & accessories 11.1%
F&B 14.2%
Fashion, handbags, shoes & accessories 15.4%
Lifestyle 19.5%
F&B 13.4%
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Expiries and Renewals The leases at the Properties are generally for terms of three years or more. Certain leases have options to renew for further terms, and in line with normal commercial practice, such renewals (including the revised rent, if any) shall be on such terms as mutually agreed by the parties. The following table sets out information on leases that have expired and those that have been renewed by the existing tenants during the period indicated: Expiring leases as a% of NLA (%) 19.8 29.4 17.9 Total NLA of leases renewed (sq ft) 122,213 220,456 148,450 Renewal rate by number of leases (%) 64.6 75.3 94.7
Total number of expiring leases FY2010 (1) FY2011 FY2012 For the six-month period ended February 2013 Total/Average
Note: (1)
NLA of expiring leases (sq ft) 177,858 264,321 161,206
Renewal rate by NLA (%) 68.7 83.4 92.1
82 97 94
68 341
173,041 776,426
19.3 21.6
154,730 645,849
83.8 79.6
89.4 83.4
Information on lease expiries and renewals in respect of Clementi Mall for FY2010 was not available as Clementi Mall only became available for full occupation when it received its second TOP on 14 March 2011.
The weighted average lease expiry by NLA as at 28 February 2013 is 1.7 years, and the weighted average lease expiry by Gross Rental Income for the month of February 2013 is 1.6 years. The chart below sets out information of leases, as at 28 February 2013, that will expire during the periods indicated:
Lease Expiry Schedule of Initial Portfolio by Gross Rental Income
40.3%
Lease Expiry Schedule of Initial Portfolio by NLA
43.3% 32.1%
25.3%
25.9%
24.5%
4.7% 0.9%
FY2013 FY2014 FY2015 FY2016
1.4%
FY2017 and beyond FY2013 FY2014 FY2015
1.6%
FY2016 FY2017 and beyond
Of the leases expiring in FY2013 and FY2014, 100.0% and 48.1%, respectively by NLA, have pre-committed leases in place for the next lease term 1.
1 As at 31 May 2013.
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Marketing and Leasing Activities The Property Manager undertakes a proactive approach towards marketing and leasing by closely tracking market trends and keeping in touch with tenants and retailers, both local and overseas, to have an understanding of their business plans with respect to plans to open new stores, introduce new concepts or new lines and expansion of current shops. The Property Manager will leverage on its extensive tenant base to cross-market retail space across its malls. The assistance of property consultants is occasionally sought for potential office vacancies only. The Manager will also explore opportunities for joint marketing efforts and other mutually beneficial opportunities with the Sponsor. Lease Agreements and Lease Management The lease agreements entered into for the Properties contain terms and conditions, including those relating to duration of the lease, provision of security deposit as well as alteration and improvement works, generally found in most office and retail lease agreements in Singapore. The terms are severally in line with market practice and procedures. In certain instances, these terms have been varied to accommodate the specific needs of major tenants such as right to space expansion, rent-free fitting out period, subletting and assignment rights. When a prospective tenant has committed to a lease, a security cash deposit or bank guarantee equal to at least three months rent and service charge (and advertising and promotion fee, for retail purposes) is usually payable. The tenant will usually take possession of the premises after it has made the requisite payments and has formally accepted the letter of offer for the lease. Rent and service charge are payable monthly in advance. As tenant retention is critical to minimising the turnover of leases, the Property Manager will maintain close communication and a good working relationship with the existing tenants. Dialogues and meetings for lease renewal will be held with tenants whose leases are due to expire well in advance with the aim of minimising void time in the event that a new tenant takes over a tenancy. Insurance The Properties are insured in a manner consistent with industry practice in Singapore. This includes property damage and business interruption insurance, acts of terrorism and public liability insurance (including personal injury) policies. There are no significant or unusual excess or deductible amounts required under such policies. There are, however, certain types of risks that are not covered by such insurance policies, including acts of war. (See Risk Factors SPH REIT may suffer material losses in excess of insurance proceeds or SPH REIT may not put in place or maintain adequate insurance in relation to the Properties and its potential liabilities to third parties for further details.) Legal Proceedings None of SPH REIT, the Manager and/or the Property Manager is currently involved in any material litigation nor, to the best of the Managers knowledge, is any material litigation currently contemplated or threatened against SPH REIT, the Manager or the Property Manager. Competition The retail property sectors in Singapore remain highly competitive. How well the Initial Portfolio performs relative to its competitors depends on several factors, including rental rates, quality and location of properties, supply of comparable space and changing needs. The accessibility and trade mix within a retail mall is also a major factor in attracting shoppers and tenants.
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Paragon According to Urbis, the majority of Paragons competition is expected to come from elsewhere in the Orchard Road district, from other high end malls such as Ngee Ann City and ION Orchard. Paragon is able to compete effectively with other Orchard Road malls due to its excellent location and unique positioning as a luxury mall with flagship stores of top international fashion brands which appeal to a mix of tourist and local shoppers. Some limited competition may come from other centres located in the central region of Singapore including Raffles City, Suntec City Mall and Marina Square. Clementi Mall Due to its location as a suburban mall located on a transport hub in the west of Singapore, Clementi Mall has limited competition in its primary trade area. Urbis notes that the west of Singapore is relatively underserviced by shopping centre floor space on a per capita basis with 1.7 sq ft per capita versus 4.3 sq ft per capita islandwide. Within Clementi Malls primary trade area, the existing malls are either older neighbourhood malls such as City Vibe, Clementi Town Centre and Clementi Shopping Centre which are relatively small and lack the same variety of retail offerings as Clementi Mall or lack the same degree of transport connectivity such as West Coast Plaza. Future Competing Developments Retail malls expected to open in the Orchard Road district include 268 Orchard, Orchard Gateway and the refurbished The Heeren. 268 Orchard and Orchard Gateway will contribute an aggregate 239,800 sq ft of new NLA with an additional 165,100 sq ft of NLA being refurbished at The Heeren. The retail floor space expected to be completed in the Orchard Road area over the next two years amounts to 405,000 sq ft of NLA, which represents a 5.5% increase in total retail stock for Orchard Road. Clementi Mall could be impacted by future competition from two new regional malls, Jem and Westgate malls, being developed in Jurong East. These two malls are expected to add an additional 980,000 sq ft of NLA over the next two years. This competition is somewhat curtailed by the strong visitorship to Clementi Mall from the immediate surrounds including residents and students from nearby colleges and universities and the fact that Jem and Westgate are at the periphery of Clementi Malls trade area. Even after the completion of Jem and Westgate, the supply of shopping centre floor space will be approximately 2.5 sq ft per capita which is below the estimated 4.3 sq ft per capita islandwide.
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Paragon
Description Paragon is a premier upscale retail mall and medical suite/office property located in the heart of Orchard Road, Singapores premier shopping and tourist precinct, with 706,690 sq ft of NLA. Along Orchard Road, Paragon Mall is the destination of choice for upmarket shoppers, both Singapore residents and tourists alike, in search of high end retail and fashion in a spacious and luxurious environment. With six levels and one basement of designer fashion and luxury boutiques, sports and lifestyle shops, restaurants and cafes, Paragon Mall offers a complete shopping experience for both tourists and locals. Paragon also houses Paragon Medical that hosts over 60 medical and dental specialist clinics and offices. These specialist clinics provide medical services ranging from cardiology, orthopaedics, urology, dermatology, obstetrics, gynaecology, oncology, paediatrics, dentistry, anti-ageing and traditional Chinese medicine. Paragon Medical is marketed using the slogan Exclusivity and Convenience, a theme that marries up the requirement for medical services to be provided in a convenient manner with the luxurious nature of Paragon Mall and the type of customers that it attracts. It has a focus on targeting foreign tourists, but also the higher end of the local market. Paragon Medical is strategically located in Orchard Road and within the Mount Elizabeth medical cluster anchored by one of the most renowned healthcare establishments in Asia, Mount Elizabeth Hospital and Mount Elizabeth Medical Centre. Paragon draws visitors from all over Singapore as well as international visitors. This unique positioning has allowed Paragon to attract over 18.0 million visitors in each of 2011 and 2012; significantly, according to Urbis, there is little variation in number of visitors over the course of the week due to contributions from tourists, office workers and visitors to the medical suites/offices. Paragon is well-served by the CTE and the property has a spacious 416-lot car park with valet service which is appreciated by affluent customers who prefer to drive or be driven when out shopping. The property is also served by complimentary shuttle bus services with bus stops at key 123
hotels in Singapore and is within walking distance to Orchard MRT Station and Somerset MRT Station. Other forms of public transport to Paragon include the bus network and taxi services, with a taxi pick up/drop off point located immediately outside of the mall. The table below sets out a summary of selected information on Paragon as at 28 February 2013: Address Property type Building completion Title Interest owned (%) Number of floors Land area (sq ft) GFA (sq ft) NLA (sq ft) Car park lots Committed Occupancy (%) Weighted average lease expiry by Gross Rental Income (years) (3) Weighted average lease expiry by NLA (years) CBRE independent valuation (S$m) (4) DTZ independent valuation (S$m) (4) Zoning Number of tenants
Notes: (1) (2) The completion of the enhancement works which involved the tearing down of the Promenade building to facilitate the construction of the present-day integrated building. Whilst Paragon is a freehold property, only a 99-year leasehold interest in respect of Paragon will be sold to SPH REIT pursuant to the Sponsors commercial intention. At the end of the lease term, SPH REIT will be required to yield up the property (together with all plant and equipment) to the Sponsor in the state and condition as at the date of such yielding up. There is currently no option granted for the extension of the lease. For the one-month ended 28 February 2013. Based on a 99-year leasehold interest.
(1)
290 Orchard Road Singapore 238859 Retail and medical suite/office 2003 99-year lease (2) 100.0 22 186,887 1,017,707 706,690 416 100.0 1.6 1.6 2,500.0 2,500.0 Commercial 285
(3) (4)
Tenant Information Paragon had 285 tenants as at 28 February 2013. The major tenants in Paragon include Metro, Marks & Spencer, MUJI and Paragon Market Place. Paragons Orchard Road facade is fronted by top international fashion brands with duplex flagship stores like Gucci, Miu Miu, Prada, Salvatore Ferragamo and Tods. The shopping podium of Paragon is also home to more designer names such as Burberry, Canali, Ermenegildo Zegna, Etro, Givenchy and Jimmy Choo. According to Urbis, Paragon provides a truly unique offering to its shoppers, including five top international fashion brands fronting Orchard Road, the largest Metro department store in Singapore, a strong offering of childrens products and well-known fine dining establishments, all provided in an ambience of elegance, spaciousness and timelessness.
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The top 10 tenants of Paragon 1 in terms of Gross Rental Income of Paragon accounted for 29.8% of Gross Rental Income for the month of February 2013 and 28.1% of NLA as at 28 February 2013. In the same period, no more than 31.9% of Gross Rental Income from Paragon was derived from any one trade sub-sector. Asset enhancement initiatives Paragon is an integration of the buildings known as Paragon by Sogo 2 and the Promenade 3 which were adjacent to each other 4. Following the acquisition of Paragon by Sogo and Promenade in 1997 5, the Sponsor has extensively and continually upgraded the said two buildings which make up Paragon and optimised its tenancy mix in order to keep the property up-to-date with market preferences and expectations and to meet the needs of retailers. Various key asset enhancement initiatives have been implemented: (i) From 1998 to 1999, the property was extensively renovated, to create a more modern outward-looking mall, with a central atrium rising from level one to level six to introduce natural skylight into the mall. The mall layout was simplified to make it easy for shoppers to navigate around the seven retail floors ensuring line-of-sight for the retail units. A 14-storey medical tower was built on top of the retail podium, to offer elective HCS to the malls target customers. (ii) From 2002 to 2003, the Sponsor carried out additional asset enhancement works which involved the tearing down of the former Promenade building to facilitate the construction of the present-day integrated building and the forming of a contiguous 136-metre frontage along Orchard Road.
(iii) From 2008 to 2009, in keeping with evolving market demands, Paragon underwent an extensive asset enhancement program costing S$82 million which involved (i) the expansion of prime retail space of 11,000 sq ft fronting Orchard Road, (ii) the addition of two storeys of medical suite/office space totalling 29,000 sq ft on top of the Paragon retail podium and (iii) upgrading works which created a transparent facade and allowed several top international fashion brands to create five prominent duplex flagship stores fronting Orchard Road. (iv) Other smaller scale but more regular asset enhancements include the upgrading of internal spaces and toilets and the make-over of interior finishes. More recently, external upgrading works undertaken include the development of a wider plaza on the Orchard Road frontage and the addition of a new taxi stand.
1 2 3 4 5
As at 28 February 2013. In this context, top 10 tenants of Paragon does not take into account one of the tenants which has not consented to the disclosure of its tenancy arrangements in this Prospectus. Located at former Lot 906X of Town Subdivision 27. Located at former Lot 982A of Town Subdivision 27. The said Lots 906X and 982A both of Town Subdivision 27 were subsequently amalgamated to form the current Lot 1139C of Town Subdivision 27 (being one of the land lots on which the present-day Paragon is located). Times Properties acquisition of interests in the property owning companies that owned Paragon by Sogo and Promenade. The remaining shares in the property owning companies which Times Properties did not own were acquired in 2001.
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Trade sector analysis for Paragon By Gross Rental Income and NLA of Paragon for the month of February 2013 The following chart provides a breakdown by Gross Rental Income and NLA of the different trade sectors represented in Paragon as at 28 February 2013:
Paragon Trade Mix by Gross Rental Income Departmental stores & supermarket 9.0% Medical suite/ office 31.6% Luxury brands, jewellery & watches 31.9% Non-retail services 2.7% F&B 9.8% Fashion, handbags, shoes & accessories 13.2% Lifestyle 17.7% F&B 9.8% Paragon Trade Mix by NLA
Medical suite/ office 19.1% Non-retail services 2.4%
Departmental stores & supermarket 17.5% Luxury brands, jewellery & watches 10.8% Fashion, handbags, shoes & accessories 9.9%
Lifestyle 14.6%
Top 10 Tenants The top 10 tenants (1) of Paragon (by Gross Rental Income for the month of February 2013) are, in alphabetical order: Burberry (S) Distribution Company Pte Ltd, Coach Singapore Pte Ltd, Cold Storage Singapore (1983) Pte Ltd, Ferragamo Singapore Pte Ltd, FJ Benjamin (Singapore) Pte Ltd, Metro (Private) Ltd, Pacific Healthcare Holdings Ltd, Prada Singapore Pte Ltd, Tods Singapore Pte Limited and Wing Tai Retail Management Pte Ltd. The table below sets out selected information about the top 10 tenants (1) of Paragon (based on Gross Rental Income of Paragon for the month of February 2013): Percentage of the Gross Rental Income of Paragon (%) 6.9 4.6 4.0
No. 1. 2. 3.
Trade Sector Luxury brands, jewellery, watches Departmental stores & supermarket Luxury brands, jewellery, watches Medical & Office
Lease Expiry Date (3) 2nd Half 2014 2nd Half 2017 Between 2nd Half 2014 and 2nd Half 2016 Between 1st Half 2014 and 1st Half 2016
4.
Tenant D
3.2
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No. 5. 6. 7. 8. 9. 10.
Tenant (2) Tenant E Tenant F Tenant G Tenant H Tenant I Tenant J
Trade Sector Luxury brands, jewellery, watches Luxury brands, jewellery, watches Departmental stores & supermarket Luxury brands, jewellery, watches Luxury brands, jewellery, watches Fashion, handbags, shoes and accessories
Lease Expiry Date (3) 2nd Half 2016 2nd Half 2015 1st Half 2016 1st Half 2015 2nd Half 2015 Between 1st Half 2014 and 2nd Half 2016
Percentage of the Gross Rental Income of Paragon (%) 2.2 1.9 1.9 1.7 1.7 1.7
Top 10 Tenants
Notes: (1) (2) (3)
29.8
The list of top 10 tenants above does not take into account one of the tenants which has not consented to the disclosure of its tenancy arrangements in this Prospectus. The names of the tenants cannot be matched to the information set out above for confidentiality reasons. Some of the tenants above have signed more than one tenancy agreement and this has resulted in more than one tenancy expiry date for such tenants.
The tenancy profile of Paragon is reasonably diversified, with no single tenant counting for more than 6.9% of the Gross Rental Income of Paragon. Expiry and Renewals The following table sets out information on leases that have expired and those that have been renewed by the existing tenants during the period indicated: Expiring leases as a% of NLA (%) 25.2 37.4 22.8 Total NLA of leases renewed (sq ft) 122,213 220,456 148,295 Renewal rate by number of leases (%) 64.6 75.3 94.6
Total number of expiring leases FY2010 FY2011 FY2012 For the six-month period ended 28 February 2013 Total/Average 82 97 93
NLA of expiring leases (sq ft) 177,858 264,321 161,051
Renewal rate by NLA (%) 68.7 83.4 92.1
67 339
172,438 775,668
24.4 27.5
154,730 645,694
85.1 79.9
89.7 83.5
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The weighted average lease expiry by NLA as at 28 February 2013 is 1.6 years, and the weighted average lease expiry by Gross Rental Income for the month of February 2013 as at 28 February 2013 is 1.6 years. The chart below sets out information of leases, as at 28 February 2013, that will expire during the periods indicated:
Paragon Lease Expiry Schedule by Gross Rental Income Paragon Lease Expiry Schedule by NLA
38.9% 32.8% 31.3% 29.6%
36.6% 30.4%
0.2%
FY2013 FY2014 FY2015 FY2016 and beyond FY2013 FY2014 FY2015
0.2%
FY2016 and beyond
As at 31 May 2013.
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Clementi Mall
Description Clementi Mall is a five-storey retail podium totalling approximately 192,089 sq ft of retail NLA and 289,877 sq ft of GFA, which includes two basements comprising a basement shopping level and an underground carpark. Directly linked to the MRT, Clementi Mall is also part of an integrated mixed-use development built by the HDB and besides the retail podium, it houses two blocks of residential blocks of 388 HDB units, the West Coast Town Council (Clementi Office) and a bus interchange on level one. The mall has 146 shops, including 19 restaurants and cafes, and boasts anchor tenants such as FairPrice Finest, Popular Bookstore and Clementi Public Library. Clementi Mall is primarily a family-oriented mall with a strong F&B offering as well as a fashion offering that the Manager believes is rare amongst mid-market suburban malls in Singapore. Clementi Mall, located in the Clementi town, has excellent frontage to Commonwealth Avenue West and located close to the AYE and PIE which connects it to the rest of the Island. The property is linked to the new Clementi bus interchange and is well-served by numerous public buses. Clementi MRT Station is linked directly to the third level of Clementi Mall. The property is located 7km to the west of Orchard Road. Clementi Malls interior design emphasises efficient circulation and visual connectivity, optimising commercial spaces with a distinctive experience on each level. The triple-volume elliptical atrium is a key element in the malls identity and is a central meeting point for shoppers. The colourful interior architecture enhances the malls vibrancy and is designed to complement the unique building facade and profile.
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Clementi Mall is extremely well located and has a good walk-up population, who are drawn to the retail mall regularly due to its co-location with the MRT station and the bus interchange. The table below sets out a summary of selected information on Clementi Mall as at 28 February 2013: Address Property type Building completion Title Interest owned (%) Number of floors GFA (sq ft) NLA (sq ft) Carpark lots Committed Occupancy (%) Weighted average lease expiry by Gross Rental Income (years) (1) Weighted average lease expiry by NLA (years) CBRE independent valuation (S$m) CBRE independent valuation without Income Support (S$m) DTZ independent valuation (S$m) DTZ independent valuation without Income Support (S$m) Zoning Number of tenants
Note: (1) For the one-month period ended 28 February 2013.
3155 Commonwealth Avenue West Singapore 129588 Retail March 2011 99-year leasehold commencing on 31 August 2010 100.0 7 289,877 192,089 169 100.0 1.4 1.9 570.0 550.0 571.0 556.0 Commercial and residential 146
Tenant Information Clementi Mall had 146 tenants as at 28 February 2013. The major tenants are BHG Department Store, NTUC Foodfare, FairPrice Finest and the National Library Board. The 10 largest tenants of Clementi Mall in terms of Gross Rental Income accounted for 27.5% of Gross Rental Income for the month of February 2013 and 46.3% of NLA as at 28 February 2013. In the same period, no more than 32.3% of Gross Rental Income from Clementi Mall was derived from any one trade sub-sector.
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The tenant mix supports the malls mid-market position, making it a popular destination for catchment residents for day-to-day shopping, dining and entertainment. Clementi Malls colocation with the MRT station and bus interchange further strengthens this market positioning these public transport interchanges generate high volumes of local traffic which typically has a need for higher volume, and lower-priced products and services. This is particularly the case for the large number of students who pass through the mall on their way to the various educational institutions in the area. Trade sector analysis for Clementi Mall By Gross Rental Income and NLA of Clementi Mall for the month of February 2013 The following chart provides a breakdown by Gross Rental Income and NLA of the different trade sectors represented in Clementi Mall as at 28 February 2013:
Clementi Mall Trade Mix by Gross Rental Income Clementi Mall Trade Mix by NLA
Departmental stores & supermarket 9.3%
Departmental stores & supermarket 17.1%
Lifestyle 27.0%
Lifestyle 26.1%
F&B 32.3%
F&B 26.4%
Top 10 Tenants The top 10 tenants of Clementi Mall (by Gross Rental Income for the month of February 2013) are, in alphabetical order: Best Denki (Singapore) Pte Ltd, BHG (Singapore) Pte Ltd, Cold Storage Singapore (1983) Pte Ltd, Crystal Jade Kitchen (CM) Pte Ltd, McDonalds Restaurants Pte Ltd, National Library Board, NTUC Fairprice Co-operative Limited, NTUC Foodfare Co-operative Limited, Popular Book Company Pte Ltd, Soup Restaurant (Causeway Point) Pte Ltd. The table below sets out selected information about the top 10 tenants of Clementi Mall (based on Gross Rental Income of Clementi Mall for the month of February 2013): Percentage of Gross Rental Income of Clementi Mall (%) 5.7 4.6 3.6
No. 1. 2. 3.
Trade Sector Departmental stores & supermarket Food & beverages Departmental stores & supermarket 131
Lease Expiry Date (2) 1st Half 2017 1st Half 2014 1st Half 2016
No. 4. 5.
Tenant (1) Tenant D Tenant E
Trade Sector Food & beverages Lifestyle
Lease Expiry Date (2) 1st Half 2014 Between 1st Half 2014 and 2nd Half 2015 1st Half 2014 1st Half 2017 1st Half 2014 1st Half 2014 1st Half 2014
Percentage of Gross Rental Income of Clementi Mall (%) 2.9 2.4
6. 7. 8. 9. 10.
Tenant F Tenant G Tenant H Tenant I Tenant J Top 10 Tenants
Lifestyle Non-retail services Lifestyle Food & beverages Food & beverages
2.2 1.6 1.6 1.5 1.4 27.5
Notes: (1) (2) The names of the tenants cannot be matched to the information set out above for confidentiality reasons. Some of the tenants above have signed more than one tenancy agreement and this has resulted in more than one tenancy expiry date for such tenants.
The tenancy profile of Clementi Mall is reasonably diversified, with no single tenant counting for more than 5.7% of the Gross Rental Income of Clementi Mall. Expiry and Renewals The following table sets out information on leases that have expired and those that have been renewed by the existing tenants during the period indicated: Expiring leases as a% of NLA (%) 0 0.1 Total NLA of leases renewed (sq ft) 0 155 Renewal rate by number of leases (%) 0 100
Total number of expiring leases FY2011 (1) FY2012 For the six-month period ended February 2013 Total/Average
Note: (1)
NLA of expiring leases (sq ft) 0 155
Renewal rate by NLA (%) 0 100
0 1
1 2
603 758
0.3 0.2
0 155
0 50.0
0 50.0
Information on lease expiry and renewals for the FY2011 will only cover, in respect of Clementi Mall, information on lease expiry and renewals from 14 March 2011 to 31 August 2011.
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The weighted average lease expiry by NLA as at 28 February 2013 is 1.9 years, and the weighted average lease expiry by Gross Rental Income for the month of February 2013 as at 28 February 2013 is 1.4 years. The chart below sets out information of leases, as at 28 February 2013, that will expire during the periods indicated:
Clementi Mall Lease Expiry Schedule by Gross Rental Income
Clementi Mall Lease Expiry Schedule by NLA
84.2% 68.1%
22.1% 6.7% 0.4%

FY2013 FY2014
0.3%
FY2013 FY2014
4.2%
FY2015
4.0%
FY2016
7.3%
FY2017 and beyond
2.7%
FY2015 FY2016 FY2017 and beyond
As at 31 May 2013.
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THE MANAGER AND CORPORATE GOVERNANCE

THE MANAGER OF SPH REIT The Manager, SPH REIT Management Pte. Ltd., was incorporated in Singapore under the Companies Act on 1 March 2013. It has a paid-up capital of S$1,000,000. Its registered office is 1000 Toa Payoh North, News Centre, Singapore 318994, and its telephone number is +65 6319 6319. The Manager is an indirect wholly-owned subsidiary of the Sponsor. The Manager has been issued a CMS Licence by the MAS pursuant to the SFA on . Management Reporting Structure
Board of Directors Mr Leong Horn Kee (Chairman and Independent Director) Mr Soon Tit Koon (Audit and Risk Committee Chairman and Independent Director) Mr David Chia Chay Poh (Independent Director) Mr Chan Heng Loon Alan (Non-Executive Director) Mr Anthony Mallek (Non-Executive Director) Ms Ginney Lim May Ling (Non-Executive Director)
Chief Executive Officer Ms Susan Leng Mee Yin
Chief Financial Officer/ Investor Relations Manager Ms Sharon Low Wan Kein
Investment Manager Ms Zheng Qinyin
Asset Manager Mr Teo Soon Piang Lincoln
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Board of Directors of the Manager The board of directors of the Manager (the Board ) is entrusted with the responsibility for the overall management of the Manager. The following table sets forth certain information regarding the directors of the Manager: Name Mr Leong Horn Kee Age 60 Address c/o 1000 Toa Payoh North, News Centre, Singapore 318994 c/o 1000 Toa Payoh North, News Centre, Singapore 318994 c/o 1000 Toa Payoh North, News Centre, Singapore 318994 c/o 1000 Toa Payoh North, News Centre, Singapore 318994 c/o 1000 Toa Payoh North, News Centre, Singapore 318994 c/o 1000 Toa Payoh North, News Centre, Singapore 318994 Position Chairman and Independent Director Audit and Risk Committee Chairman and Independent Director Independent Director
Mr Soon Tit Koon
61
Mr David Chia Chay Poh
58
Mr Chan Heng Loon Alan
60
Non-Executive Director Non-Executive Director Non-Executive Director
Mr Anthony Mallek
58
Ms Ginney Lim May Ling
52
Each of the directors of the Manager has served as a director of a public-listed company and/or manager of a public-listed REIT within the last 10 years, save for Mr David Chia Chay Poh, Mr Anthony Mallek and Ms Ginney Lim May Ling, for whom appropriate arrangements have been made to orientate them in acting as directors of a manager of a public-listed REIT. The Board collectively has the appropriate experience to act as the directors of the Manager and is familiar with the rules and responsibilities of a director of a public-listed company and/or manager of a public-listed REIT. None of the directors of the Manager are related to one another, any substantial shareholder of the Manager or any Substantial Unitholder (as defined herein). None of the independent directors of the Board sits on the boards of the principal subsidiaries of SPH REIT that are based in jurisdictions other than in Singapore. Each of the independent directors of the Manager confirms that they are able to devote sufficient time to discharge their duties as an independent director of the Manager. In light of Mr Leongs confirmation that (a) he would be independent as the companies that he is a director of are not in the same commercial real estate sector of SPH REIT; (b) he would have sufficient time to discharge his duties as a director on SPH REIT as he is currently not employed as a full-time executive of any company; (c) for the boards of the listed companies that he currently sits on, he is an independent non-executive director and for the board of the private companies, he sits on these boards as non-executive Chairman or director representing his direct or indirect shareholding interests; and (d) he does not hold full time executive responsibilities in these companies, and based on Mr Leongs perfect attendance record for board meetings of listed companies in FY2012, nothing has come to the attention of the directors of the Manager that
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causes them to believe that Mr Leong does not have sufficient time to discharge his responsibilities as an independent director of the Manager, notwithstanding his multiple directorships. Experience and Expertise of the Board of Directors Information on the business and working experience of the directors of the Manager is set out below: Mr Leong Horn Kee is the Chairman and an Independent Director of the Manager. Currently, he is the chairman of CapitalCorp Partners Private Limited, a corporate advisory services company where he is responsible for general management, since 2008 to date. He is also a member of the Securities Industry Council since 2008. Prior to joining CapitalCorp Partners Private Limited, from 1993 to 2008, Mr Leong was an executive director and chief operating officer of Far East Organization Pte Ltd. Concurrently, he was the chief executive officer of Yeo Hiap Seng Ltd from 1999 to 2002 and the chief executive officer of Orchard Parade Holdings Limited (now known as Far East Orchard Limited) from 1993 to 1999. From 1989 to 1992, he was a director of N M Rothschild & Sons (Singapore) Limited where he was head of corporate finance. From 1983 to 1989, he was a Senior Manager (Corporate Finance) of the Natsteel Group. Concurrently, from 1987 to 1989, he served as Vice President of Transtech Venture Management Pte Ltd. From 1977 to 1983, Mr Leong was an assistant director at the Ministry of Finance and a deputy director at the Ministry of Trade & Industry. He was a Member of Parliament from 1984 to 2006. He was Singapores non-resident ambassador to Mexico from September 2006 to February 2013. He is non-resident High Commissioner (designate) to Cyprus. Mr Leong holds a Bachelor of Technology degree in Production Engineering and Management from Loughborough University, United Kingdom; a Bachelor of Science degree in Economics from University of London, United Kingdom; a Bachelor of Arts degree in Chinese Language and Literature from Beijing Normal University, Peoples Republic of China; a Master of Business Administration degree from the European Institute of Business Administration (INSEAD), France; and a Master of Business Research degree from University of Western Australia, Australia. Mr Soon Tit Koon is the Audit and Risk Committee Chairman and an Independent Director of the Manager. Currently, he is also the Advisor to Oversea-Chinese Banking Corporation Limited (OCBC Bank) on contract. Mr Soon held a series of senior positions in OCBC Bank from 2002 to December 2011 when he retired from the bank. He was the Chief Financial Officer of OCBC Bank from September 2002 to June 2008, and from April 2010 to November 2011. He was the Head of Group Investments of OCBC Bank from June 2008 to April 2010. During his employment in OCBC Bank, he was a director in several OCBC group companies including OCBC Bank (Malaysia) Berhad, OCBC Bank (China) Limited, Bank of Singapore Limited and The Great Eastern Life Assurance Company Limited. Mr Soon was also a director of Fraser & Neave (Singapore) Limited from May 2007 to August 2012. Mr Soon is currently a director of Bank of Ningbo Co, Ltd, AVIC Trust Co., Ltd, Wah Hin and Company Private Limited and WBL Corporation Limited. Prior to joining OCBC Bank, from 2000 to 2002, Mr Soon was the Chief Financial Officer of Wilmar Holdings Pte Ltd. From 1983 to 2000, he worked in Citicorp Investment Bank (Singapore) Limited and was Managing Director from 1993 to 2000. Prior to joining the banking industry, Mr Soon spent six years in the oil industry in refinery and oil field servicing businesses. 136
Mr Soon holds a Bachelor of Science (Honours) in Applied Chemistry from the University of Singapore and a Master of Business Administration from University of Chicago. He also completed the Advanced Management Program at Harvard Business School in 1997. Mr David Chia Chay Poh is an Independent Director of the Manager. Currently, he is also the Managing Director and sole proprietor of Associated Property Consultants Pte Ltd, a property consultancy company since late 2002, when it was acquired. From 1999 to 2002, Mr Chia was the Managing Director and shareholder of FPDSavills (Singapore) Pte Ltd, a leading international property consultancy company. And from 1987 to 1999, he was with Chesterton International Property Consultants Pte Ltd rising to the position of the Executive Director of the company in 1996. From 1981 to 1987, he served as the District Valuer in the Property Tax Division of IRAS. Prior to that, he served as an Estate/Projects Officer in the Singapore Ministry of Defence from 1978 to 1981. Mr Chia was a member of the Property Committee in the Singapore International Chamber of Commerce and a Board Member of CISCO Police from 1996 to 2002. Mr Chia obtained his professional valuation qualifications in New Zealand in 1978 under a Colombo Plan Scholarship. He is an Associate Member of the New Zealand Institute of Valuers and a Fellow Member of the Singapore Institute of Surveyors and Valuers. Mr Chan Heng Loon Alan is a Non-Executive Director of the Manager. Currently, he is also the Chief Executive Officer of the Sponsor. Before his appointment as Chief Executive Officer in January 2003, he was the Group President of the Sponsor after joining the Sponsor Group in July 2002. Mr Chan is currently on the boards of the Sponsor and its subsidiaries, Singapore Power Limited and its subsidiaries, MediaCorp TV Holdings Pte. Ltd., MediaCorp Press Ltd and OpenNet Pte. Ltd. He is a member of the Public Service Commission (PSC) and the Singapore Symphony Orchestra Council; and a director of Business China, Singapore-China Foundation and the Lee Kuan Yew Fund for Bilingualism. He chaired the Council that revised the Code of Corporate Governance in 2012. Mr Chan holds a Diplome Ingenieur from Ecole Nationale de lAviation Civile and a Master of Business Administration (with distinction) degree from the European Institute of Business Administration (INSEAD), France. Mr Anthony Mallek is a Non-Executive Director of the Manager. Currently, he is also the Chief Financial Officer of the Sponsor. Before his appointment in January 2010, he served as Executive Vice President, Finance from July 2006 and Senior Vice President, Finance when he joined in June 2003. Prior to this, Mr Mallek was General Manager, Finance for Intraco Limited from 1999 to 2001. Originally from Hong Kong, he started his career in 1978 in the United Kingdom and has been with various U.S. multinationals until 1991 when he was posted to Singapore. His Singapore experience has mainly been in the healthcare industry, including general manager positions in finance and business development for Parkway Holdings Limited from 1994 to 1997. Mr Mallek holds a Bachelor of Technology (Honours) degree in Operations Management from The University of Bradford and is a Fellow of the Chartered Institute of Management Accountants.
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Ms Ginney Lim May Ling is a Non-Executive Director of the Manager. Currently, she is also General Counsel, Executive Vice-President, Corporate Communications & CSR, and Group Company Secretary of the Sponsor. She joined the Sponsor in 1991 and set up the Secretariat/Legal Division. She is responsible for the corporate secretarial, legal, risk management, insurance and corporate communications functions in the Sponsor Group. She is concurrently the General Manager of Singapore Press Holdings Foundation Limited, an Institution of Public Character established in 2003 by the Sponsor, a position she held since 2005. Ms Lim is a director of Times Development Pte. Ltd., O290 and SPH Retail Property Management Services Pte. Ltd., all of which are wholly-owned indirect property subsidiaries of the Sponsor. She is also an alternate director in MediaCorp Press Limited. Prior to joining the Sponsor, Ms Lim was heading the Legal & Secretariat department as well as the public relations section of NTUC Income, from 1985 to 1991. Ms Lim was admitted as an advocate and solicitor of the Supreme Court of Singapore and holds a Bachelor of Law (Honours) degree from the National University of Singapore. She is also a Fellow in the Institute of Chartered Secretaries and Administrators and an Associate of the Chartered Insurance Institute. List of Present and Past Principal Directorships of Directors A list of the present and past directorships of each director of the Manager over the last five years preceding the Latest Practicable Date is set out in Appendix H, List of Present and Past Principal Directorships of Directors and Executive Officers. Role of the Board of Directors The key roles of the Board are to: guide the corporate strategy and directions of the Manager; ensure that senior management discharges business leadership and demonstrates the highest quality of management skills with integrity and enterprise; and oversee the proper conduct of the Manager.
The Board comprises six directors. The audit and risk committee of the Board (the Audit and Risk Committee ) comprises Mr Soon Tit Koon, Mr David Chia Chay Poh and Mr Anthony Mallek. Mr Soon Tit Koon will assume the position of Chairman of the Audit and Risk Committee. The Board shall meet to review the key activities and business strategies of the Manager. The Board intends to meet regularly, at least once every quarter, to deliberate the strategies of SPH REIT, including acquisitions and disposals, funding and hedging activities, approval of the annual budget and review of the performance of SPH REIT. The Board or the relevant board committee will also review SPH REITs key financial risk areas and the outcome of such reviews will be disclosed in the annual report or where the findings are material, immediately announced via SGXNET. Each director of the Manager has been appointed on the basis of his professional experience and ability to contribute to the proper guidance of SPH REIT. The Board will have in place a set of internal controls containing approval limits for operational and capital expenditures, investments and divestments, bank borrowings and cheque signatory arrangements. In addition, sub-limits are also delegated to various management levels to facilitate operational efficiency.
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Taking into account the fact that SPH REIT is constituted only on 9 July 2013 and will only acquire the Initial Portfolio on the Listing Date, the Board, in concurrence with the Audit and Risk Committee, and taking into consideration the Sponsors internal group controls and risk management framework, are of the opinion that the internal controls as are further described in: The Manager and Corporate Governance The Manager of SPH REIT Board of Directors of the Manager Role of the Board of Directors; The Manager and Corporate Governance Corporate Governance of the Manager Board of Directors of the Manager; The Manager and Corporate Governance Corporate Governance of the Manager Audit and Risk Committee; The Manager and Corporate Governance Corporate Governance of the Manager Compliance Officer; The Manager and Corporate Governance Corporate Governance of the Manager Dealings in Units; The Manager and Corporate Governance Corporate Governance of the Manager Management of Business Risk; The Manager and Corporate Governance Corporate Governance of the Manager Potential Conflicts of Interest; The Manager and Corporate Governance Related Party Transactions The Managers Internal Control System; The Manager and Corporate Governance Related Party Transactions Role of the Audit and Risk Committee for Related Party Transactions; The Manager and Corporate Governance Related Party Transactions Related Party Transactions in Connection with the Setting Up of SPH REIT and the Offering; The Manager and Corporate Governance Related Party Transactions Exempted Agreements; and The Manager and Corporate Governance Related Party Transactions Future Related Party Transactions,
will be adequate in addressing financial, operational and compliance risks faced by SPH REIT. The members of the Audit and Risk Committee will monitor changes to regulations and accounting standards closely. To keep pace with regulatory changes, where these changes have an important bearing on the Managers or its directors disclosure obligations, the directors of the Manager will be briefed either during Board meetings or at specially convened sessions involving relevant professionals. Management will also provide the Board with complete and adequate information in a timely manner through regular updates on financial results, market trends and business developments. The positions of Chairman of the Board and Chief Executive Officer of the Manager are separately held by two persons in order to maintain an effective check and balance. The Chairman of the Board is Mr Leong Horn Kee, while the Chief Executive Officer of the Manager is Ms Susan Leng Mee Yin.
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There is a clear separation of the roles and responsibilities between the Chairman and the Chief Executive Officer of the Manager. The Chairman is responsible for the overall management of the Board as well as ensuring that the members of the Board and the management work together with integrity and competency, and that the Board engages the management in constructive debate on strategy, business operations, enterprise risk and other plans. The Chief Executive Officer of the Manager has full executive responsibilities over the business directions and operational decisions in the day-to-day management of the Manager. At least one-third of the directors of the Manager are non-executive and independent. This enables the management to benefit from their external, diverse and objective perspective on issues that are brought before the Board. It would also enable the Board to interact and work with the management through a robust exchange of ideas and views to help shape the strategic process. This, together with a clear separation of the roles of the Chairman and the Chief Executive Officer of the Manager, provide a healthy professional relationship between the Board and the management, with clarity of roles and robust oversight as they deliberate on the business activities of the Manager. The Board has separate and independent access to senior management and the company secretary(s) at all times. The company secretary(s) attends to corporate secretarial administration matters and attends all Board meetings. The Board also has access to independent professional advice where appropriate and when requested. Executive Officers of the Manager The executive officers of the Manager are entrusted with the responsibility for the daily operations of the Manager. The following table sets forth information regarding the executive officers of the Manager: Name Ms Susan Leng Mee Yin Address c/o 1000 Toa Payoh North, News Centre, Singapore 318994 c/o 1000 Toa Payoh North, News Centre, Singapore 318994 c/o 1000 Toa Payoh North, News Centre, Singapore 318994 c/o 1000 Toa Payoh North, News Centre, Singapore 318994 Position Chief Executive Officer
Ms Sharon Low Wan Kein
Chief Financial Officer/ Investor Relations Manager Investment Manager
Ms Zheng Qinyin
Mr Teo Soon Piang Lincoln
Asset Manager
Experience and Expertise of Executive Officers Information on the working experience of the executive officers of the Manager is set out below: Ms Susan Leng Mee Yin is the Chief Executive Officer of the Manager. Prior to joining the Manager, from 2011 to 2012, Ms Leng was the General Manager at Capitol Investment Holdings Pte. Ltd., a joint venture between Perennial (Capitol) Pte. Ltd., Chesham Properties Pte. Ltd. and Top Property Investment Pte. Ltd. She was responsible for the overall management of the joint venture company which won the tender to redevelop the historical site of Capitol Theatre, Capitol Building and Stamford House into an integrated mixed-use development with residential, hotel and retail components.
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Ms Leng has 16 years of aggregate experience in shopping centre management and property development, and 8 years of accounting and finance experience. From 2008 to 2010, Ms Leng was Director (Retail Management) at Far East Management (Private) Limited, where her primary responsibility was to steer the leasing and marketing efforts, including public relations to prepare for the opening of West Coast Plaza and Orchard Central. During the period from 2004 to 2008, Ms Susan Leng was in Beijing with her family as her husband had taken up a diplomatic position in Beijing. From 1997 to 2004, Ms Leng was General Manager at O290, where she was responsible for the profitability and continual growth of Paragon. From 1992 to 1997, she was General Manager at Scotts Holding Limited, where she was responsible for maximising the profitability of Scotts Shopping Centre and keeping the mall relevant to the changing dynamics of the retail scene. Ms Leng is a Fellow of the Chartered Association of Certified Accountants (FCCA), United Kingdom. Ms Sharon Low Wan Kein is the Chief Financial Officer and the Investor Relations Manager of the Manager. Ms Low has more than 18 years of financial experience. Ms Low joined the Sponsor in 1997. She was Financial Controller of the Sponsors magazines business from 2008 to 2012, with a corporate rank of Assistant Vice President, Finance. Prior to this position, she served as the Sponsors Investor Relations Manager from 2004 to 2008, covering strategic communication with investors and analysts. Prior to that, she was the Group Reporting Manager from 1997 to 2004 and was responsible for the groups consolidation, results announcement, analysis of the key business segments, coordinating with external auditors, compliance with statutory requirements and monitoring of developments on reporting standards. During her tenure at the Sponsor, she arranged a S$650 million loan facility for Paragon, and was involved in identifying and evaluating asset enhancement options for Paragon. Prior to joining the Sponsor, Ms Low was a Senior Associate at KPMG from 1994 to 1997. Ms Low holds a Bachelor of Accountancy degree from Nanyang Technological University, and is also a non-practising Certified Public Accountant under the Institute of Certified Public Accountants of Singapore. After making all reasonable enquiries, and to the best of their knowledge and belief, nothing has come to the attention of the members of the Audit and Risk Committee to cause them to believe that Ms Low does not have the competence, character and integrity expected of a Chief Financial Officer/Investor Relations Manager of the Manager. The Audit and Risk Committee considers that Ms Lows Bachelor of Accountancy degree and qualification as a Certified Public Accountant (non-practising) under the Institute of Certified Public Accountants of Singapore coupled with her extensive experience of over 18 years of financial experience makes her a suitable candidate to be the Chief Financial Officer of the Manager. On this basis, the Audit and Risk Committee is of the opinion that Ms Low is suitable as the Chief Financial Officer/Investor Relations Manager on the basis of her qualifications and relevant past experience. Ms Zheng Qinyin is the Investment Manager of the Manager. Prior to joining the Manager, Ms Zheng was Manager, Corporate Development Division, with the Sponsor since 2007 where she was responsible for developing and executing a spectrum of corporate development initiatives, including handling property transactions, new strategic corporate projects, mergers and acquisitions and joint venture partnerships. From 2006 to 2007, 141
Ms Zheng was a Senior Associate at Deloitte & Touche Corporate Finance Pte Ltd where she advised clients on mergers and acquisitions, initial public offerings and valuations. From 2003 to 2005, Ms Zheng was at Deloitte & Touche Singapores Audit & Assurance Division, where she was involved in statutory audits and special assignments, including forensic audits, quarterly reviews, audit certifications and internal controls reviews. Ms Zheng holds a Masters in Applied Finance from Macquarie University, Sydney, Australia and a Bachelor of Commerce (Accounting & Finance) from the University of Queensland, Brisbane, Australia. Mr Teo Soon Piang Lincoln is the Asset Manager of the Manager. Prior to joining the Manager, Mr Teo was the Project Director at Times Properties (a wholly-owned subsidiary of the Sponsor) since September 2010 where he was responsible for the project management of The Seletar Mall, the property management of SPH News Centre, SPH Media Centre and Sky@eleven. His responsibilities also include lease management and business development, and he is part of the team which undertook the tender evaluation process for land sale sites to expand the Singapore Press Holdings Groups real estate investment portfolio. From 2006 to 2010, Mr Teo was a Project Director at Times Development Private Limited (a wholly-owned subsidiary of the Sponsor), where he was responsible for the design, project and property management of Sky@eleven. From 2004 to 2006, Mr Teo was a Project Manager at Hong Leong Holdings Limited, where he was responsible for the design and project management of The Tate Residences, Watermark Robertson Quay and LeReve Condominium. From 2000 to 2004, Mr Teo was a Senior Architectural Associate at CPG Consultants Pte Ltd, where he was responsible for the design and project management of Country Park Condominium. From 1998 to 2000, Mr Teo was an Architect at the HDB, Singapore, where he was responsible for the design and project management of a public housing project at Punggol East and a commercial development at Bedok New Town. Mr Teo brings with him 13 years of experience in the real estate industry and various related sectors. Mr Teo holds a Bachelor of Arts (Architectural Studies) degree, a Bachelor of Architecture (with honours) degree and a Masters of Science (Project Management) degree from the National University of Singapore, and a Masters of Science (Facility and Environment Management) (with distinction) degree from University College London. List of Present and Past Principal Directorships of Executive Officers A list of the present and past directorships of each executive officer of the Manager over the last five years preceding the Latest Practicable Date is set out in Appendix H, List of Present and Past Principal Directorships of Directors and Executive Officers. Roles of the Executive Officers of the Manager The Chief Executive Officer of the Manager will work with the Board to determine the strategy for SPH REIT. The Chief Executive Officer of the Manager will also work with the other members of the management team to ensure that SPH REIT operates in accordance with the Managers stated investment strategy. Additionally, the Chief Executive Officer of the Manager will be responsible for planning the future strategic development of SPH REIT. The Chief Executive Officer of the Manager is also responsible for strategic planning, the overall day-to-day management and operations of SPH REIT and working with the Managers investment, asset management, financial and legal and compliance personnel in meeting the strategic, investment and operational objectives of SPH REIT.
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The Chief Financial Officer/Investor Relations Manager of the Manager will work with the Chief Executive Officer of the Manager and the other members of the management team to formulate strategic plans for SPH REIT in accordance with the Managers stated investment strategy. The Chief Financial Officer/Investor Relations Manager of the Manager will be responsible for applying the appropriate capital management strategy, including tax and treasury matters, as well as finance and accounting matters, including statutory reporting, overseeing implementation of SPH REITs short and medium-term business plans, fund management activities and financial condition. In the area of investor relations, she is responsible for facilitating communications and liaison with Unitholders. The Investment Manager , together with the Chief Executive Officer and the Chief Financial Officer of the Manager, are responsible for identifying, researching and evaluating potential acquisitions and related investments with a view to enhancing SPH REITs portfolio or divestments where a property is no longer strategic, fails to enhance the value SPH REITs portfolio or fails to be yield accretive. The Investment Manager also recommends and analyses potential asset enhancement initiatives. In order to support these various initiatives, the Investment Manager, in consultation with the Chief Financial Officer of the Manager, will develop financial models to test the financial impact of different courses of action. These findings will be research-driven to help develop and implement the proposed initiatives. The Asset Manager , together with the Chief Executive Officer of the Manager, are responsible for implementing the business plans in relation to SPH REITs properties with short, medium and long-term objectives, and with a view to maximising the rental income of SPH REIT via active asset management. The Asset Manager will work closely with the Property Manager to implement SPH REITs strategies so as to ensure that the properties in SPH REITs portfolio maximise their income generation potential and minimise their expense base without compromising their marketability. The Asset Manager will focus on the operations of SPH REITs properties, the implementation of the short to medium term objectives of SPH REITs portfolio and will supervise the Property Manager in the implementation of SPH REITs property-related strategies. Roles and Responsibilities of the Manager The Manager has general powers of management over the assets of SPH REIT. The Managers main responsibility is to manage SPH REITs assets and liabilities for the benefit of Unitholders. The Manager will set the strategic direction of SPH REIT and give recommendations to the Trustee on the acquisition, divestment, development and/or enhancement of assets of SPH REIT in accordance with its stated investment strategy. The Manager has covenanted in the Trust Deed to use its best endeavours to: carry on and conduct its business in a proper and efficient manner; ensure that SPH REIT is carried on and conducted in a proper and efficient manner; and ensure that its Related Parties will conduct all transactions with or for SPH REIT on an arms length basis and on normal commercial terms.
The Manager will prepare property plans on a regular basis, which may contain proposals and forecasts on Gross Revenue, capital expenditure, sales and valuations, explanations of major variances to previous forecasts, written commentary on key issues and any relevant assumptions. The purpose of these plans is to explain the performance of SPH REITs properties.
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The Manager will also be responsible for ensuring compliance with the applicable provisions of the SFA and all other relevant legislation, the Listing Manual, the Property Funds Appendix, the Singapore Code on Take-overs and Mergers, the Trust Deed, the CMS Licence and any tax ruling and all relevant contracts. The Manager will be responsible for all regular communications with Unitholders. The Manager may require the Trustee to borrow on behalf of SPH REIT (upon such terms and conditions as the Manager deems fit, including the charging or mortgaging of all or any part of the Deposited Property) whenever the Manager considers, among others, that such borrowings are necessary or desirable in order to enable SPH REIT to meet any liabilities or to finance the acquisition of any property. However, the Manager must not direct the Trustee to incur a borrowing if to do so would mean that SPH REITs total borrowings and deferred payments will exceed the limit stipulated by the MAS based on the value of its Deposited Property at the time the borrowing is incurred, taking into account deferred payments (including deferred payments for assets whether to be settled in cash or in Units). In the absence of fraud, gross negligence, wilful default or breach of the Trust Deed by the Manager, it shall not incur any liability by reason of any error of law or any matter or thing done or suffered to be done or omitted to be done by it in good faith under the Trust Deed. In addition, the Manager shall be entitled, for the purpose of indemnity against any actions, costs, claims, damages, expenses or demands to which it may be put as Manager, to have recourse to the Deposited Property or any part thereof save where such action, cost, claim, damage, expense or demand is occasioned by the fraud, gross negligence, wilful default or breach of the Trust Deed by the Manager. The Manager may, in managing SPH REIT and in carrying out and performing its duties and obligations under the Trust Deed, with the written consent of the Trustee, appoint such person to exercise any or all of its powers and discretions and to perform all or any of its obligations under the Trust Deed, provided always that the Manager shall be liable for all acts and omissions of such persons as if such acts and omissions were its own. The Manager has currently outsourced the legal, compliance, corporate secretariat, internal audit, risk management and corporate communications functions to the Sponsor. The information technology and systems management function will also be outsourced to the Sponsor or a third party service provider. Managers Fees The Manager is entitled under the Trust Deed to the following management fees: a Base Fee at the rate of 0.25% per annum of the value of SPH REITs Deposited Property; and a Performance Fee equal to the rate of 5.0% per annum of the Net Property Income of SPH REIT in the relevant financial year.
The Manager may elect to receive the Base Fee and Performance Fee in cash or Units or a combination of cash and Units (as it may in its sole discretion determine). For the Forecast Period 2H FY2013 and Projection Year FY2014, the Manager has elected to receive 100.0% of the Base Fee and Performance Fee in the form of Units. Any increase in the rate or any change in the structure of the Managers management fees must be approved by an Extraordinary Resolution passed at a Unitholders meeting duly convened and held in accordance with the provisions of the Trust Deed. For the avoidance of doubt, the Managers change in its election to receive cash or Units or a combination of cash and Units is not 144
considered as a change in structure of the Managers management fees. For the avoidance of doubt, the rates in relation to the management fee payable to the Manager as stated above are at the maximum permitted level under the trust deed of SPH REIT. The Manager is also entitled to: an acquisition fee equivalent to 0.75% for acquisitions from Related Parties and 1.0% for all other cases of each of the following as is applicable (subject to there being no double-counting): in relation to an acquisition (whether directly or indirectly through one or more SPVs of SPH REIT) of any real estate, the acquisition price of any real estate purchased by SPH REIT, plus any other payments 1 in addition to the acquisition price made by SPH REIT or its SPVs to the vendor in connection with the purchase of the real estate (pro-rated if applicable to the proportion of SPH REITs interest); in relation to an acquisition (whether directly or indirectly through one or more SPVs of SPH REIT) of any SPVs or holding entities which holds real estate, the underlying value of any real estate which is taken into account when computing the acquisition price payable for the acquisition from the vendor of the equity interests of any vehicle holding directly or indirectly the real estate purchased by SPH REIT (plus any additional payments made by SPH REIT or its SPVs to the vendor in connection with the purchase of such equity interests) (pro-rated if applicable to the proportion of SPH REITs interest); or the acquisition price of any investment by SPH REIT, whether directly or indirectly through one or more SPVs, in any debt securities of any property corporation or other SPV owning or acquiring real estate; and
a divestment fee equivalent to 0.5% of each of the following as is applicable (subject to there being no double-counting): the sale price of any real estate sold or divested, whether directly or indirectly through one or more SPVs, by SPH REIT (plus any other payments 2 in addition to the sale price received by SPH REIT or its SPVs from the purchaser in connection with the sale or divestment of the real estate) (pro-rated if applicable to the proportion of SPH REITs interest); in relation to a divestment (whether directly or indirectly through one or more SPVs of SPH REIT) of any SPVs or holding entities which holds real estate, the underlying value of any real estate which is taken into account when computing the sale price for the equity interests in any vehicle holding directly or indirectly the real estate, sold or divested, whether directly or indirectly through one or more SPVs, by SPH REIT, plus any additional payments received by SPH REIT or its SPVs from the purchaser in connection with the sale or divestment of such equity interests (pro-rated if applicable to the proportion of SPH REITs interest); or
Other payments refer to additional payments to the vendor of the asset, for example, where the vendor has already made certain payments for enhancements to the asset, and the value of the asset enhancements is not reflected in the acquisition price as the asset enhancements are not completed, but other payments do not include stamp duty or other payments to third party agents and brokers. Other payments refer to additional payments to SPH REIT or its SPVs for the sale of the asset, for example, where SPH REIT or its SPVs have already made certain payments for enhancements to the asset, and the value of the asset enhancements is not reflected in the sale price as the asset enhancements are not completed, but other payments do not include stamp duty or other payments to third party agents and brokers.
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the sale price of any investment by SPH REIT, whether directly or indirectly through one or more SPVs, in any debt securities of any property corporation or other SPVs owning or acquiring real estate.
For the avoidance of doubt, no acquisition fee is payable in relation to the Initial Portfolio. In accordance with the Property Funds Appendix, where the Manager receives a percentagebased fee when SPH REIT acquires real estate from an interested party, or disposes of real estate to an interested party, the acquisition or, as the case may be, the divestment fee should be in the form of Units issued at prevailing market prices, such Units are not to be sold within one year from the date of issuance. Any payment to third party agents or brokers in connection with the acquisition or divestment of any real estate or real estate-related assets of SPH REIT shall be paid by the Manager to such persons out of the Deposited Property of SPH REIT or the assets of the relevant SPV, and not out of the acquisition fee or the divestment fee received or to be received by the Manager. The acquisition fee and divestment fee are payable to the Manager in the form of cash and/or Units (as the Manager may elect) at the then prevailing market price(s) provided that in respect of any acquisition and sale or divestment of real estate assets from/to interested parties, such a fee should be in the form of Units issued by SPH REIT at prevailing market price(s). Any increase in the maximum permitted level of the Managers acquisition fee or divestment fee must be approved by an Extraordinary Resolution passed at a Unitholders meeting duly convened and held in accordance with the provisions of the Trust Deed. For the avoidance of doubt, the rates in relation to the acquisition fee and divestment fee payable to the Manager as stated above are at the maximum permitted level under the trust deed of SPH REIT. Retirement or Removal of the Manager The Manager shall have the power to retire in favour of a corporation approved by the Trustee to act as the manager of SPH REIT. Also, the Manager may be removed by notice given in writing by the Trustee if: the Manager goes into liquidation (except a voluntary liquidation for the purpose of reconstruction or amalgamation upon terms previously approved in writing by the Trustee) or a receiver is appointed over its assets or a judicial manager is appointed in respect of the Manager; the Manager ceases to carry on business; the Manager fails or neglects after reasonable notice from the Trustee to carry out or satisfy any material obligation imposed on the Manager by the Trust Deed; the Unitholders by an Ordinary Resolution (as defined herein) duly proposed and passed by Unitholders present and voting at a meeting of Unitholders convened in accordance with the Trust Deed, with no Unitholder (including the Manager and its Related Parties) being disenfranchised, vote to remove the Manager; for good and sufficient reason, the Trustee is of the opinion, and so states in writing, that a change of the Manager is desirable in the interests of the Unitholders; or the MAS directs the Trustee to remove the Manager.
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Where the Manager is removed on the basis that a change of the Manager is desirable in the interests of the Unitholders, the Manager has a right under the Trust Deed to refer the matter to arbitration. Any decision made pursuant to such arbitration proceedings is binding upon the Manager, the Trustee and all Unitholders. THE PROPERTY MANAGER SPH Retail Property Management Services Pte. Ltd. has been appointed as property manager of the Properties. The Property Manager is an indirect wholly-owned subsidiary of the Sponsor, and was incorporated in Singapore on 6 August 2010. Its registered office is located at 1000, Toa Payoh North, News Centre, Singapore 318994. The Property Manager will be providing property management services for the commercial properties that are owned or to be acquired by the Sponsor outside of the Initial Portfolio. It is run by an experienced pool of staff. The Initial Portfolio will be managed by a separate leasing team which will have in place appropriate chinese wall policies. The Property Manager will work with the Manager to formulate strategic plans for SPH REIT in accordance with the Managers stated investment strategy. The Property Manager will be responsible for implementing best practices in the portfolio management aspects across the Initial Portfolio. ANNUAL REPORTS An annual report will be issued by the Manager to Unitholders within the timeframe as set out in the Listing Manual and the CIS Code, and at least 14 days before the annual general meeting of the Unitholders, containing, among others, the following key items: (i) (ii) (iii) details of all real estate transactions entered into during the financial accounting period; details of SPH REITs real estate assets; the tenant profile of SPH REITs real estate assets, including: (a) (b) the total number of tenants; the top 10 1 tenants, and the percentage of the total gross rental income attributable to each of these top 10 tenants (provided that the actual name of each such tenant is not disclosed in the tenancy profile write-up and each such tenant is instead identified by a letter, e.g. Tenant A); trade sector mix of tenants, in terms of the percentage of total gross rental income attributable to major trade sectors; and lease maturity profile, in terms of the percentage of total gross rental income, for each of the next five years;
(c)
(d)
In this context, SPH REITs top 10 tenants does not take into account one of the tenants which has not consented to the disclosure of its tenancy arrangements in SPH REITs annual report. (See General Information Waiver from the MAS Paragraph (12) for further details.)
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(iv)
if applicable, with respect to investments other than real property: (a) (b) (c) (d) a brief description of the business; proportion of share capital owned; cost; (if relevant) directors of the Managers valuation and in the case of listed investments, market value; dividends received during the year (indicating any interim dividends); dividend cover or underlying earnings; any extraordinary items; and net assets attributable to investments;
(e) (f) (g) (h) (v) (vi) (vii)
cost of each property held by SPH REIT; annual valuation of each property of SPH REIT; analysis of provision for diminution in value of each property of SPH REIT (to the extent possible); annual rental income for each property of SPH REIT; Committed Occupancy rates for each property of SPH REIT; remaining term for each of SPH REITs leasehold properties; amount of distributable income held pending distribution; details of assets other than real estate; details of SPH REITs exposure to derivatives;
(viii) (ix) (x) (xi) (xii) (xiii)
(xiv) details of SPH REITs investments in other property funds; (xv) details of borrowings by the Trustee and other financial accommodation to the Trustee in relation to SPH REIT;
(xvi) value of the Deposited Property and the NAV of SPH REIT at the beginning and end of the financial year under review; (xvii) the prices at which the Units were quoted at the beginning and end of the accounting period, and the highest and lowest prices at which the Units were traded on the SGX-ST during the financial accounting period; (xviii) volume of trade in the Units during the accounting period;
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(xix) the aggregate value of all transactions entered into by the Trustee (for and on behalf of SPH REIT) with an interested party (as defined in the Property Funds Appendix) or with an interested person (as defined in the Listing Manual) during the financial year under review; (xx) total operating expenses of SPH REIT in respect of the accounting period, including expenses paid to the Manager and interested parties (if any) and the Trustee, and taxation incurred in relation to SPH REITs properties;
(xxi) historical performance of SPH REIT, including rental income obtained and Committed Occupancy rates for each property in respect of the accounting period and other various periods of time (e.g. one-year, three-year, five-year or 10-year) and any distributions made; (xxii) total amount of fees paid to the Trustee; (xxiii) name of the manager of SPH REIT, together with an indication of the terms and duration of its appointment and the basis of its remuneration; (xxiv) total amount of fees paid to the Manager and the price(s) of the Units at which they were issued in part payment thereof; (xxv) total amount of fees paid to the Property Manager; and (xxvi) such other items which may be required to be disclosed under the prevailing applicable laws, regulations and rules. The first annual report will cover the period from the Listing Date to 31 August 2014. Additionally, SPH REIT will announce its NAV on a quarterly basis. Such announcements will be based on the latest available valuation of SPH REITs real estate and real estate-related assets, which will be conducted at least once a year (as required under the Property Funds Appendix). CORPORATE GOVERNANCE OF THE MANAGER The following outlines the main corporate governance practices of the Manager. Board of Directors of the Manager The Board is responsible for the overall corporate governance of the Manager including establishing goals for management and monitoring the achievement of these goals. The Manager is also responsible for the strategic business direction and risk management of SPH REIT. All Board members participate in matters relating to corporate governance, business operations and risks, financial performance, and the nomination and review of the directors of the Manager. The Board will have in place a framework for the management of the Manager and SPH REIT, including a system of internal audit and control and a business risk management process. The Board consists of six members, three of whom are independent directors. None of the directors of the Manager has entered into any service contract with SPH REIT. The composition of the Board is determined using the following principles: the Chairman of the Board should be a non-executive director of the Manager;
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the Board should comprise directors with a broad range of commercial experience including expertise in funds management, legal matters, audit and accounting and the property industry; and at least one-third of the Board should comprise independent directors.
However, according to Guideline 2.2 of the Code of Corporate Governance 2012, at least half of the Board should comprise independent directors where: the Chairman and the Chief Executive Officer is the same person; the Chairman and the Chief Executive Officer are immediate family members; the Chairman is part of the management team; or the Chairman is not an independent director.
The composition will be reviewed regularly to ensure that the Board has the appropriate mix of expertise and experience. Audit and Risk Committee The Audit and Risk Committee is appointed by the Board from among the directors of the Manager and is composed of three members, a majority of whom (including the Chairman of the Audit and Risk Committee) are required to be independent directors. As at the date of this Prospectus, the members of the Audit and Risk Committee are Mr Soon Tit Koon, Mr David Chia Chay Poh and Mr Anthony Mallek. Mr Soon Tit Koon has been appointed as the Chairman of the Audit and Risk Committee. A majority of the members of the Audit and Risk Committee are independent directors and all of them are resident in Singapore. The role of the Audit and Risk Committee is to monitor and evaluate the effectiveness of the Managers internal controls. The Audit and Risk Committee also reviews the quality and reliability of information prepared for inclusion in financial reports, and is responsible for the nomination of external auditors and reviewing the adequacy of external audits in respect of cost, scope and performance. The Audit and Risk Committees responsibilities also include: monitoring the procedures established to regulate Related Party Transactions, including ensuring compliance with the provisions of the Listing Manual relating to interested person transactions (as defined therein) and the provisions of the Property Funds Appendix relating to interested party transactions (as defined therein) (both such types of transactions constituting Related Party Transactions ); reviewing transactions constituting Related Party Transactions; deliberating on resolutions relating to conflicts of interest situations involving SPH REIT; reviewing external audit reports to ensure that where deficiencies in internal controls have been identified, appropriate and prompt remedial action is taken by the management; reviewing arrangements by which staff and external parties may, in confidence, raise probable improprieties in matters of financial reporting or other matters, with the objective that arrangements are in place for the independent investigation of such matters and for appropriate follow up action; 150
reviewing internal audit reports at least twice a year to ascertain that the guidelines and procedures established to monitor Related Party Transactions have been complied with; ensuring that the internal audit and accounting function is adequately resourced and has appropriate standing with SPH REIT; reviewing, on an annual basis, the adequacy and effectiveness of the internal audit function; the appointment, re-appointment or removal of internal auditors (including the review of their fees and scope of work); monitoring the procedures in place to ensure compliance with applicable legislation, the Listing Manual and the Property Funds Appendix; reviewing the appointment, re-appointment or removal of external auditors; reviewing the nature and extent of non-audit services performed by external auditors; reviewing, on an annual basis, the independence and objectivity of the external auditors; meeting with external and internal auditors, without the presence of the executive officers, at least on an annual basis; reviewing the system of internal controls including financial, operational, compliance controls and risk management processes; reviewing the financial statements and the internal audit report; reviewing and providing their views on all hedging policies and instruments to be implemented by SPH REIT to the Board; reviewing and approving the procedures for the entry into of any foreign exchange hedging transactions and monitoring the implementation of such policy, including reviewing the instruments, processes and practices in accordance with the policy for entering into foreign exchange hedging transactions; investigating any matters within the Audit and Risk Committees terms of reference, whenever it deems necessary; and reporting to the Board on material matters, findings and recommendations.
Compliance Officer The Manager has outsourced the role of the compliance officer to the Sponsor. The compliance officer will report to the Chief Executive Officer and the Board, and his duties include: updating employees of the Manager on compliance requirements under the SFA, the CIS Code (including the Property Funds Appendix), the Listing Manual and all applicable laws, regulations and guidelines; highlighting any deficiencies or making recommendations with respect to the Managers compliance processes; assisting in the application process for the appointment of new directors to the Board; and
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assisting in any other matters concerning compliance with the SFA, the CIS Code (including the Property Funds Appendix), the Listing Manual and all applicable laws, regulations and guidelines.
Dealings in Units Each director of the Manager and the Chief Executive Officer of the Manager is to give notice to the Manager of his acquisition of Units or of changes in the number of Units which he holds or in which he has an interest, within two business days after such acquisition or the occurrence of the event giving rise to changes in the number of Units which he holds or in which he has an interest. (See The Formation and Structure of SPH REIT Declaration of Unitholdings for further details.) All dealings in Units by the directors of the Manager will be announced via SGXNET, with the announcement to be posted on the internet at the SGX-ST website http://www.sgx.com. The directors and employees of the Manager are encouraged, as a matter of internal policy, to hold Units but are prohibited from dealing in the Units: in the period commencing one month before the public announcement of SPH REITs annual results and property valuations, and two weeks before the public announcement of SPH REITs quarterly results and ending on the date of announcement of the relevant results or, as the case may be, property valuations; and at any time while in possession of price sensitive information.
The directors and employees of the Manager are also prohibited from communicating price sensitive information to any person. The Sponsor has in place a Code of Dealings which prohibits dealings in the units of SPH REIT by directors of the Manager and certain key employees, within certain trading periods. The black-out periods are two weeks prior to the announcement of SPH REITs financial statements for each of the first three quarters of its financial year and one month prior to the announcement of SPH REITs full year financial statements. Pursuant to Section 137ZC of the SFA, the Manager is required to, inter alia , announce to the SGX-ST the particulars of any acquisition or disposal of interest in Units by the Manager as soon as practicable, and in any case no later than the end of the business day following the day on which the Manager became aware of the acquisition or disposal. In addition, all dealings in Units by any director of the Manager or the Chief Executive Officer of the Manager will also need to be announced by the Manager via SGXNET, with the announcement to be posted on the internet at the SGX-ST website http://www.sgx.com and in such form and manner as the Authority may prescribe. Management of Business Risk The Board will meet quarterly, or more often if necessary, and will review the financial performance of the Manager and SPH REIT against a previously approved budget. The Board will also review the business risks of SPH REIT, examine liability management and act upon any comments from the auditors of SPH REIT. The Manager has appointed experienced and well-qualified management personnel to handle the day-to-day operations of the Manager and SPH REIT. In assessing business risk, the Board will consider the economic environment and risks relevant to the property industry. It reviews management reports and feasibility studies on individual investment projects prior to approving major transactions. The management meets regularly to review the operations of the Manager and SPH REIT and discuss any disclosure issues. 152
The Manager has also provided an undertaking to the SGX-ST that: (i) regular reviews will be carried out by the Board of Directors or the Audit and Risk Committee of the REITs key financial risk areas and the outcome of these reviews must be disclosed in the Annual Report or where the findings are material, immediately announced via SGXNET; the Manager will make periodic announcements on the use of the IPO proceeds as and when the funds from the IPO are materially disbursed and provide a status report on the use of the IPO proceeds in the annual report; and
(ii)
(iii) the Audit and Risk Committee will review and recommend all hedging policies and instruments (if any) to be implemented by SPH REIT to the Board, and that the trading of such financial and foreign exchange instruments will require the specific approval of the Board. Potential Conflicts of Interest The Manager has also instituted the following procedures to deal with potential conflicts of interest issues: The Manager will not manage any other REIT which invests in the same type of properties as SPH REIT. All key executive officers will be working exclusively for the Manager and will not hold other executive positions in other entities. All resolutions in writing of the directors of the Manager in relation to matters concerning SPH REIT must be approved by at least a majority of the directors of the Manager, including at least one Independent Director. At least one-third of the Board shall comprise independent directors. In respect of matters in which the Sponsor and/or its subsidiaries have an interest, direct or indirect, any nominees appointed by the Sponsor and/or its subsidiaries to the Board to represent their interests will abstain from deliberation and voting on such matters. For such matters, the quorum must comprise a majority of the independent directors of the Manager and must exclude nominee directors of the Sponsor and/or its subsidiaries. The Manager and the Property Manager are indirect wholly-owned subsidiaries of the Sponsor. It is also provided in the Trust Deed that if the Manager is required to decide whether or not to take any action against any person in relation to any breach of any agreement entered into by the Trustee for and on behalf of SPH REIT with a Related Party of the Manager, the Manager shall be obliged to consult with a reputable law firm (acceptable to the Trustee) which shall provide legal advice on the matter. If the said law firm is of the opinion that the Trustee, on behalf of SPH REIT, has a prima facie case against the party allegedly in breach under such agreement, the Manager shall be obliged to take appropriate action in relation to such agreement. The directors of the Manager (including its independent directors) will have a duty to ensure that the Manager so complies. Notwithstanding the foregoing, the Manager shall inform the Trustee as soon as it becomes aware of any breach of any agreement entered into by the Trustee for and on behalf of SPH REIT with a Related Party of the Manager and the Trustee may take such action as it deems necessary to protect the rights of Unitholders and/or which is in the interests of Unitholders. Any decision by the Manager not to take action against a Related Party of the Manager shall not constitute a waiver of the Trustees right to take such action as it deems fit against such Related Party.
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RELATED PARTY TRANSACTIONS The Managers Internal Control System The Manager has established an internal control system to ensure that all future Related Party Transactions: will be undertaken on normal commercial terms; and will not be prejudicial to the interests of SPH REIT and the Unitholders.
As a general rule, the Manager must demonstrate to its Audit and Risk Committee that such transactions satisfy the foregoing criteria. This may entail: obtaining (where practicable) quotations from parties unrelated to the Manager; or obtaining two or more valuations from independent professional valuers (in compliance with the Property Funds Appendix).
The Manager will maintain a register to record all Related Party Transactions which are entered into by SPH REIT and the bases, including any quotations from unrelated parties and independent valuations, on which they are entered into. The Manager will also incorporate into its internal audit plan a review of all Related Party Transactions entered into by SPH REIT. The Audit and Risk Committee shall review the internal audit reports at least twice a year to ascertain that the guidelines and procedures established to monitor Related Party Transactions have been complied with. The Trustee will also have the right to review such audit reports to ascertain that the Property Funds Appendix has been complied with. The following procedures will be undertaken: transactions (either individually or as part of a series or if aggregated with other transactions involving the same Related Party during the same financial year) equal to or exceeding S$100,000 in value but below 3.0% of the value of SPH REITs net tangible assets will be subject to review by the Audit and Risk Committee at regular intervals; transactions (either individually or as part of a series or if aggregated with other transactions involving the same Related Party during the same financial year) equal to or exceeding 3.0% but below 5.0% of the value of SPH REITs net tangible assets will be subject to the review and prior approval of the Audit and Risk Committee. Such approval shall only be given if the transactions are on normal commercial terms and not prejudicial to the interests of SPH REIT and its Unitholders and are consistent with similar types of transactions made by the Trustee with third parties which are unrelated to the Manager; and transactions (either individually or as part of a series or if aggregated with other transactions involving the same Related Party during the same financial year) equal to or exceeding 5.0% of the value of SPH REITs net tangible assets will be reviewed and approved prior to such transactions being entered into, on the basis described in the preceding paragraph, by the Audit and Risk Committee which may, as it deems fit, request advice on the transaction from independent sources or advisers, including the obtaining of valuations from independent professional valuers. Furthermore, under the Listing Manual and the Property Funds Appendix, such transactions would have to be approved by the Unitholders at a meeting of Unitholders duly convened and held in accordance with the provisions of the Trust Deed.
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Where matters concerning SPH REIT relate to transactions entered into or to be entered into by the Trustee for and on behalf of SPH REIT with a Related Party of the Manager (which would include relevant Associates (as defined in the Listing Manual) thereof) or SPH REIT, the Trustee is required to consider the terms of such transactions to satisfy itself that such transactions are conducted: on normal commercial terms; are not prejudicial to the interests of SPH REIT and the Unitholders; and are in accordance with all applicable requirements of the Property Funds Appendix and/or the Listing Manual relating to the transaction in question.
The Trustee has the discretion under the Trust Deed to decide whether or not to enter into a transaction involving a Related Party of the Manager or SPH REIT. If the Trustee is to sign any contract with a Related Party of the Manager or SPH REIT, the Trustee will review the contract to ensure that it complies with the requirements relating to interested party transactions in the Property Funds Appendix (as may be amended from time to time) and the provisions of the Listing Manual relating to interested person transactions (as may be amended from time to time) as well as such other guidelines as may from time to time be prescribed by the MAS and the SGX-ST to apply to REITs. Save for the transactions described under Related Party Transactions in Connection with the Setting Up of SPH REIT and Exempted Agreements, SPH REIT will comply with Rule 905 of the Listing Manual by announcing any interested person transaction in accordance with the Listing Manual if such transaction, by itself or when aggregated with other interested person transactions entered into with the same interested person during the same financial year, is 3.0% or more of SPH REITs latest audited net tangible assets. The aggregate value of all Related Party Transactions which are subject to Rules 905 and 906 of the Listing Manual in a particular financial year will be disclosed in SPH REITs annual report for that financial year. Role of the Audit and Risk Committee for Related Party Transactions The Audit and Risk Committee will periodically review all Related Party Transactions to ensure compliance with the Managers internal control system, the relevant provisions of the Listing Manual, and the Property Funds Appendix. The review will include the examination of the nature of the transaction and its supporting documents or such other data deemed necessary by the Audit and Risk Committee. If a member of the Audit and Risk Committee has an interest in a transaction, he is to abstain from participating in the review and approval process in relation to that transaction. Related Party Transactions in Connection with the Setting Up of SPH REIT and the Offering Existing Agreements The Trustee, on behalf of SPH REIT, has entered into a number of transactions with the Manager and certain related parties of the Manager in connection with the setting up of SPH REIT. These Related Party Transactions are as follows: The Trustee has on 9 July 2013 entered into the Trust Deed with the Manager. The terms of the Trust Deed are generally described in The Formation and Structure of SPH REIT.
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The Sponsor has on 9 July 2013 granted to the Trustee a ROFR which is subject to certain conditions. The ROFR is more particularly described in Certain Agreements Relating to SPH REIT and the Properties Right of First Refusal Agreement. The Manager believes that the ROFR is made on normal commercial terms and is not prejudicial to the interests of SPH REIT and the Unitholders. The Trustee has on 9 July 2013 entered into the Clementi Mall Call Option Agreement (as defined herein) with CM Domain pursuant to which the Trustee was granted the right to require CM Domain to enter into the Clementi Mall Sale Agreement (as defined herein) for the sale of Clementi Mall. The Clementi Mall Call Option Agreement and the Clementi Sale Agreement are more particularly described in Certain Agreements Relating to SPH REIT and the Properties Description of the Agreements to Acquire the Properties Clementi Mall. The Manager believes that the Clementi Mall Call Option Agreement and the Clementi Sale Agreement are made on normal commercial terms and are not prejudicial to the interests of SPH REIT and the Unitholders. The Trustee has on 9 July 2013 entered into a Deed of Income Support with CM Domain. The Deed of Income Support is more particularly described in Certain Agreements Relating to SPH REIT and the Properties Description of the Agreements to Acquire the Properties Clementi Mall Deed of Income Support. The Manager believes that the Deed of Income Support is made on normal commercial terms and is not prejudicial to the interests of SPH REIT and the Unitholders. The Trustee has on 9 July 2013 entered into the Paragon Call Option Agreement (as defined herein) with O290 pursuant to which the Trustee was granted the right to require O290 to enter into the Paragon Sale Agreement (as defined herein) for the sale of Paragon. The Paragon Call Option Agreement and the Paragon Sale Agreement are more particularly described in Certain Agreements Relating to SPH REIT and the Properties Description of the Agreements to Acquire the Properties Paragon. The Manager believes that the Paragon Call Option Agreement and the Paragon Sale Agreement are made on normal commercial terms and are not prejudicial to the interests of SPH REIT and the Unitholders. The Trustee and O290 will on completion of the sale and purchase of Paragon execute (a) a deed of assignment in respect of the agreements (collectively, the New Sculpture Contract ) relating to the acquisition of a new sculpture for Paragon whereby O290 will assign to the Trustee, O290s rights and benefits under the New Sculpture Contract or (b) (with the consent of the counterparty to the New Sculpture Contract) enter into a novation agreement in respect of the New Sculpture Contract so that the Trustee will, with effect from the date of completion, take over the performance and discharge of O290s liabilities and obligations under or by virtue of the New Sculpture Contract as if the Trustee is the party named in the New Sculpture Contract in lieu of O290. The New Sculpture Contract is more particularly described in Certain Agreements Relating to SPH REIT and the Properties Description of the Agreements to Acquire the Properties Paragon Paragon Sale Agreement. The Manager believes that the New Sculpture Contract is made on normal commercial terms and is not prejudicial to the interests of SPH REIT and the Unitholders. The Trustee and O290 will on completion of the sale and purchase of Paragon enter into the Vendor Lease, pursuant to which SPH REIT will in respect of Paragon, acquire a registrable 99-year leasehold title commencing on the Listing Date. The Vendor Lease is more particularly described in Certain Agreements Relating to SPH REIT and the Properties Description of the Agreements to Acquire the Properties Paragon Vendor Lease. The Manager believes that the Vendor Lease is made on normal commercial terms and is not prejudicial to the interests of SPH REIT and the Unitholders.
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The Trustee, the Manager and the Property Manager will on completion of the sale and purchase of Paragon enter into the property management agreement (the Property Management Agreement ) for the operation, maintenance, management and marketing of properties of SPH REIT by the Property Manager from time to time. These agreements are more particularly described in Certain Agreements Relating to SPH REIT and the Properties Property Management Agreement.
The Property Manager is staffed by employees with relevant experience and expertise and therefore the Manager considers that the Property Manager has the necessary expertise and resources to perform the property management, lease management, project management and marketing services for the Properties. The Manager believes that the Property Management Agreement is made on normal commercial terms and is not prejudicial to the interests of SPH REIT and the Unitholders. The Trustee and O290 will on completion of the sale and purchase of Paragon enter into an intellectual property licence agreement ( IP Licence Agreement ) in respect of the trade mark Paragon (the Mark ). O290 is currently named as the proprietor of the Mark registered with the Intellectual Property Office of Singapore. The IP Licence Agreement is more particularly described in Certain Agreements Relating to SPH REIT and the Properties IP Licence Agreement. The Manager believes that the IP Licence Agreement is made on normal commercial terms and is not prejudicial to the interests of SPH REIT and the Unitholders.
Save as disclosed in this Prospectus, the Trustee has not entered into any other transactions with (i) the Manager or any Related Party of the Manager or (ii) the Property Manager in connection with the setting up of SPH REIT. Property Management Agreement In respect of property and lease management services, marketing services and project management services to be provided by the Property Manager for each property under its management (including each subsequently acquired property which are managed by the Property Manager), the Property Manager shall be entitled to receive from the Trustee in respect of each property of SPH REIT under its management: 2.0% per annum of Gross Revenue for the relevant property; 2.0% per annum of Net Property Income for the relevant property (calculated before accounting for the property management fee in that financial period); and 0.5% per annum of the Net Property Income for the relevant property (calculated before accounting for the property management fee in that financial period) in lieu of leasing commissions otherwise payable to the Property Manager and/or third party agents.
The Manager may elect to pay the property management fee in cash or Units or a combination of cash and Units (as the Manager may in its sole discretion determine). The Manager is of the view that leasing services provided by external agents would incur fees that are in line with those proposed to be charged by the Property Manager. The Manager believes that SPH REIT would benefit by having leasing services provided by the Property Manager, given that the Property Managers leasing team are most familiar with the properties and have historically been handling the leasing for the properties.
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Project Management fee In relation to the development and redevelopment of a property (if not prohibited by the Property Funds Appendix or if otherwise permitted by the MAS), the refurbishment, retrofitting and renovation works on such a property where the construction costs equal or exceed S$100,000 but do not exceed S$500,000, a fee of 5.0% of the construction costs; where the construction costs exceed S$500,000 but do not exceed S$1,000,000, a fee of 2.0% of the construction costs; where the construction costs exceed S$1,000,000 but are below S$10,000,000, a fee of 1.5% of the construction costs; and where the construction costs equal or exceed S$10,000,000 but do not exceed S$25,000,000, a fee of 1.25% of the construction costs.
Where the construction costs are below S$100,000, no fee is payable. In addition to its fees, the Property Manager will be fully reimbursed for certain costs. (See Certain Agreements Relating to SPH REIT and the Properties Property Management Agreement Expenses for further details.) Exempted Agreements The entry into and the fees and charges payable by SPH REIT under the Trust Deed, the ROFR, the Clementi Mall Call Option Agreement, the Clementi Sale Agreement, the Deed of Income Support, the New Sculpture Contract, the Paragon Call Option Agreement, the Paragon Sale Agreement, the Vendor Lease, the Property Management Agreement and the IP Licence Agreement (collectively, the Exempted Agreements), each of which constitutes or will, when entered into, constitute a Related Party Transaction, are deemed to have been specifically approved by the Unitholders upon subscription for the Units and are therefore not subject to Rules 905 and 906 of the Listing Manual to the extent that specific information on these agreements have been disclosed in this Prospectus and there is no subsequent change to the rates and/or bases of the fees charged thereunder which will adversely affect SPH REIT. (See Overview Certain Fees and Charges for the fees and charges payable by SPH REIT in connection with the establishment and on-going management and operation of SPH REIT for further details.) Any renewal of the Property Management Agreement will be subject to Rules 905 and 906 of the Listing Manual. (See The Manager and Corporate Governance Related Party Transactions The Managers Internal Control System for further details). Future Related Party Transactions As a REIT, SPH REIT is regulated by the Property Funds Appendix and the Listing Manual. The Property Funds Appendix regulates, among others, transactions entered into by the Trustee (for and on behalf of SPH REIT) with an interested party relating to SPH REITs acquisition of assets from or sale of assets to an interested party, SPH REITs investment in securities of or issued by an interested party and the engagement of an interested party as property management agent or marketing agent for SPH REITs properties.
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Depending on the materiality of transactions entered into by SPH REIT for the acquisition of assets from, the sale of assets to or the investment in securities of or issued by, an interested party, the Property Funds Appendix may require that an immediate announcement to the SGX-ST be made, and may also require that the approval of the Unitholders be obtained. The Listing Manual regulates all interested person transactions, including transactions already governed by the Property Funds Appendix. Depending on the materiality of the transaction, SPH REIT may be required to make a public announcement of the transaction (Rule 905 of the Listing Manual), or to make a public announcement of and to obtain Unitholders prior approval for the transaction (Rule 906 of the Listing Manual). The Trust Deed requires the Trustee and the Manager to comply with the provisions of the Listing Manual relating to interested person transactions as well as such other guidelines relating to interested person transactions as may be prescribed by the SGX-ST to apply to REITs. The Manager may in the future seek a general annual mandate from the Unitholders pursuant to Rule 920(1) of the Listing Manual for recurrent transactions of a revenue or trading nature or those necessary for its day-to-day operations, including a general mandate in relation to leases and/or licence agreements to be entered into with interested persons. All transactions conducted under such general mandate for the relevant financial year will not be subject to the requirements under Rules 905 and 906 of the Listing Manual. In seeking such a general annual mandate, the Trustee will appoint an independent financial adviser (without being required to consult the Manager) pursuant to Rule 920(1)(b)(v) of the Listing Manual to render an opinion as to whether the methods or procedures for determining the transaction prices of the transactions contemplated under the annual general mandate are sufficient to ensure that such transactions will be carried out on normal commercial terms and will not be prejudicial to the interests of SPH REIT and the Unitholders. Both the Property Funds Appendix and the Listing Manual requirements would have to be complied with in respect to a proposed transaction which is prima facie governed by both sets of rules. Where matters concerning SPH REIT relate to transactions entered or to be entered into by the Trustee for and on behalf of SPH REIT with a Related Party (either an interested party under the Property Funds Appendix or an interested person under the Listing Manual) of the Manager or SPH REIT, the Trustee and the Manager are required to ensure that such transactions are conducted in accordance with applicable requirements of the Property Funds Appendix and/or the Listing Manual. The Manager is not prohibited by either the Property Funds Appendix or the Listing Manual from contracting or entering into any financial, banking or any other type of transaction with the Trustee (when acting other than in its capacity as trustee of SPH REIT) or from being interested in any such contract or transaction, provided that any such transaction shall be on normal commercial terms and is not prejudicial to the interests of SPH REIT and the Unitholders. The Manager shall not be liable to account to the Trustee or to the Unitholders for any profits or benefits or other commissions made or derived from or in connection with any such transaction. The Trustee shall not be liable to account to the Manager or to the Unitholders for any profits or benefits or other commission made or derived from or in connection with any such transaction. Generally, under the Listing Manual, the Manager, its connected persons (as defined in the Listing Manual) and any director of the Manager are prohibited from voting their respective own Units at, or being part of a quorum for, any meeting to approve any matter in which it has a material interest.
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THE SPONSOR
Incorporated in 1984, the Sponsor is Southeast Asias leading media organisation, engaging minds and enriching lives across multiple languages and platforms with a corporate mission to inform, educate and entertain. Listed on the SGX-ST since 1984, the Sponsor has a market capitalisation of approximately S$6.7 billion as at the Latest Practicable Date. For FY2012, the Sponsor had total assets of S$4.1 billion and generated operating revenue of S$1.3 billion. The Sponsor is engaged in the following businesses: Newspapers, Magazines and Book Publishing: In Singapore, the Sponsor publishes 18 newspaper titles in four languages. SPHs English flagship newspaper The Straits Times has a rich heritage of 168 years while SPHs Chinese daily Lianhe Zaobao celebrates its 90th anniversary this year. On an average day in 2012, 2.88 million individuals, or 71.0% of people above 15 years old in Singapore, read one of the Sponsors news publications. The Sponsor also publishes and produces more than 100 magazine titles in Singapore and around Asia, covering a broad range of interests from lifestyle to information technology. Through its subsidiaries, Straits Times Press Pte. Ltd. and Focus Publishing Ltd., the Sponsor also publishes and produces books and periodicals in English and Chinese. The Sponsor also has a 40.0% stake in MediaCorp Press Ltd, which publishes the free newspaper, Today. Internet and Mobile: The Internet editions of the Sponsors newspapers receive over 445 million page views with 18 million unique visitors every month as at March 2013. Apart from the Sponsors internet portal AsiaOne, the Sponsors online and new media initiatives include ST701, one of the leading online marketplace for jobs (STJobs), property (STProperty), cars (STCars) and general classifieds (STClassifieds); Stomp (Straits Times Online Mobile Print), a portal that connects, engages and interacts with readers on the Web and via mobile phone messaging; omy.sg, a bilingual news and interactive portal; The Straits Times RazorTV, a free access interactive webcast service offering live chat shows and video-on-demand clips and Shareinvestor.com Holdings Pte Ltd., the Sponsors financial internet media and technology subsidiary. The Sponsor launched The Straits Times iPad and enhanced iPhone applications, an Android smartphone application and The Business Times iPad and smartphone application. Lianhe Zaobao also introduced its digital editions which include a web application, as well as online and PDF versions. Currently, 44 digital editions of the Sponsors magazines in Singapore and the region can be accessed via tablets and smartphones. Beyond Singapore, 701Search Pte. Ltd., a joint venture between the Sponsor and Schibsted Media Group also launched classified portals in Malaysia, Vietnam, Philippines, Indonesia and China. Broadcasting: The Sponsor has a 92.9% stake in SPH UnionWorks Pte. Ltd., which operates entertainment stations UFM 100.3 in Mandarin, as well as Kiss92 and HOT FM91.3 in English. In addition, the Sponsor has a 20.0% stake in MediaCorp TV Holdings Pte. Ltd., which operates free-to-air channels 5, 8 and U. Events and Outdoor Advertising: The Sponsors events arm, Sphere Exhibits Pte. Ltd., organises innovative consumer and trade events and exhibitions as well as large scale conferences in Singapore and Southeast Asia. Its signature events include COMEX, IT SHOW, Asian Masters and Gourmet Japan. In addition, the Sponsor has ventured into out-of-home advertising through its digital out-of-home platform SPH MediaBoxOffice.
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Properties: The Sponsor owns and manages Paragon, a premier upscale retail mall and medical suite/office property located in the heart of Orchard Road. The Sponsor acquired Paragon in 1997 1 and has extensively and continually upgraded the mall and optimised its tenancy mix in order to keep the property up-to-date with market preferences and expectations and to meet the needs of retailers. The Sponsors leadership has been critical to Paragon maintaining 100.0% Committed Occupancy since 2006. In addition, the Sponsors second retail development, Clementi Mall, a mid-market suburban mall located in the centre of Clementi town opened officially in 2011. It enjoys high levels of visitation with over 27.1 million visitors in 2012. Through its wholly-owned subsidiary Times Development Pte. Ltd., the Sponsor also developed a freehold 43-storey upmarket residential condominium, Sky@eleven, in prime district 11 at Thomson Road. The Sponsors latest retail development project, The Seletar Mall, is intended to be a suburban lifestyle hub and is slated for completion by December 2014. In addition, the Sponsor will continue to explore opportunities to develop and invest on a long term basis, in attractive retail projects. The Sponsor has provided a ROFR to SPH REIT in respect of any of its current and future developments which are used primarily for retail purposes.
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THE FORMATION AND STRUCTURE OF SPH REIT

The Trust Deed is a complex document and the following is a summary only and is qualified in its entirety by, and is subject to, the contents of the Trust Deed. Investors should refer to the Trust Deed itself to confirm specific information or for a detailed understanding of SPH REIT. The Trust Deed is available for inspection at the registered office of the Manager at 1000 Toa Payoh North, News Centre, Singapore 318994. THE TRUST DEED SPH REIT is a REIT constituted by the Trust Deed on 9 July 2013 and is principally regulated by the SFA and the CIS Code (including the Property Funds Appendix). The terms and conditions of the Trust Deed shall be binding on each Unitholder (and persons claiming through such Unitholder) as if such Unitholder had been a party to the Trust Deed and as if the Trust Deed contains covenants by such Unitholder to observe and be bound by the provisions of the Trust Deed and an authorisation by each Unitholder to do all such acts and things as the Trust Deed may require the Manager and/or the Trustee to do. Operational Structure SPH REIT is established to invest in real estate and real estate-related assets. The Manager must manage SPH REIT so that the principal investments of SPH REIT are real estate and real estate-related assets (including ownership of companies or other legal entities whose primary purpose is to hold or own real estate and real estate-related assets). SPH REIT is a Singapore-based REIT established principally to invest, directly or indirectly, in a portfolio of income-producing real estate which is used primarily for retail purposes in Asia-Pacific, as well as real estate-related assets. SPH REIT aims to generate returns for its Unitholders by owning, buying and actively managing such properties in line with its investment strategy (including the selling of any property that has reached a stage that offers only limited scope for growth). Subject to the restrictions and requirements in the Property Funds Appendix and the Listing Manual, the Manager is also authorised under the Trust Deed to invest in investments which need not be real estate. The Manager may use certain financial derivative instruments for hedging purposes or efficient portfolio management, provided that (i) such financial derivative instruments are not used to gear SPH REITs overall investment portfolio or are intended to be borrowings of SPH REIT and (ii) the policies regarding such use of financial derivative instruments have been approved by the Board. The Units and Unitholders The rights and interests of Unitholders are contained in the Trust Deed. Under the Trust Deed, these rights and interests are safeguarded by the Trustee. Each Unit represents an undivided interest in SPH REIT. A Unitholder has no equitable or proprietary interest in the underlying assets of SPH REIT. A Unitholder is not entitled to the transfer to him of any asset (or any part thereof) or of any real estate, any interest in any asset and real estate-related assets (or any part thereof) of SPH REIT. A Unitholders right is limited to the right to require due administration of SPH REIT in accordance with the provisions of the Trust Deed, including, without limitation, by suit against the Trustee or the Manager.
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Under the Trust Deed, each Unitholder acknowledges and agrees that he will not commence or pursue any action against the Trustee or the Manager seeking an order for specific performance or for injunctive relief in respect of the assets of SPH REIT (or any part thereof), including all its Authorised Investments, and waives any rights it may otherwise have to such relief. If the Trustee or the Manager breaches or threatens to breach its duties or obligations to the Unitholder under the Trust Deed, the Unitholders recourse against the Trustee or the Manager is limited to a right to recover damages or compensation from the Trustee or the Manager in a court of competent jurisdiction, and the Unitholder acknowledges and agrees that damages or compensation is an adequate remedy for such breach or threatened breach. Unless otherwise expressly provided in the Trust Deed, a Unitholder may not interfere with the rights, powers, authority or discretion of the Manager or the Trustee, exercise any right in respect of the assets of SPH REIT or any part thereof or lodge any caveat or other notice affecting the real estate or real estate-related assets of SPH REIT (or any part thereof), or require that any Authorised Investments forming part of the assets of SPH REIT be transferred to such Unitholder. No certificate shall be issued to Unitholders by either the Manager or the Trustee in respect of Units issued to Unitholders. For so long as SPH REIT is listed, quoted and traded on the SGX-ST and/or any other Recognised Stock Exchange (as defined herein) and the Units have not been suspended from such listing, quotation and trading for more than 60 consecutive calendar days or de-listed permanently, the Manager shall pursuant to the Depository Services Terms and Conditions (as defined herein) appoint CDP as the Unit depository for SPH REIT, and all Units issued will be represented by entries in the register of Unitholders kept by the Trustee or the agent appointed by the Trustee in the name of, and deposited with, CDP as the registered holder of such Units. The Manager or the agent appointed by the Manager shall issue to CDP not more than 10 Business Days 1 after the issue of Units a confirmation note confirming the date of issue and the number of Units so issued and, if applicable, also stating that the Units are issued under a moratorium and the expiry date of such moratorium and for the purposes of the Trust Deed, such confirmation note shall be deemed to be a certificate evidencing title to the Units issued. There are no restrictions under the Trust Deed or Singapore law on a persons right to purchase (or subscribe for) Units and to own Units. The Singapore Code on Take-overs and Mergers applies to REITs. As a result, acquisitions of Units which may result in a change in effective control of SPH REIT will be subject to the mandatory provisions of the Singapore Code on Take-overs and Mergers, such as a requirement to make a general offer for Units. Issue of Units The following is a summary of the provisions of the Trust Deed relating to the issue of Units. Subject to the following sub-paragraphs (1), (2) and (3) below and to such laws, rules and regulations as may be applicable, for so long as SPH REIT is listed, the Manager may issue Units on any Business Day at an issue price equal to the market price, without the prior approval of the Unitholders. For this purpose, market price shall mean: (i) (subject to (ii) below) the volume weighted average price for a Unit for all trades on the SGX-ST, or such other Recognised Stock Exchange on which SPH REIT is listed, in the ordinary course of trading on the SGX-ST or, as the case may be, such other Recognised Stock Exchange, for the period of 10 Business Days (or such other period as may be prescribed by the SGX-ST or relevant Recognised Stock Exchange) immediately preceding the relevant Business Day; or (ii) if the Manager believes that the calculation in paragraph (i) above does not provide a fair reflection of the market price of a Unit (which may include, among other, instances where the trades on the Units are very low or where
1
Business Day means any day (other than a Saturday, Sunday or gazetted public holiday) on which commercial banks are open for business in Singapore and the SGX-ST is open for trading.
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there is disorderly trading activity in the Units), an amount as determined by the Manager and the Trustee (after consultation with a stockbroker approved by the Trustee), as being the fair market price of a Unit. (1) The Manager shall comply with the Listing Manual in determining the issue price, including the issue price for a rights issue on a pro rata basis to all existing Unitholders, the issue price of a Unit issued other than by way of a rights issue offered on a pro rata basis to all existing Unitholders and the issue price for any reinvestment or distribution arrangement. Where Units are issued as full or partial consideration for the acquisition of an Authorised Investment by SPH REIT in conjunction with an issue of Units to raise cash for the balance of the consideration for the said Authorised Investment (or part thereof) or to acquire other Authorised Investments in conjunction with the said Authorised Investment, the Manager shall have the discretion to determine that the issue price of a Unit so issued as partial consideration shall be the same as the issue price for the Units issued in conjunction with an issue of Units to raise cash for the aforesaid purposes. The scope of the general mandate to be given in a general meeting of the Unitholders is limited to the issue of an aggregate number of additional Units which must not exceed 50.0% of the total number of Units in issue, of which the aggregate number of additional Units to be issued other than on a pro rata basis to the existing Unitholders must not exceed 20.0% of the total number of Units in issue as at the date of the approval.
(2)
(3)
Unit Issue Mandate By subscribing for the Units under the Offering, investors are (A) deemed to have approved the issuance of all Units comprised in the Offering, the Sponsor Initial Unit, the Consideration Units, the Cornerstone Units and (B) deemed to have given the authority (the Unit Issue Mandate ) to the Manager to: (i) (a) (b) issue Units whether by way of rights, bonus or otherwise; and/or make or grant offers, agreements or options (collectively, Instruments ) that might or would require Units to be issued, including but not limited to the creation and issue of (as well as adjustments to) securities, warrants, debentures or other instruments convertible into Units,
at any time and upon such terms and conditions and for such purposes and to such persons as the Manager may in its absolute discretion deem fit; and (ii) issue Units in pursuance of any Instrument made or granted by the Manager while the Unit Issue Mandate was in force (notwithstanding that the authority conferred by the Unit Issue Mandate may have ceased to be in force at the time such Units are issued),
provided that: (A) the aggregate number of Units to be issued pursuant to the Unit Issue Mandate (including Units to be issued in pursuance of Instruments made or granted pursuant to the Unit Issue Mandate) must not exceed 50.0% of the total number of issued Units (excluding treasury Units, if any) (as calculated in accordance with sub-paragraph (B) below), of which the aggregate number of Units to be issued other than on a pro rata basis to Unitholders must not exceed 20.0% of the total number of issued Units (excluding treasury Units, if any) (as calculated in accordance with sub-paragraph (B) below):
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(B)
subject to such manner of calculation as may be prescribed by the SGX-ST for the purpose of determining the aggregate number of Units that may be issued under sub-paragraph (A) above, the total number of issued Units (excluding treasury Units, if any) shall be based on the number of issued Units (excluding treasury Units, if any) after completion of the Offering, after adjusting for any subsequent bonus issue, consolidation or subdivision of Units;
(C) in exercising the Unit Issue Mandate, the Manager shall comply with the provisions of the Listing Manual for the time being in force (unless such compliance has been waived by the SGX-ST) and the Trust Deed for the time being in force (unless otherwise exempted or waived by the MAS); (D) (unless revoked or varied by the Unitholders in a general meeting) the authority conferred by the Unit Issue Mandate shall continue in force until (i) the conclusion of the first annual general meeting of SPH REIT or (ii) the date by which first annual general meeting of SPH REIT is required by applicable regulations to be held, whichever is earlier; (E) where the terms of the issue of the Instruments provide for adjustment to the number of Instruments or Units into which the Instruments may be converted, in the event of rights, bonus or other capitalisation issues or any other events, the Manager is authorised to issue additional Instruments or Units pursuant to such adjustment notwithstanding that the authority conferred by the Unit Issue Mandate may have ceased to be in force at the time the Instruments or Units are issued; and the Manager and the Trustee be and are hereby severally authorised to complete and do all such acts and things (including executing all such documents as may be required) as the Manager or, as the case may be, the Trustee may consider expedient or necessary or in the interest of SPH REIT to give effect to the authority conferred by the Unit Issue Mandate.
(F)
Suspension of Issue of Units The Manager or the Trustee may, with the prior written approval of the other and subject to the Listing Manual, suspend the issue of Units during: any period when the SGX-ST or any other relevant Recognised Stock Exchange is closed (otherwise than for public holidays) or during which dealings are restricted or suspended; the existence of any state of affairs which, in the opinion of the Manager or, as the case may be, the Trustee, might seriously prejudice the interests of the Unitholders as a whole or the Deposited Property; any breakdown in the means of communication normally employed in determining the price of any assets of SPH REIT or the current price thereof on the SGX-ST or any other relevant Recognised Stock Exchange, or when for any reason the prices of any assets of SPH REIT cannot be promptly and accurately ascertained; any period when remittance of money which will or may be involved in the realisation of any asset of SPH REIT or in the payment for such asset of SPH REIT cannot, in the opinion of the Manager, be carried out at normal rates of exchange; any period where the issuance of Units is suspended pursuant to any order or direction issued by the MAS; in relation to any general meeting of Unitholders, the 48-hour period before such general meeting or any adjournment thereof; or
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when the business operations of the Manager or the Trustee in relation to SPH REIT are substantially interrupted or closed as a result of, pestilence, acts of war, terrorism, insurrection, revolution, civil unrest, riots, strikes, nuclear fusion or fission or acts of God.
Such suspension shall take effect forthwith upon the declaration in writing thereof by the Manager or the Trustee (as the case may be) and shall terminate on the day following the first Business Day on which the condition giving rise to the suspension ceases to exist and no other conditions under which suspension is authorised (as set out above) exists, upon the declaration in writing thereof by the Manager or the Trustee (as the case may be). In the event of any suspension while SPH REIT is listed on the SGX-ST, the Manager shall ensure that immediate announcement of such suspension is made through the SGX-ST. Redemption of Units The Trust Deed provides that any redemption of Units will be carried out in accordance with the Property Funds Appendix, the rules of the Listing Manual (if applicable) and all other applicable laws and regulations. With respect to any terms which are necessary to carry out such redemption but are not prescribed by the Property Funds Appendix, the rules in the Listing Manual and any laws and regulations, these terms shall be determined by mutual agreement between the Manager and the Trustee. For so long as the Units are listed on the SGX-ST, the Unitholders have no right to request the Manager to repurchase or redeem their Units while the Units are listed on the SGX-ST and/or any other Recognised Stock Exchange. It is intended that the Unitholders may only deal in their listed Units through trading on the SGX-ST. Rights and Liabilities of Unitholders The key rights of Unitholders include rights to: receive income and other distributions attributable to the Units held; receive audited accounts and the annual reports of SPH REIT; and participate in the termination of SPH REIT by receiving a share of all net cash proceeds derived from the realisation of the assets of SPH REIT less any liabilities, in accordance with their proportionate interests in SPH REIT.
No Unitholder has a right to require that any asset of SPH REIT be transferred to him. Further, Unitholders cannot give any directions to the Trustee or the Manager (whether at a meeting of Unitholders duly convened and held in accordance with the provisions of the Trust Deed or otherwise) if it would require the Trustee or the Manager to do or omit doing anything which may result in: SPH REIT ceasing to comply with applicable laws and regulations; or the exercise of any discretion expressly conferred on the Trustee or the Manager by the Trust Deed or the determination of any matter which, under the Trust Deed, requires the agreement of (i) the Trustee, (ii) the Manager, or (iii) both the Trustee and the Manager.
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The Trust Deed contains provisions that are designed to limit the liability of a Unitholder to the amount paid or payable for any Unit. The provisions ensure that if the issue price of the Units held by a Unitholder has been fully paid, no such Unitholder, by reason alone of being a Unitholder, will be personally liable to indemnify the Trustee or any creditor of SPH REIT in the event that the liabilities of SPH REIT exceed its assets. Under the Trust Deed, every Unit carries the same voting rights. Amendments of the Trust Deed Approval of Unitholders by an Extraordinary Resolution will be obtained for any amendment of the Trust Deed unless the Trustee certifies, in its opinion, that such amendment: does not materially prejudice the interests of Unitholders and does not operate to release to any material extent the Trustee or the Manager from any responsibility to the Unitholders; is necessary in order to comply with applicable fiscal, statutory or official requirements (whether or not having the force of law); or is made to remove obsolete provisions or to correct a manifest error.
No such amendment shall impose upon any Unitholder any obligation to make any further payments in respect of his Units or to accept any liability in respect thereof. Notwithstanding any of the above, the Manager and the Trustee may, with the written approval of the competent authorities, alter certain provisions in the Trust Deed relating to the use of derivatives. Meeting of Unitholders Under applicable law and the provisions of the Trust Deed, SPH REIT will not hold any meetings for Unitholders unless the Trustee or the Manager convenes a meeting or unless not less than 50 Unitholders or Unitholders representing not less than 10.0% of the total Units issued requests a meeting to be convened. In addition, SPH REIT is required to hold an annual general meeting once in every calendar year and not more than 15 months after the holding of the last preceding annual general meeting, but so long as SPH REIT holds its first annual general meeting within 18 months of its constitution, it need not hold it in the year of its constitution or the following year. Furthermore, the Trust Deed shall comply with paragraph 4 of the Property Funds Appendix. A meeting of Unitholders when convened may, by Extraordinary Resolution and in accordance with the provisions of the Trust Deed: sanction any modification, alteration or addition to the Trust Deed which shall be agreed by the Trustee and the Manager as provided in the Trust Deed; sanction a supplemental deed increasing the maximum permitted limit or any change in the structure of the Managers management fees, acquisition fee, divestment fee and the Trustees fee; remove the auditors and appoint other auditors; remove the Trustee; direct the Trustee to take any action pursuant to Section 295 of the SFA (relating to the winding-up of the Trust); and delist SPH REIT after it has been listed. 167
A meeting of Unitholders may, also by an Ordinary Resolution of Unitholders present and voting at a meeting of Unitholders convened in accordance with the Trust Deed, vote to remove the Manager (with the Manager and its related parties being permitted to vote). Any decision to be made by resolution of Unitholders other than the above shall be made by Ordinary Resolution, unless an Extraordinary Resolution is required by the SFA, the CIS Code or the Listing Manual. Except as otherwise provided for in the Trust Deed, and save for Extraordinary Resolutions (which requires at least 21 days notice (not inclusive of the day on which the notice is served or deemed to be served and of the day for which the notice is given)), at least 14 days notice (not inclusive of the day on which the notice is served or deemed to be served and of the day for which the notice is given) of every meeting shall be given to the Unitholders in the manner provided in the Trust Deed. Each notice shall specify the place, day and hour of the meeting, and the terms of the resolutions to be proposed. Any notice of a meeting called to consider special business shall be accompanied by a statement regarding the effect of any proposed resolutions in respect of such special business. The quorum at a meeting shall not be less than two Unitholders present in person or by proxy holding or representing one-tenth in value of all the Units for the time being in issue. Subject to the prevailing Listing Rules by the SGX-ST, voting at a meeting shall be by a show of hands unless a poll is (before the declaration of the result of the show of hands) demanded by the chairman of the meeting, or by five or more Unitholders present in person or by proxy, or holding or representing one tenth in value of all the Units represented at the meeting. Unitholders do not have different voting rights on account of the number of votes held by a particular Unitholder. On a show of hands, every Unitholder has one vote. On a poll, every Unitholder has one vote for each Unit of which it is the Unitholder. The Trust Deed does not contain any limitation on non-Singapore resident or foreign Unitholders holding Units or exercising the voting rights with respect to their unitholdings. Neither the Manager nor any of its Associates shall be entitled to vote or be counted as part of a quorum at a meeting convened to consider a matter in respect of which the Manager or any of its Associates has a material interest save for an Ordinary Resolution duly proposed to remove the Manager, in which case, no Unitholder shall be disenfranchised. For so long as the Manager is the manager of SPH REIT, the controlling shareholders of the Manager and of any of its Associates are prohibited from voting or being counted as part of a quorum for any meeting of Unitholders convened to consider a matter in respect of which the relevant controlling shareholders of the Manager and/or of any of its Associates have a material interest. DECLARATION OF UNITHOLDINGS Duty of Manager to Make Disclosure Pursuant to Section 137ZC of the SFA, where the Manager acquires or disposes of interests in Units or debentures or units of debentures of SPH REIT, or the Manager has been notified in writing by, inter alia , a Substantial Unitholder or director or Chief Executive Officer of the Manager pursuant to the unitholdings disclosure requirements of the SFA as set out below, the Manager shall announce such information via the SGXNET and in such form and manner as the Authority may prescribe as soon as practicable and in any case no later than the end of the business day following the day on which the Manager became aware of the acquisition or disposal or received the notice.
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Substantial Unitholdings Pursuant to Sections 135 to 137B of the SFA (read with Section 137U of the SFA), Substantial Unitholders are required to notify the Manager and the Trustee within two business days after becoming aware of their becoming a Substantial Unitholder, any subsequent change in the percentage level of their interest(s) in Units (rounded down to the next whole number) or their ceasing to be a Substantial Unitholder. Directors and Chief Executive Officer of the Manager Pursuant to Section 137Y of the SFA, directors and Chief Executive Officer of the Manager are required to, within two business days, notify the Manager of their acquisition of interest in Units or of changes to the number of Units which they hold or in which they have an interest. A director or chief executive officer of the Manager is deemed to have an interest in Units in the following circumstances: Where the director or chief executive officer is the beneficial owner of a Unit (whether directly through a direct Securities Account (as defined herein) or indirectly through a depository agent or otherwise). Where a body corporate is the beneficial owner of a Unit and the director is entitled to exercise or control the exercise of not less than 20.0% of the votes attached to the voting shares in the body corporate. Where the directors or chief executive officers (i) spouse or (ii) son, adopted son, step-son, daughter, adopted daughter or step-daughter below the age of 21 years has any interest in a Unit. Where the director or chief executive officer, his (i) spouse or (ii) son, adopted son, step-son, daughter, adopted daughter or step-daughter below the age of 21 years: has entered into a contract to purchase a Unit; has a right to have a Unit transferred to any of them or to their order, whether the right is exercisable presently or in the future and whether on the fulfilment of a condition or not; has the right to acquire a Unit under an option, whether the right is exercisable presently or in the future and whether on the fulfilment of a condition or not; or is entitled (otherwise than by reason of any of them having been appointed a proxy or representative to vote at a meeting of Unitholders) to exercise or control the exercise of a right attached to a Unit, not being a Unit of which any of them is the holder.
Where the property subject to a trust consists of or includes a Unit and the director or chief executive officer knows or has reasonable grounds for believing that he has an interest under the trust and the property subject to the trust consists of or includes such Unit.
THE TRUSTEE The trustee of SPH REIT is DBS Trustee Limited. The Trustee is a company incorporated in Singapore and registered as a trust company under the Trust Companies Act, Chapter 336 of Singapore. It is approved to act as a trustee for authorised collective investment schemes under the SFA. As at the date of this Prospectus, the Trustee has a paid-up capital of S$2.5 million. The Trustees registered office is located at 12 Marina Boulevard, Marina Bay Financial Centre Tower 3, Singapore 018982. The Trustee is independent of the Manager.
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Powers, Duties and Obligations of the Trustee The Trustees powers, duties and obligations are set out in the Trust Deed. The powers and duties of the Trustee include: acting as trustee of SPH REIT and, in such capacity, safeguarding the rights and interests of the Unitholders, for example, by satisfying itself that transactions it enters into for and on behalf of SPH REIT with a Related Party of the Manager or SPH REIT are conducted on normal commercial terms, are not prejudicial to the interests of SPH REIT and the Unitholders, and in accordance with all applicable requirements under the Property Funds Appendix and/or the Listing Manual relating to the transaction in question; holding the assets of SPH REIT on trust for the benefit of the Unitholders in accordance with the Trust Deed; and exercising all the powers of a trustee and the powers that are incidental to the ownership of the assets of SPH REIT.
The Trustee has covenanted in the Trust Deed that it will exercise all due diligence and vigilance in carrying out its functions and duties, and in safeguarding the rights and interests of Unitholders. In the exercise of its powers, the Trustee may (on the recommendation of the Manager) and subject to the provisions of the Trust Deed, acquire or dispose of any real or personal property, borrow and encumber any asset. The Trustee may, subject to the provisions of the Trust Deed, appoint and engage: a person or entity to exercise any of its powers or perform its obligations; and any real estate agents or managers, including a Related Party of the Manager, in relation to the management, development, leasing, purchase or sale of any of real estate assets and real estate-related assets.
Subject to the Trust Deed and the Property Funds Appendix, the Manager may direct the Trustee to borrow or raise money or obtain other financial accommodation for the purposes of SPH REIT, both on a secured and unsecured basis. The Trustee must carry out its functions and duties and comply with all the obligations imposed on it as set out in the Trust Deed, the Listing Manual, the SFA, the CIS Code (including the Property Funds Appendix), the Singapore Code on Take-overs and Mergers, any tax ruling and all other relevant laws. It must retain SPH REITs assets, or cause SPH REITs assets to be retained, in safe custody and cause SPH REITs accounts to be audited. Pursuant to the Trust Deed, it can appoint any custodian, joint-custodian or sub-custodian (including, without limitation, any Related Party of the Trustee) in relation to the whole or any part of SPH REITs assets. It can appoint valuers to value the real estate assets and real estate-related assets of SPH REIT. The Trustee is not personally liable to a Unitholder in connection with the office of the Trustee except in respect of its own fraud, gross negligence, wilful default, breach of the Trust Deed or breach of trust. Any liability incurred and any indemnity to be given by the Trustee shall be limited to the assets of SPH REIT over which the Trustee has recourse, provided that the Trustee has acted without fraud, gross negligence, wilful default or breach of the Trust Deed. The Trust Deed contains certain indemnities in favour of the Trustee under which it will be indemnified out of the assets of SPH REIT for liability arising in connection with certain acts or omissions. These indemnities are subject to any applicable laws.
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Retirement and Replacement The Trustee may retire or be replaced under the following circumstances: The Trustee shall not be entitled to retire voluntarily except upon the appointment of a new trustee (such appointment to be made in accordance with the provisions of the Trust Deed). The Trustee may be removed by notice in writing to the Trustee by the Manager: (i) if the Trustee goes into liquidation (except a voluntary liquidation for the purpose of reconstruction or amalgamation upon terms previously approved in writing by the Manager) or if a receiver is appointed over any of its assets or if a judicial manager is appointed in respect of the Trustee; if the Trustee ceases to carry on business;
(ii)
(iii) if the Trustee fails or neglects after reasonable notice from the Manager to carry out or satisfy any material obligation imposed on the Trustee by the Trust Deed; (iv) if an Extraordinary Resolution is passed at a Unitholders meeting duly convened and held in accordance with the provisions of the Trust Deed, and of which not less than 21 days notice has been given to the Trustee and the Manager, shall so decide; or (v) if the MAS directs that the Trustee be removed.
Trustees Fee The Trustees fee shall not exceed 0.1% per annum of the value of the Deposited Property, subject to a minimum of S$15,000 per month, excluding out-of-pocket expenses and GST in accordance with the Trust Deed. The actual fee payable to the Trustee will be determined between the Manager and the Trustee from time to time, and is presently charged on a scaled basis of up to 0.02% per annum of the value of the Deposited Property. The Trustee will also be paid a one-time inception fee as may be agreed between the Trustee and the Manager, subject to a maximum of S$60,000. Any increase in the maximum permitted amount or any change in the structure of the Trustees fee must be approved by an Extraordinary Resolution at a Unitholders meeting duly convened and held in accordance with the provisions of the Trust Deed. TERMINATION OF SPH REIT Under the provisions of the Trust Deed, the duration of SPH REIT shall end on: such date as may be provided under written law; the date on which SPH REIT is terminated by the Manager in such circumstances as set out under the provisions of the Trust Deed as described below; or the date on which SPH REIT is terminated by the Trustee in such circumstances as set out under the provisions of the Trust Deed as described below.
The Manager may in its absolute discretion terminate SPH REIT by giving notice in writing to all Unitholders and the Trustee not less than three months in advance and to the MAS not less than seven days before the termination in any of the following circumstances: if any law shall be passed which renders it illegal or in the opinion of the Manager impracticable or inadvisable to continue SPH REIT;
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if the NAV of the Deposited Property shall be less than S$50.0 million after the end of the first anniversary of the date of the Trust Deed or any time thereafter; or if at any time SPH REIT becomes unlisted after it has been listed.
Subject to the SFA and any other applicable law or regulation, SPH REIT may be terminated by the Trustee by notice in writing in any of the following circumstances: if the Manager shall go into liquidation (except a voluntary liquidation for the purpose of reconstruction or amalgamation upon terms previously approved in writing by the Trustee) or if a receiver is appointed over any of its assets or if a judicial manager is appointed in respect of the Manager or if any encumbrancer shall take possession of any of its assets or if it shall cease business and the Trustee fails to appoint a successor manager in accordance with the provisions of the Trust Deed; if any law shall be passed which renders it illegal or in the opinion of the Trustee impracticable or inadvisable to continue SPH REIT; or if within the period of three months from the date of the Trustee expressing in writing to the Manager the desire to retire, the Manager shall have failed to appoint a new trustee in accordance with the provisions of the Trust Deed.
The decision of the Trustee in any of the events specified above shall be final and binding upon all the parties concerned but the Trustee shall be under no liability on account of any failure to terminate SPH REIT pursuant to the paragraph above or otherwise. The Manager shall accept the decision of the Trustee and relieve the Trustee of any liability to it and hold it harmless from any claims whatsoever on its part for damages or for any other relief. Generally, upon the termination of SPH REIT, the Trustee shall, subject to any authorisations or directions given to it by the Manager or the Unitholders pursuant to the Trust Deed, sell the Deposited Property and repay any borrowings incurred on behalf of SPH REIT in accordance with the Trust Deed (together with any interest accrued but remaining unpaid) as well as all other debts and liabilities in respect of SPH REIT before distributing the balance of the Deposited Property to the Unitholders in accordance with their proportionate interests in SPH REIT.
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CERTAIN AGREEMENTS RELATING TO SPH REIT AND THE PROPERTIES

The agreements discussed in this section are complex documents and the following is a summary only. Investors should refer to the agreements themselves to confirm specific information or for a detailed understanding of SPH REIT. The agreements are available for inspection at the registered office of the Manager at 1000 Toa Payoh North, News Centre, Singapore 318994. RIGHT OF FIRST REFUSAL AGREEMENT SPHL has granted a ROFR dated 9 July 2013 to the Trustee for so long as: the Manager or any of its related corporations remains the manager of SPH REIT; SPHL and/or any of its related corporations, alone or in aggregate, remains as a controlling shareholder of the Manager; and SPHL and/or any of its related corporations, alone or in aggregate, remains as a controlling unitholder of SPH REIT.
For the purposes of the ROFR: a controlling shareholder means (i) a person who holds directly or indirectly 15.0% or more of the nominal amount of all voting shares of the company or (ii) in fact exercises control over the company; a controlling unitholder in relation to a REIT means (i) a person who holds directly or indirectly 15.0% or more of the nominal amount of all voting units in the REIT or (ii) in fact exercises control over the REIT; a Relevant Entity means SPHL or any of its existing or future subsidiaries or future private funds to be managed by SPHL ( SPHL Private Funds ); and a Relevant Asset refers to a completed income-producing real estate located in Asia Pacific which is used primarily for retail purposes. Where such real estate is held by a Relevant Entity through an SPV established solely to own such real estate, the term Relevant Asset shall refer to the shares or, as the case may be, equity interests in that SPV. Where such real estate is co-owned by a Relevant Entity as a tenant-in-common, the term Relevant Asset shall refer to the ownership share of the Relevant Entity in such real estate.
The ROFR shall cover any proposed offer by a Relevant Entity to dispose of any interest in any Relevant Asset which is owned by the Relevant Entity ( Proposed Disposal ). If the Relevant Asset is: owned jointly by a Relevant Entity together with one or more third parties and if consent of any of such third parties to offer the Relevant Asset to SPH REIT is required; or owned by Sponsors subsidiaries or SPHL Private Funds which are not wholly-owned by the Sponsor and whose other shareholder(s) or private fund investor(s) is/are third parties, and if consent from such shareholder(s) or private fund(s) to offer the Relevant Asset to SPH REIT is required,
the Sponsor shall use its best endeavours to obtain the consent of the relevant third party(ies) or other shareholder(s) or private fund investor(s), failing which the ROFR will exclude the disposal of such Relevant Asset.
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For the avoidance of doubt, the grant by any Relevant Entity of a lease (including a long-term lease) over any such Relevant Asset (or any part thereof) for a rent or other service income shall not constitute or be deemed to constitute a Proposed Disposal for the purposes of this paragraph. The ROFR shall: be subject to prior overriding contractual obligations 1 which the Relevant Entity may have in relation to the Relevant Assets and/or the third parties that hold these Relevant Assets; exclude the disposal of any interest in the Relevant Assets by a Relevant Entity to a related corporation of such Relevant Entity pursuant to a reconstruction, amalgamation, restructuring, merger and/or any analogous event or transfer of shares of the Relevant Entity between the shareholders as may be provided in any shareholders agreement; and be subject to the applicable laws, regulations and government policies.
In the event that: (i) the Trustee fails to or does not enter into a binding commitment (in the form of a sale and purchase agreement or a put and call option agreement, whether conditional or unconditional) (the Binding Commitment ) for the purchase of the Relevant Asset within 30 days (or such other period as may be mutually agreed by the Trustee and the Relevant Entity) from the date of the Trustees receipt of the written notice together with the relevant copies of the offer documents and other supporting documentation as may be reasonably available to SPHL (which shall include the indicative price for the Relevant Asset) in connection with the relevant Proposed Offer; the Trustee indicates in writing to the Relevant Entity that it shall not be purchasing the Relevant Asset; or
(ii)
(iii) where the Trustee has entered into a Binding Commitment for the purchase of the Relevant Asset and the proposed acquisition of the Relevant Asset is subsequently aborted by the Trustee, the Trustee shall be deemed to be unable to, or not to have, exercised the Right of First Refusal and the Relevant Entity shall be entitled to dispose of, the Relevant Asset to a third party on terms no more favourable to the third party than those offered by the Relevant Entity to the Trustee provided that if the completion of the disposal of the Relevant Assets by the Relevant Entity does not occur within 12 months from the date of the written notice of the Proposed Disposal, any proposal to dispose of such Relevant Asset after the aforesaid 12-month period shall then remain subject to the ROFR. INFORMATION REGARDING THE TITLE OF THE PROPERTIES Clementi Mall Clementi Mall is a 99-year leasehold property with the lease term commencing on 31 August 2010 pursuant to (i) an Agreement to Lease dated 7 January 2010 (the Agreement to Lease ) and (ii) Lease No. ID/514616Q dated 12 April 2013 made between the HDB and CM Domain. Clementi Mall is located within a mixed development at Clementi Town Centre which includes residential flats and a bus interchange.
The Seletar Mall is not subject to prior overriding contractual obligations.
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The land on which, inter alia , Clementi Mall is located has, pursuant to State Lease No. 26379 dated 10 May 2007 (as supplemented by the Supplemental Lease dated 22 September 2008) (the State Lease ) (referred to in this section as the Land ), been leased by the President of the Republic of Singapore as lessor (the Head Lessor ) in favour of the HDB as lessee for a leasehold term of 110 years from 6 November 2006. State Lease Principal terms of the State Lease include, inter alia , the following special conditions: Unless the prior written permission of the Head Lessor is given, the Land shall not be used otherwise than for a public housing development with a residential GFA not exceeding 56,654.5 m 2, a commercial development with a GFA not exceeding 27,432.0 m 2, an institutional development with a GFA not exceeding 2,125.8 m 2 and carpark not exceeding 438 car lots and 149 motor cycle lots and any such prior written permission shall be given on such conditions as the Head Lessor shall think fit including the right to demand a differential premium as determined by the Head Lessor; If directed by the Head Lessor, HDB shall surrender to the Head Lessor such portions of the Land not used for the purposes specified above at rates equivalent to the compensation payable for such such portions of the Land if they had been acquired under the Land Acquisition Act on the date of the direction; HDB shall not demise, mortgage, charge, assign, sublet, underlet or part with possession of the Land in whole or in part without prior written consent of the Head Lessor, except that the consent of the Head Lessor is not required for a mortgage or charge of part or whole of the Land to any bank licensed under the Banking Act or to any finance company licensed under the Finance Companies Act; Subject to the special condition below, the HDB shall on the expiry or earlier determination of the term granted by the Head Lease, yield up to the Head Lessor without charge the Land together with all buildings, structures and appurtenances thereon in good and tenantable condition and state of repair and in clean and sanitary order and condition; Immediately prior to the expiry or earlier determination of the term granted by the State Lease, the HDB shall if so required by the Head Lessor, at the HDBs own costs and expenses, remove all buildings, structures, alterations, additions, structural changes and improvements and all other works built or carried out on, under or within the Land, and in such case to restore the Land to its state as at the commencement of the term granted by the State Lease, in default of which the Head Lessor may, without prejudice to the Head Lessors other rights, proceed to do the same and all costs and expenses incurred by the Head Lessor shall be recoverable from the HDB; HDB is required to maintain and keep the Land and all buildings located at the Land in good and tenantable state of repair and condition; If the HDB shall in any respect fail to perform or observe the terms and conditions of the State Lease or any of them, then the Collector of Land Revenue or any officer authorised by him in writing shall in the name of the Head Lessor be at liberty to re-enter upon and take possession of the Land or any part thereof in the name of the whole and all buildings, crops and plants thereon without making to the HDB or any person claiming under it any compensation or allowance in respect thereof and the State Lease shall thereupon cease and terminate;
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HDB must purchase any additional State land or surrender part of the Land at the same rate as offered for the alienation if the area offered based on the pre-computation survey is found to be different from the area determined by final survey except where the difference in area does not exceed 1.0% of the area offered; and The burden of the covenants and conditions in the State Lease shall run with the Land.
Clementi Mall is affected by the following Gazettes: Gazette No. 960 dated 15 March 1985 where notice was given that the maps prepared by the Mass Rapid Transit Corporation ( Corporation ) for the MRT route from Tiong Bahru Station to Clementi Station and the MRT route from Bishan Station to Yio Chu Kang Station have been deposited with the Chief Planner, Planning Department, Singapore. The areas set forth in these maps are the areas within which land may be acquired or rights in, under or over land may be exercised by the Corporation for the purposes of and incidental to any railway. Gazette No. 3100 dated 6 November 2001 where notice was given that the maps prepared by the LTA relating to the MRT station at Clementi on, under or over the physical parent lot of the land on which Clementi Mall is situated have been deposited with the Chief Planner, Urban Redevelopment Authority. The areas set forth in these maps are the areas within which land may be acquired or rights in, under or over land may be exercised by the LTA for the purposes of and incidental to any railway. Gazette No. 3623 dated 23 October 1988 where notice was given that the maps prepared by the Corporation for the MRT route from Clementi Station to Lakeside Station and from Yio Chu Kang Station to Yishun Station have been deposited with the Chief Planner, Planning Department, Singapore. The areas set forth in these maps are the areas within which land may be acquired or rights in, under or over land may be exercised by the Corporation for the purposes of and incidental to any railway. Gazette No. S52 dated 8 March 1988 where notice was given that the Corporation or any person authorised by the Corporation may, at any reasonable time and for the purposes of and incidental to the operation of the railway, enter upon the railway area in the lands described in the First Schedule of the said Gazette ( Railway Lands ) and exercise the following rights: (i) uninterrupted right to pass and repass with trains along any railway tunnels constructed under any of the Railway Lands and along any railway viaduct constructed above any of such Railway Lands, for the purpose of the carriage of passengers by train and for all purposes necessary and incidental thereto; right of uninterrupted passage without vehicles for the purpose of access and regress to and from any railway premises constructed on, above or under any of the Railway Lands or any other land adjoining thereto; and
(ii)
(iii) right at all times to have any structure constructed by the Corporation on, above or under the Railway Lands for the operation of the MRT system supported, upheld and maintained by the soil and subsoil of such Railway Lands; Clementi Mall is also affected by railway safety line, railway protection line, railway 1st reserve line and land within railway safety zone. Given Clementi Malls proximity to the MRT railway, SPH REIT will not be allowed to carry out any restricted activity within six metres of the railway and any person contravening such restriction shall be guilty of an offence. However, the Manager does not believe that these reserve lines are indicative of future acquisitions for a future railway line for the MRT system. The Manager is of the view that these reserves are for the purpose of ensuring the 176
protection of the existing railway infrastructure located in the vicinity of the mixed development as there is the existing Clementi MRT station in the vicinity of mixed development in which Clementi Mall is located. Particulars & Conditions of Tender Pursuant to Particulars & Conditions of Tender (the Conditions of Tender ) for proposed commercial space within mixed development at Clementi Town Centre comprising residential flats, podium block, bus interchange and basement (the Mixed Development ), HDB invited tenders for the purchase of a 99-year leasehold interest in the stratum of commercial space comprising the stratum of airspace and the stratum of subterranean space in the Mixed Development for commercial use as a commercial mall. The Conditions of Tender provide that HDB shall at the cost and expense of the successful tenderer engage a surveyor to carry out the final survey of the area of Clementi Mall as specified in the Conditions of Tender. For the avoidance of doubt, the said area to be surveyed means the commercial GFA and the additional institutional space. If the difference between the said area and the final surveyed area exceeds 3.0% of the said area, the successful tenderer shall, if so required by HDB in its absolute discretion, purchase the full area in excess of the said area at the price based on the tender price on a pro rata basis. If the deficiency between the said area and the final surveyed area is greater than 3.0% of the said area, HDB shall pay to the successful tenderer the shortfall in the area at the price based on the tender price on a pro rata basis. The Manager has obtained confirmation from HDB that the final survey of Clementi Mall has been completed and that CM Domain (as lessee) will not be required by HDB to purchase any excess of the said area pursuant to the Conditions of Tender. The commercial GFA of Clementi Mall specified in the Conditions of Tender is a maximum of 25,000 sq m and the additional institutional GFA of Clementi Mall specified in the Conditions of Tender is 1,975.70 sq m (approximately). The Conditions of Tender require the successful tenderer to take reasonable steps to ensure that Clementi Mall is fully operational for business and commercial activities within 12 months from 31 August 2010. The HDB has also reserved the right to re-define in any way it deems fit the boundary of Clementi Mall and the successful tenderer shall be bound with full notice and knowledge of any re-defined boundary as may be declared or notified to it in a written notice by HDB and shall be taken to have accepted any re-defined boundary of Clementi Mall. The Manager has obtained confirmation from HDB that as the strata title plan for Clementi Mall has been approved by the Chief Surveyor, there will be no further re-defining of the boundaries of Clementi Mall.
CM Domain was the successful tenderer and pursuant thereto, HDB and CM Domain have entered into the Agreement to Lease and Clementi Mall Lease in relation to the lease of Clementi Mall to CM Domain (the Lessee ) for a leasehold term of 99 years commencing on 31 August 2010 (the CM Lease Term ). HDB has, through their solicitors, M/s Wee Swee Teow & Co, informed that HDB has obtained the necessary approval for HDB to lease Clementi Mall to CM Domain for the CM Lease Term.
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Agreement to Lease Principal terms of the Agreement to Lease relating to the sale of a 99-year leasehold interest in Clementi Mall include, inter alia , the following: The yearly rent payable by the Purchaser under the Agreement to Lease is S$12.00; As Clementi Mall forms part of the Mixed Development, it is sold subject to various easement rights 1 and privileges in favour of HDB, the Ministry of Transport, the LTA, their respective successors and assigns and the owners and occupiers of the bus interchange component of the Mixed Development and/or persons licensed or authorised by them, the Town Council, the owners and occupiers of the residential component of the Mixed Development and their respective successors and assigns, and the Purchaser is required to execute at their request assurance(s) containing such easement rights and privileges in favour of the foregoing parties 2; The Purchaser is required to use the commercial GFA not exceeding 25,000 square metres for commercial use and to let out the institutional GFA of approximately 1,975.70 sq m to the National Library Board for use as a community library. The Purchaser is required to provide certain items set out in the Agreement to Lease for the National Library Board; The Purchaser is required to provide at its own cost and expense certain items (e.g. central antenna television system, automated car parking system etc.) for Clementi Mall as set out in an appendix to the Agreement to Lease and HDB is entitled to amend, add or delete any or all of the items in such appendix; The Purchaser is required to negotiate in good faith with the National Library Board, the terms of the tenancy for the community library, such tenancy to include certain terms (e.g. renewal term, supply of air-conditioning, provision of basic lighting etc.) as well as the provision of certain items (e.g. tv antenna, public address system, book drops etc.) specified in an appendix to the Agreement to Lease and such other terms that the National Library Board may require. The rent payable by the National Library Board is to be agreed by the parties and failing agreement to be determined by an appointed valuer; The Purchaser is required to let out the institutional space for use as a community library and not for any other purpose except when (i) the Purchaser and the National Library Board do not reach agreement on the tenancy terms notwithstanding that negotiations were carried out in good faith, or (ii) the tenancy to the National Library Board does not take place, is prematurely terminated or has expired and the National Library Board does not renew. Any such other use nevertheless requires HDBs consent thereto. Where the institutional space is not used as a community library, the Purchaser must use such space for civic and community institution as approved by the Urban Redevelopment Authority and HDB; Where there is any approval for the change of the approved use for Clementi Mall specified in the Agreement to Lease, differential premium as determined by HDB or other competent authorities may be payable;
1 2
These are generally rights granted to third parties such as rights for access, support, passage of water, gas and electricity, to and from a property. In the event that the Purchaser is required to execute such assurance(s) containing such easement rights and privileges in favour of the abovementioned parties, SPH REIT will then be required to extend the relevant easement rights which are stated in the Clementi Mall Lease to be for the benefit of the various identified third parties therein, such as the Town Council, the Ministry of Transport and the owners and occupiers of the residential flats and other premises in the Mixed Development.
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Although the Certificate of Statutory Completion for Clementi Mall has been obtained, the HDB must still obtain the Certificate of Statutory Completion for the rest of the Mixed Development. The rest of the Mixed Development comprises two blocks of HDB residential flats (388 units) as well as a bus interchange. Clementi Mall forms part of the Mixed Development and is located on the lower levels of the Mixed Development with the HDB flats located above Clementi Mall. The Purchaser is to indemnify HDB for losses, damages, costs and expenses if HDB determines in its absolute discretion that the Purchasers act or default has caused a delay in such issuance of the Certificate of Statutory Completion 1; Save for short term tenancies not exceeding six years or such other term as HDB allows, there is to be no assignment, transfer, demise, mortgage or parting with the benefit of the Agreement to Lease and no assignment, transfer, demise, mortgage charge, subletting or parting with possession of Clementi Mall, save with HDBs prior written consent. HDB is entitled to impose such terms and conditions (including the levy of a fee) for its consent as HDB thinks fit; The Agreement to Lease also contains provisions which the Purchaser is required to comply with if it wishes to carry out alterations, additions or renovation works to Clementi Mall, including the requirement to seek HDBs consent; Notwithstanding completion, the Agreement to Lease obliges the Purchaser to observe and perform the terms of the Conditions of Tender, the Agreement to Lease and the Clementi Mall Lease insofar as they have not been fulfilled; The Purchaser shall not without HDBs prior written consent, amalgamate or merge with any other company, corporation, firm or any other party or go into voluntary liquidation or reconstruction or do any acts or things that will cause compulsory winding up proceedings to be taken against it; The Purchaser shall not without HDBs prior written consent, sell, transfer, assign, exchange or allot any of its companys shares to any other company, corporation, firm or party and if such consent is granted, it shall be subject to terms and conditions as HDB thinks fit; The HDB has also reserved the right to re-define in any way it deems fit in its absolute discretion any boundary of Clementi Mall without prior notice. The Manager has obtained confirmation from HDB that as the strata title plan for Clementi Mall has been approved by the Chief Surveyor, there will be no further re-defining of the boundaries of Clementi Mall; and In the event the Purchaser enters into any composition or arrangement with or for the benefit of its creditors, a resolution is passed for its winding up, a receiver is appointed, any execution or distress is levied on its goods, the Purchaser (without HDBs consent) amalgamates or merges with another company, corporation, firm or party or goes into voluntary liquidation or reconstruction or causes compulsory winding up proceedings to be taken against it, the Purchaser (without HDBs consent) sells, transfers, assigns, exchanges or allots its shares to another company, corporation, firm or party, or the Purchaser does not comply with the terms or stipulations of the Agreement to Lease, HDB is entitled, by the giving of the written notice, to re-enter and resume possession of Clementi Mall and all monies paid to HDB for rents and/or the tender price shall be forfeited and belong to HDB.
The above provision will require the Manager or the Property Manager (consistent with the current practice of CM Domain) to work with HDB and consultants in relation to any proposed renovation or other major alteration or addition works at Clementi Mall (in connection with the Mixed Development or any other premises in the Mixed Development).
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Clementi Mall and all materials on it will belong to HDB and HDB is not obliged to pay any compensation and the foregoing is without prejudice to HDBs rights and remedies for antecedent breaches. Clementi Mall Lease Principal terms of the Clementi Mall Lease include, inter alia , the following: The annual rent payable by the Lessee under the Clementi Mall Lease is Dollars Twelve ($12.00) but it is subject to review in such manner and for such amount by HDB in its absolute discretion; The Lessee must pay all charges for the supply of water, gas, sanitation, electricity, light, power or telecommunication and other utilities or services in respect of Clementi Mall; All rates, taxes, charges, assessments, outgoings and impositions in respect of Clementi Mall are to be borne by the Lessee. This includes any increase in property tax, which may be imposed whether by way of an increase in the annual value or an increase in the rate per centum, in the proportion attributable to Clementi Mall as determined by HDB in its absolute discretion; The Lessee is required to pay monthly service and conservancy charges and GST thereon to HDB or the Town Council for the cleansing and maintenance of common staircases in the Mixed Development; The Lessee is required to forthwith in the joint names of the Lessee and HDB to insure and keep insured Clementi Mall against loss or damage by fire, lightning and such other risks the HDB may from time to time require, to the full cost of reinstatement thereof (including all fees and charges required under any statutes, legislations, bye-laws or regulations and all professional fees) and to pay all premiums necessary for that purpose and if Clementi Mall or any part thereof shall be destroyed or damaged, forthwith to cause all monies received by virtue of such insurance to be laid out in rebuilding and reinstating Clementi Mall in accordance with the plans and specifications approved by HDB or the competent authority and in case the monies so received under such insurance shall be insufficient for the aforesaid rebuilding or reinstating of Clementi Mall, the Lessee shall make up the deficiency out of its own monies; The Lessee is required to procure (i) a comprehensive public liability insurance for such amounts as HDB may from time to time prescribe in its absolute discretion in respect of any one occurrence and with no limit or restriction on the number of claims that may be made or occurrences for which claims may be made, and (ii) such other insurance policy or policies which HDB may reasonably deem necessary; If the Lessee shall at any time fail to keep Clementi Mall insured as aforesaid or purchase the insurances as required, HDB may (but is not obliged to do so) do so and any monies expended by it shall be repayable by the Lessee on demand and recoverable forthwith as a debt from the Lessee; The Lessee is required to comply with its obligations under the Clementi Mall Lease to repair and maintain Clementi Mall and the interior and exterior of Clementi Mall (including walls, columns, pipes, wiring, apparatus and installations etc.); At the end or sooner determination of the CM Lease Term, the Lessee is to yield up to HDB without compensation Clementi Mall together with all structures and fixtures therein in good and tenantable repair and condition and where the Lessee receives written notice from HDB, whether before on or after determination of the CM Lease Term, to demolish or remove all 180
or any identified structures, fixtures, alterations, additions or structural changes, improvements or any other works made on or to Clementi Mall and restore Clementi Mall to a good and tenantable condition within such time as may be specified by HDB, failing which HDB may proceed to do so and recover the costs and expenses from the Lessee; The Lessee is to permit HDB and its servants, agents and persons authorised by HDB to have access to Clementi Mall, to view and examine the condition and state of repair of Clementi Mall and the Mixed Development and to allow them to carry out repairs or works therein or to execute any repairs or works to or in the connection with the Mixed Development, Clementi Mall or any other premises in the Mixed Development; The Lessee is to, at its own expense, comply with all applicable statutes, legislation, bye-laws, orders or regulations relating to the use or maintenance of Clementi Mall or otherwise and whether they are to be complied with by HDB, the Lessee or any occupier and to indemnify and keep HDB indemnified against all actions, proceedings, costs, expenses, claims, liabilities, losses and demand in respect of any act matter or thing in contravention of the said provisions or requirements; The Lessee is to be responsible for any loss, injury to any person or damage to Clementi Mall or the Mixed Development or any part thereof and any movable and immovable property arising directly or indirectly out of or in connection with the occupation or use of Clementi Mall or by any act neglect or default of the Lessee, its occupiers, licensees, invitees, servants, contractors or agents and to fully indemnify and to keep HDB fully indemnified against all losses damage expenses and actions arising out of or in respect of such loss injury or damage; The Lessee must not without the prior written consent of HDB, make any alteration or addition to Clementi Mall or the Mixed Development or any part thereof or to any fixtures and fittings installed or to be installed (whether temporary or permanent) by the Lessee; The Clementi Mall Lease also contains provisions which the Lessee is required to comply with if it wishes to carry out alterations, additions or renovation works to Clementi Mall, including the requirement to seek HDBs consent, The Lessee is not to hold HDB liable or to make any claim against HDB in respect of any interruption of services, any act omission or negligence of any attendant or other servant or employee of HDB, any damage injury or loss arising out of any breakage or leakage of or defects in the piping, wiring or other apparatus used in or about Clementi Mall and/or the Mixed Development, and/or loss injury or damage that may be suffered by the Lessee its occupiers, licensees, invitees, servants, contractors or agents resulting from any defects inherent or otherwise in Clementi Mall and the Mixed Development and to fully indemnify and keep HDB fully indemnified against all losses, damages, expenses and actions arising out of or in respect of such loss, injury or damage; The Lessee must not do, permit or omit the doing of anything which may delay or prevent the issuance of the Certificate of Statutory Completion in respect of Clementi Mall and/or the Mixed Development or any part thereof. In the event the said Certificate of Statutory Completion is not obtained due to the act or default of the Lessee as determined by HDB, the Lessee must indemnify HDB for all losses, damages, costs and expenses whatsoever including legal costs and expenses arising from such act or default; The Lessee must not do, permit or omit the doing of anything which affects the structure or safety of Clementi Mall and/or the Mixed Development;
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The Lessee must not without the prior written consent of HDB use or permit Clementi Mall in respect of the GFA not exceeding 25,000 sq m to be used otherwise than for commercial purpose and the additional GFA not exceeding 1,975.70 sq m to be used other than as a community library by the National Library Board or such other civic and community institution use in accordance with the approval of HDB and the competent authority appointed under the Planning Act. HDB is entitled to impose a fee and/or any terms or conditions for the grant of consent; Except for short term tenancies of individual units not exceeding a term of six years or such other term as HDB may approve or determine from to time to time, the Lessee shall not assign, transfer, demise, mortgage, charge, sublet or part with the possession of Clementi Mall or any part thereof or subdivide Clementi Mall or any part thereof without the prior written consent of HDB. HDB is entitled to impose a fee and/or any terms or conditions for the grant of consent; No subdivision (whether by way of strata subdivision or otherwise) is permitted without HDBs consent; The Lessee must perform and observe all the terms and conditions of the Conditions of Tender and the Agreement to Lease insofar as the same have not been observed or performed by the Lessee; The Lessee must perform and observe all the obligations in respect of Clementi Mall which HDB may be liable to perform or observe during the CM Lease Term by any direction or requirement of any relevant competent authorities; The Lessee is to indemnify HDB in respect of all claims, expenses or demands by or losses, damages, injuries, to any person or to the Mixed Development or any part thereof and any movable and immovable property arising or which may arise directly or indirectly out of or in connection with the use and occupation of Clementi Mall or any act, neglect or default of the Lessee, its occupiers, invitees, servants, contractors or agents; The Lessee must grant to HDB, its servants and agents (where required by HDB), access to Clementi Mall to facilitate the rectification of any breaches on the part of the Lessee; Lots 70002K, 70003N, 70004X, 70005L, 70006C and 70007M of Mukim 5 (the State Lot ) located in the vicinity of Clementi Mall were being developed initially for a bus interchange. The Clementi Mall Lease provides that Clementi Mall is leased subject to the rights reserved in favour of HDB, the Ministry of Transport, the LTA, their respective successors and assigns, the owners and occupiers for the time being of the State Lot and persons authorized by them or given permission by them, to exercise without any charge, payment, hindrance or restriction (i) the right of support and protection of the State Lot from Clementi Mall and any structural elements including columns and beams thereon owned by the Lessee (the Lessees Structural Elements ) for the support, upholding and maintaining of the State Lot and the structures at the State Lot, (ii) the right to install cables, pipes, ducts, wires, sewers and channels in, on, under and over Clementi Mall and to maintain and use them for the passage, provision and running of air, drainage, gas, garbage, artificially heated or cooled air, water, electricity, telecommunications, data and other utilities and services (including telephone, radio and television services) to and from Clementi Mall, (iii) the right to install and place any electrical and mechanical plant, system and equipment including appurtenant cables, pipes and ducts owned or to be owned by HDB, the Ministry of Transport, the LTA, their respective successors and assigns, the owners and occupiers for the time being of the State Lot and persons authorised by them or given permission by them (the Electrical and Mechanical Plant and System ) on or in any designated part of Clementi Mall for purposes of the operation of the facility, building or development on the State Lot which is initially the bus interchange (the Stratum ), (iv) the right at all times by the owners and occupiers for 182
the time being of the State Lot and by the members of the public by day or night to pass and re-pass along such portion of Clementi Mall as would be necessary for reasonable access, to and from the Stratum, to and from the escalators, lifts, stairs, stairways and the observation lift and service lift on the second storey of Clementi Mall and lift lobbies for ingress and egress, and to and from HDBs bin centre for use, maintenance, repair or renewal, and (v) the right at all times to enter onto any part of Clementi Mall with or without workmen and others and with or without materials and specialist services and with or without vehicles onto any part of Clementi Mall to: (a) inspect, clean, repair, maintain, renew, remove, replace, upgrade, paint and restore the walls, entrances and exits of any of the escalators, lifts, fire escapes, stairs, stairways, lift lobbies and other structures sited or to be sited within, under or above Clementi Mall or along the boundary of Clementi Mall and the State Lot or leading to and from the State Lot and belonging to HDB, the Ministry of Transport, the LTA, their respective successors and assigns, the owners and occupiers for the time being of the State Lot and persons authorised by them or given permission by them; inspect and where necessary, repair, maintain or upgrade the Lessees Structural Elements at the cost and expense of the Lessee; inspect, clean, repair, maintain, renew, upgrade, remove and replace the cables, pipes, ducts, wires, sewers and channels belonging to HDB, the Ministry of Transport, the LTA, their respective successors and assigns, the owners and occupiers for the time being of the State Lot and persons authorised by them or given permission by them; and inspect, repair, maintain, renew, upgrade or replace any of the said Electrical and Mechanical Plant and System.
(b)
(c)
(d)
The Lessee for itself and its successors and assigns and for the benefit of the whole of the State Lot or any part thereof (and so that the covenants and conditions shall as far as practicable be enforceable by HDB, the Ministry of Transport, the LTA or by their respective successor and assigns or the owners and occupiers for the time being of the State Lot or any part thereof) covenants, inter alia , that it shall: (i) at its own cost and expense maintain in good order and condition and keep open and unobstructed for the use of the public, without any charge, payment, hindrance or restriction (a) all corridors, staircases, passages, walkways, ramps, escalators, elevators, the linkbridge on the third storey of Clementi Mall connecting to the Clementi MRT station and other forms and means of access in or on Clementi Mall leading to and from the Stratum during the operating hours of the businesses in Clementi Mall, (b) a passageway from the bus-stop at Commonwealth Avenue West to the main entrance of the bus interchange strictly for twenty-four (24) hours public access, and (c) a covered thoroughfare on the first storey strictly for twenty-four (24) hours public access and for no other purpose; grant free and unobstructed right to use observation lift and service lift stopping at the second storey of Clementi Mall to HDB, Ministry of Transport, LTA or persons authorised or given permission by any of them during the operating hours of the commercial businesses in Clementi Mall;
(ii)
(iii) not make or permit any structural alterations, modifications or additions to Clementi Mall and anything whatsoever thereon, therein or otherwise that has the direct or indirect effect of adversely affecting the columns, foundations, beams, walls and other structures that support, uphold and maintain the State Lot and the structures on the State Lot (the Structural Elements );
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(iv) not damage, deface or do or permit or suffer anything (whether temporary or permanent) that (a) impairs the structural integrity of the Stratum, the structures on the State Lot and Structural Elements that has the direct or indirect effect of withdrawing or lessening the shelter, support or protection given or afforded to the State Lot by Clementi Mall and anything whatsoever thereon, therein or otherwise, or (b) obstructs or damages the said Electrical and Mechanical Plant and System; (v) not do or permit or suffer to be done any works on or which may affect the Structural Elements and the said Electrical and Mechanical Plant and System without the prior written consent of HDB, the Ministry of Transport, the LTA, their successors and assigns, the owners and occupiers for the time being of the State Lot and persons authorized by them or given permission by them;
(vi) not obstruct any part of Clementi Mall over which rights of way have been reserved to HDB, the Ministry of Transport, the LTA, their respective successors and assigns and the owners and occupiers for the time being of the State Lot and persons authorised by them or given permission by them and members of the public; (vii) not do or permit or suffer to be done anything on Clementi Mall which in the opinion of HDB or the Ministry of Transport or LTA, has the direct or indirect effect of damaging or destroying the Stratum or obstructing or interfering with the operations of the Stratum; and (viii) not transfer, assign, demise, sublet or dispose of Clementi Mall or any part thereof without procuring from the transferee, assignee, sub-lessee or other person a covenant to observe and perform the covenants contained in the Clementi Mall Lease, including the present covenants for the benefit of HDB, the Ministry of Transport, the LTA, their respective successors and assigns, the owners and occupiers for the time being of the State Lot and persons authorised by them or given permission by them. As a result of this provision which is set forth in Clause 4.4(k) of the Clementi Mall Lease, the provisions of the Clementi Mall Sale Agreement referred to below requires the Trustee to enter into a deed of undertaking in favour of HDB, the Ministry of Transport, the LTA, their respective successors and assigns, the owners and occupiers for the time being of the State Lot and persons authorised by them or given permission by them, to observe and perform the relevant covenants in the Clementi Mall Lease; The Lessee for itself and its successors and assigns (and for the benefit of the Mixed Development including the residential flats, common property and other premises in the Mixed Development), and so that the easements and rights shall as far as practicable be enforceable by HDB, the relevant Town Council ( Town Council ), their successors and assigns, the owners and occupiers for the time being of the residential flats, common property and other premises in the Mixed Development) grants to HDB, the Town Council, their successors and assigns, the owners and occupiers for the time being of the residential flats, common property and other premises in the Mixed Development and persons authorised by them or given permission by them and members of the public, easements and rights which include, inter alia , the following: (i) the right of support and protection of the residential flats, common property and other premises in the Mixed Development and every part of the Mixed Development from the Property for the purpose of supporting, upholding and maintaining the foregoing; the right, without charge, payment, hindrance or restriction, to enter upon Clementi Mall for the purposes of ingress and egress, all corridors, staircases, passages, walkways, ramps, escalators, elevators, the linkbridge on the third storey of Clementi Mall
(ii)
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connected to the Clementi MRT station and other forms and means of access in or on Clementi Mall leading to common property, the residential flats and other premises in the Mixed Development, during the operating hours of the businesses in Clementi Mall; (iii) the right at all times to enter onto any part of Clementi Mall with or without workmen and others and with or without materials and specialist services and with or without tools and equipment and with or without vehicles onto any part of Clementi Mall: (a) to lay and perpetually retain structures such as columns and beams to support, uphold and maintain the residential flats, common property and other premises in the Mixed Development and every part of the Mixed Development; to construct, develop and complete the residential flats, common property and other premises in the Mixed Development and every part of the Mixed Development; to install, inspect, clean, repair, maintain, renew, remove, replace, paint and restore the walls, entrances, exits, escalators, lifts, fire escapes, staircases, lift lobbies, columns, structural elements and other structures or items whatsoever relating to the residential flats, common property or other premises in the Mixed Development; to install, inspect, clean, repair, maintain, renew, remove and replace cables, pipes, ducts, wires, sewers, channels, electrical and mechanical plant system and equipment relating to the residential flats, common property or other premises in the Mixed Development in, on, under and above Clementi Mall; to maintain and use the said cables, pipes, ducts, wires, sewers, channels, electrical and mechanical plant system and equipment for free and uninterrupted passage, provision and running of water, air, gas, drainage, garbage, sewage, electricity, telecommunications, data and other utilities and services (including telephone, radio and television services) through, to and from Clementi Mall together with the right of exclusive possession of the space occupied by the said cables, pipes, ducts, wires, sewers, channels, electrical and mechanical plant system and equipment; and to install, inspect, clean, repair, maintain, renew, remove, replace and use without any charge, payment, hindrance, or restriction HDBs bin centre serving the residential flats, common property and other premises in the Mixed Development and to collect and remove garbage from the said bin centre.
(b)
(c)
(d)
(e)
(f)
The Lessee for itself and its successors and assigns (and for the benefit of the whole of the Mixed Development, the residential flats, the common property and other premises in the Mixed Development or any part thereof, and so that the rights, covenants and conditions shall as far as practicable be enforceable by HDB, the Town Council, their successors and assigns, the owners and occupiers for the time being of the residential flats, common property and other premises in the Mixed Development) covenants, inter alia , that it shall: (i) at its own cost and expense at all times maintain in good order and condition and keep the same open and unobstructed and without any charge, payment, hindrance or restriction, for the use of HDB, the Town Council, their successors and assigns, the owners and occupiers for the time being of the residential flats, common property and other premises in the Mixed Development and persons authorised by them or given permission by them and members of the public:
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(a)
all arcades, plazas, entrances, corridors, sidewalks, walkways, passages, staircases, ramps, escalators, lifts, driveways, lanes, fire engine access and any other portions of Clementi Mall whatsoever necessary for access through the foregoing areas; and any other forms and means of access in or on Clementi Mall leading to and from the residential flats, common property and other premises in the Mixed Development, during the operating hours of the commercial businesses in Clementi Mall;
(b)
(ii)
not do or make or permit or suffer to be done or made anything including not make or permit or suffer to be made any structural alterations, modifications or additions or otherwise whatsoever that in any way (a) impairs the structural integrity of the residential flats, common property or other premises in the Mixed Development or any part thereof, (b) damages any of the columns, foundations, beams, walls, structural elements and other structures or items whatsoever, (c) has the direct or indirect effect of withdrawing or lessening the shelter or support given or afforded by Clementi Mall and anything whatsoever thereon, therein or otherwise to the residential flats, common property or other premises in the Mixed Development or any part thereof or obstructs or damages the cables, pipes, ducts, wires, sewers, channels, electrical and mechanical plant system and equipment, or any part of the Mixed Development, or (d) adversely affects the passage, provision and running of water, air, gas, drainage, garbage, sewage, electricity, telecommunications, data and other utilities and services (including telephone, radio and television services) to and from the residential flats, common property and other premises in the Mixed Development or any part thereof or that may affect HDB, the Town Council, their successors and assigns, the owners and occupiers for the time being of the residential flats, common property and other premises in the Mixed Development and persons authorized by them or given permission by them including the quiet enjoyment of their respective properties;
(iii) not transfer, assign, demise, sublet or dispose Clementi Mall or any part thereof without procuring from the transferee, assignee, sub-lessee or other person a covenant to observe and perform the covenants contained in the Clementi Mall Lease, including the present covenants for the benefit of HDB, the Town Council, their respective successors and assigns, the owners and occupiers for the time being of the residential flats, common property and other premises in the Mixed Development and persons authorised by them or given permission by them. As a result of this provision which is set forth in Clause 6.6 of the Clementi Mall Lease, the provisions of the Clementi Mall Sale Agreement referred to below requires the Trustee to enter into a deed of undertaking in favour of HDB such deed of undertaking to set forth the Trustees undertakings to observe and perform the covenants in the Clementi Mall Lease and a deed of undertaking in favour of HDB, the Town Council, their respective successors and assigns, the owners and occupiers for the time being of residential flats, common property and other premises in the Mixed Development and persons authorized by them or given permission by them, such deed of undertaking to set forth the Trustees covenant to observe and perform the relevant covenants in the Clementi Mall Lease; (iv) at its own cost and expense maintain the Fire Command Centre and all equipment therein in good order and condition and in compliance with the requirements of the competent authority; (v) paint and maintain any access door in respect of the cables, pipes, ducts, wires, sewers, channels, electrical and mechanical plant system and equipment relating to the residential flats, common property or other premises in the Mixed Development sited in Clementi Mall;
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(vi) maintain the linkbridge on the third storey of Clementi Mall linking the Clementi MRT Station to Clementi Mall; (vii) not obstruct any part of Clementi Mall over which rights of way are reserved to HDB, the Town Council, their successors and assigns, the owners and occupiers for the time being of the residential flats, common property and other premises in the Mixed Development and persons authorised by them or given permission by them and members of the public; and (viii) co-operate and comply at the Lessees cost with all directions of HDB, the Town Council, their successors and assigns and persons authorized by them or given permission by them relating to the construction and maintenance of the Mixed Development or any part thereof; If required by HDB, the Ministry of Transport, the LTA, the Town Council, their successors and assigns and/or the owners and occupiers for the time being of the State Lot, the residential flats, common property and/or other premises in the Mixed Development, the Lessee shall at its own cost and expense execute in favour of HDB, the Ministry of Transport, the LTA, the Town Council, their successors and assigns and/or the owners and occupiers for the time being of the State Lot, the residential flats, common property and/or other premises in the Mixed Development an assurance/such assurances containing the relevant provisions of the Clementi Mall Lease and/or other easements and other rights and restrictive and other covenants in the Clementi Mall Lease which are expressed to be for their benefit in such form as HDB, the Ministry of Transport, the LTA, the Town Council, their successors and assigns and/or the owners and occupiers for the time being of the State Lot, the residential flats, common property and/or other premises in the Mixed Development may require; Notwithstanding anything in the Clementi Mall Lease, the HDB reserves the right to re-define in any way it deems fit in its absolute discretion any boundary of Clementi Mall indicated on any plan including the plan annexed in the First Schedule to the Agreement to Lease at any time without prior notice. The Lessee shall be bound with full notice and knowledge of any re-defined boundary as may be declared or notified to it in a written notice by HDB and shall be taken to have accepted any re-defined boundary of Clementi Mall. The Manager has obtained confirmation from HDB that as the strata title plan for Clementi Mall has been approved by the Chief Surveyor, there will be no further re-defining of the boundaries of Clementi Mall; and HDB has the right to impose penalties and to re-enter upon Clementi Mall or any part thereof in the name of the whole in which case the CM Lease Term shall end (without prejudice to any right of action or remedy of HDB in respect of any antecedent breach by the Lessee of any of the covenants contained in the Clementi Mall Lease) if: (i) the rent or any part thereof shall be in arrears for fourteen (14) days after the due date thereof (whether the same shall have been formally demanded or not); or any of the covenants on the part of the Lessee contained in the Clementi Mall Lease shall not be performed or observed; or
(ii)
(iii) the Lessee or other person or persons in whom for the time being the CM Lease Term shall be vested shall become bankrupt or has a winding up order made against it or is in receivership or makes any assignment for the benefit of its or their creditors or enters into an agreement or makes any arrangement with its or their creditors for liquidation of its or their debts by composition or otherwise.
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Paragon The land on which Paragon is erected consists of three land lots, namely Lots 1139C, 981T and 1273N all of Town Subdivision 27. O290 currently holds the estate in fee simple 1 in each of the aforesaid land lots. There is a mortgage registered in favour of DBS Bank Ltd. in respect of Paragon which will be discharged on completion. Lot 1139C of Town Subdivision 27 was created by the amalgamation of two separate adjoining land lots 2. Lot 1139C is held under Grants in Fee Simple Nos. 34 and 49 (together the Grants in Fee Simple ). Subsequently, in consideration of a sum of S$19,333,930 paid by O290, the President of the Republic of Singapore ( Grantor ) further granted a freehold title in respect of Lots 981T and 1273N, both of Town Subdivision 27 to O290 subject to the terms of the Grant in Fee Simple No. 2967 dated 31 March 2008 ( Further Grant in Fee Simple ). The Further Grant in Fee Simple contains the following special conditions: O290 shall use Lots 981T and 1273N, both of Town Subdivision 27 together with Lot 1139C of Town Subdivision 27 for the purpose of commercial development with a gross plot ratio not exceeding 5.39 only; Unless the prior written permission of the Grantor is given, Lots 981T and 1273N, both of Town Subdivision 27 shall not be used otherwise than as provided in the special condition set out above. Any such prior written permission shall be given on such conditions as the Grantor shall think fit. Among other things, the Grantor shall have the right to demand a differential premium, as determined by the Grantor in its absolute discretion, in respect of any request by O290 for a change of use or increase in gross plot ratio or change of density or floor area; and O290 shall undertake to purchase any additional State land or surrender part of Lots 981T and 1273N, both of Town Subdivision 27 at the same rate as offered for the alienation if the area offered (namely, 561.0 sq m in respect of Lot 981T of Town Subdivision 27 and 156.4 sq m in respect of Lot 1273N of Town Subdivision 27) is found to be different from the area determined by final survey except where the difference in area is not exceeding 1.0% of the area offered.
Temporary Occupation Licences Parts of the structure within Paragon are recorded as having encroached upon adjoining State land and O290 has been granted the following TOLs by the State: a TOL for the extended portion of the coach bays aluminium canopy (with an area of 22.91 sq m) over the adjoining State Land (Road) Lot 1274X TS 27; a TOL for the use of part of a canopy and outdoor refreshment area of 23.37 sq m on State Land Lot 1274PT TS 27; and a TOL for wayleave usage over the following State Land Lots, namely TS27-01129P, TS27-01274X, TS27-00479L and others.
The licence fees payable are not substantial. O290 is currently paying annual fees of S$3,300, S$9,564 and S$385 for the grant of the TOLs. Subject to the State issuing fresh TOLs to SPH REIT, licence fees for the TOL areas will be borne by SPH REIT on and after completion. The TOLs
1 2 The term estate in fee simple refers to a freehold title. Lots 906X and 982A both of Town Subdivision 27 were amalgamated to form Lot 1139C of Town Subdivision 27.
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are contractual licences which only grant a contractual right to the licensee thereunder to the use of the areas licensed under such TOLs. The TOL areas do not form part of Paragon. For the foregoing reasons, the value of the TOL areas is not included in the valuation for Paragon. In the event that the State does not agree to issue fresh TOLs to SPH REIT over these areas, the costs of removal of the fittings and installations encroaching over the TOL areas shall be borne by O290, as provided under the terms of the Paragon Sale Agreement. Following completion, SPH REIT will submit its application for fresh TOLs in respect of the TOL areas to the Singapore Land Authority and SPH REIT should be able to receive the feedback from the Singapore Land Authority in approximately three months. DESCRIPTION OF THE AGREEMENTS TO ACQUIRE THE PROPERTIES Clementi Mall Clementi Mall Call Option Agreement Principal terms of the Clementi Mall Call Option Agreement include, inter alia , the following: CM Domain and the Trustee, as trustee of SPH REIT, have entered into a call option agreement dated 9 July 2013 (the Clementi Mall Call Option Agreement ) pursuant to which the Trustee was granted the right to require CM Domain to enter into a sale and purchase agreement (the Clementi Mall Sale Agreement ) for the sale of Clementi Mall together with the plant and equipment to the Trustee at the purchase price of S$570,500,000. The call option may only be exercised if the Trustee has also concurrently exercised the call option for Paragon referred to below; If, after the date of the Clementi Mall Call Option Agreement and prior to the exercise of the call option in respect of Clementi Mall, Clementi Mall and/or the plant and equipment or any part thereof is damaged, and such damage constitutes a Material Damage, the Trustee is not entitled to exercise the call option in respect of Clementi Mall unless the Trustee confirms at the time of its exercise of such call option that it is prepared to bear all costs for the reinstatement of Clementi Mall and/or the plant and equipment and without seeking any compensation or contribution for such reinstatement from CM Domain. Material Damage means that there is damage to any part of Clementi Mall and/or any part of the plant and equipment which causes, or will cause, results or will result in, the amount of the aggregate loss of net property income of Clementi Mall over the 12-month period following the completion date to exceed S$7,000,000; If Clementi Mall and/or the plant and equipment or any part thereof is damaged, but such damage does not constitute a Material Damage, the Trustee may exercise the call option in respect of Clementi Mall and CM Domain must, unless that damage has been repaired to the reasonable satisfaction of the Trustee before the exercise of the call option in respect of Clementi Mall, at no cost to the Trustee repair that damage as soon as practicable after the exercise of the call option in respect of Clementi Mall to the reasonable satisfaction of the Trustee and the provisions of the Clementi Mall Sale Agreement relating to the carrying out of such works shall apply; CM Domain may enter into new tenancies or licences (i) where the term or period (including any options) would expire on or prior to the completion date, (ii) which are terminable with seven days (or less) notice, or (iii) where CM Domain is legally bound to renew any existing tenancy or licence in accordance with the terms of an existing tenancy or licence agreement provided that in the event of any such renewal (a) CM Domain gives written notice to the Trustee of any exercise of option by the relevant tenant or licensee, (b) provides the Trustee with full details of the renewal terms, and (c) where the rent or licence fee for the renewed term or period is to be agreed with the relevant tenant or licensee or is to be based on 189
prevailing market rent, CM Domain shall ensure that the gross monthly rent or monthly licence fee is not lower than the applicable monthly rent or monthly licence fee specified in an agreed schedule of rent and licence fee rates unless CM Domain has first obtained the Trustees written consent to that rent or licence fee (such consent not to be unreasonably withheld or delayed); and CM Domain must during the period commencing from the date of the Clementi Mall Call Option Agreement and ending on the earlier of (i) the date of expiry of the call option period specified in the Clementi Mall Call Option Agreement, and (ii) the date of the Clementi Mall Sale Agreement, give written notification to the Trustee of the occurrence of certain events specified in the Clementi Mall Call Option Agreement (e.g. if CM Domain becomes aware of the occurrence of any event or of any matter that has arisen in relation to Clementi Mall, which results or is likely to result in any of the warranties set out in Clementi Mall Sale Agreement being unfulfilled, untrue, misleading or incorrect in any respect).
Clementi Mall Sale Agreement The Clementi Mall Sale Agreement will be entered into by CM Domain (as vendor), the Trustee (as purchaser) and Times Properties (as guarantor). CM Domain has agreed that when the call option under the Clementi Mall Call Option Agreement is exercised, CM Domain will enter into the Clementi Mall Sale Agreement as well as the Deed of Income Support on the same day. It is intended that the call option will be exercised by the Trustee on the Listing Date and that completion of the sale and purchase of Clementi Mall will also take place on the Listing Date. Principal terms of the Clementi Mall Sale Agreement include, inter alia , the following: The purchase price of Clementi Mall together with the plant and equipment is S$570,500,000; The purchase price is to be paid by the allotment and issue of 336,065,167 Units (the Consideration Units ) with the balance of the purchase price paid in cash to CM Domain; The Consideration Units are to be issued to the following parties nominated by CM Domain, such Consideration Units to be issued in the following proportions: 141,147,417 Consideration Units in favour of Times Properties; 60,491,750 Consideration Units in favour of TPR; 67,213,000 Consideration Units in favour of NTUC Fairprice Co-operative Ltd; and 67,213,000 Consideration Units in favour of NTUC Income Insurance Co-operative Ltd; Clementi Mall will be sold subject to (i) the terms, covenants and conditions set forth in, and incorporated into, the Conditions of Tender, the Agreement to Lease and the Clementi Mall Lease, and (ii) all rights of way and other rights and easements (including, without limitation, the easement and other rights referred to in the Conditions of Tender, the Agreement to Lease and the Clementi Mall Lease) affecting Clementi Mall. On completion and in addition to the leasehold title to Clementi Mall that will be transferred to the Trustee, CM Domain and the Trustee will execute a deed of assignment in respect of the Agreement to Lease whereby CM Domain will assign to the Trustee, CM Domains rights, title, interest and benefits under the Agreement to Lease, all rights and remedies for enforcing any or all of the terms and conditions contained therein which are to be observed and performed by HDB and together with the full benefit and right to all moneys paid by CM Domain to HDB under the Agreement to Lease. The deed of assignment in respect of the Agreement to Lease will also contain the 190
Trustees covenant to observe, perform, take over, discharge and fulfil all obligations of CM Domain under the Agreement to Lease in respect of the period from and including completion as well as a covenant by the Trustee to indemnify CM Domain from and against the Trustees breach of the provisions of the Agreement to Lease after completion; Clementi Mall and the plant and equipment are at the risk of CM Domain until completion but the foregoing shall not prejudice or affect the confirmation given by the Trustee under clause 6.1.1 of the Clementi Call Option Agreement, on or before its exercise of the call option, that it is prepared to bear all costs for the reinstatement of any Material Damage that occurred prior to the exercise of the call option. Material Damage means that there is damage to any part of Clementi Mall and/or any part of the plant and equipment which causes, or will cause, results or will result in, the amount of the aggregate loss of net property income of Clementi Mall over the 12-month period following the completion date to exceed S$7,000,000; If there is any Material Damage prior to completion, the Trustee is entitled to either (a) rescind the Clementi Mall Sale Agreement by giving written notice under the Clementi Mall Sale Agreement, or (b) not to rescind the Clementi Mall Sale Agreement on the ground of the occurrence of such Material Damage. In the event there is any Material Damage and the Trustee does not elect to rescind the Clementi Mall Sale Agreement, CM Domain will be under no obligation to repair such Material Damage. Material Damage means that there is damage to any part of Clementi Mall and/or any part of the plant and equipment which causes, or will cause, results or will result in, the amount of the aggregate loss of net property income of Clementi Mall over the 12-month period following the completion date to exceed S$7,000,000; Clementi Mall will be sold subject to and with the benefit of all existing tenancies and licence agreements as from the date of completion. On completion, CM Domain and the Trustee will execute a deed of assignment in respect of the existing tenancies and licence agreements whereby CM Domain will assign to the Trustee, CM Domains rights, benefits and covenants under the existing tenancies and licence agreements. The deed of assignment in respect of the existing tenancies and licence agreements will also contain the Trustees covenant to observe, perform, take over, discharge and fulfil all obligations of CM Domain under the existing tenancies and licence agreements in respect of the period from and including completion as well as a covenant by the Trustee to indemnify CM Domain from and against the Trustees breach of the provisions of the existing tenancies and licence agreements after completion; On completion, the Trustee will, as required by the provisions of the Clementi Mall Lease, execute the relevant undertakings setting forth the Trustees covenant to observe and perform the covenants contained in the Clementi Mall Lease; On completion, the security deposits held by CM Domain will be transferred to the Trustee, and all assignable bank/insurance company guarantees covering security deposits issued to CM Domain will be assigned to the Trustee. Subject to any lawful claim the Trustee may have under the terms of the relevant tenancy or licence agreement, the Trustee agrees to return the said guarantees to the relevant tenant or licensee. The Trustee covenants to indemnify CM Domain from and against any breach on the part of the Trustee in returning such guarantees to the relevant tenant or licensee; If prior to completion, the government acquires or gives notice of acquisition or intended acquisition affecting the building in which Clementi Mall is located or any part thereof, the Trustee is entitled to rescind the Clementi Mall Sale Agreement;
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The Trustee may in its discretion rescind the Clementi Mall Sale Agreement if: (i) the occurrence of certain events specified in the Clementi Mall Sale Agreement (e.g. notification from CM Domain of any notice of termination by any of the tenants of Clementi Mall) and/or the breach of any of the representations and warranties made by CM Domain under the Clementi Mall Sale Agreement, causes, or will cause, results or will result in, the aggregate loss of the Net Property Income of Clementi Mall over the 12 month period following completion to exceed S$7,000,000; or there is any Material Breach of Warranty. Material Breach of Warranty means any breach of any of the warranties contained in a schedule to the Clementi Mall Sale Agreement which causes, or will cause, results or will result in, the amount of the aggregate loss of Net Property Income of Clementi Mall over the 12-month period following the completion date to exceed S$7,000,000.
(ii)
This above rights of rescission are only applicable prior to completion; Certain limited representations and warranties are made by CM Domain as vendor in respect of Clementi Mall and the existing tenancies. However the Trustees rights to claim against CM Domain for breach of such representations and warranties are subject to certain limitations including: (i) the maximum aggregate liability in respect of all claims (but excluding claims relating to certain warranties relating to title) shall not exceed 50.0% of the purchase price; no claim under the representations and warranties shall be made against CM Domain unless notice of such claim was given to CM Domain on or prior to the date falling 18 months after completion of the sale of Clementi Mall;
(ii)
(iii) no proceedings shall be commenced by or on behalf of the Trustee in relation to any alleged breach of representations and warranties unless proceedings are commenced no later than 24 months after completion of the sale of Clementi Mall and for this purpose, proceedings shall not be deemed to have commenced unless they have been issued and served on CM Domain; and (iv) if the Trustee is entitled to recover any sum (whether by payment, discount, credit or otherwise) from any third party in respect of any matter or event which could give rise to a claim against CM Domain under the representations and warranties, the Trustee shall use reasonable endeavours to recover such sum and any sum recovered (after deduction of all reasonable costs and expenses of the recovery) will be applied towards the amount of the claim and if the recovery is delayed until after the claim has been satisfied by CM Domain, the Trustee shall account to CM Domain in respect of any amount so recovered (after deduction of all reasonable costs and expenses of the recovery) up to the amount of the claim; Completion of the sale and purchase of Clementi Mall is conditional upon the listing of the Units on the Listing Date and commencement of trading of such Units on the SGX-ST; As required under the Clementi Mall Lease, the Trustee shall on completion sign and deliver, inter alia, the deeds of undertaking to facilitate compliance with Clause 4.4(k) and Clause 6.6 of the Clementi Mall Lease referred to above;
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Times Properties will, following the Trustees exercise of the call option in accordance with the Clementi Mall Call Option Agreement, enter into the Clementi Mall Sale Agreement as guarantor. As guarantor, Times Properties guarantees to the Trustee, CM Domains due and punctual payment of all amounts payable by CM Domain under the Clementi Mall Sale Agreement and the due and punctual performance and observance by CM Domain of all its obligations, commitments, undertakings, warranties and indemnities under or pursuant to the Clementi Mall Sale Agreement (in this paragraph referred to as the Guaranteed Obligations ) and agrees to indemnify the Trustee against all losses, liabilities, costs (including legal costs) charges, expenses, actions, proceedings, claims and demands which the Trustee or SPH REIT may suffer as a result of any breach by CM Domain of the Guaranteed Obligations. The limitations in the Clementi Mall Sale Agreement to the Trustees rights to claim against CM Domain for breach by CM Domain of its representations and warranties are similarly available to Times Properties; and With respect to the warranty in the Clementi Mall Sale Agreement whereby CM Domain has represented and warranted that the plant and equipment at Clementi Mall have been regularly maintained, the Disclosure Schedule to the Clementi Mall Sale Agreement contains a disclosure against the said warranty i.e. CM Domain has disclosed that the air conditioning central plant serving Clementi Mall is not energy efficient and is currently in the course of assessment by CM Domains consultants to ascertain whether refurbishment, replacement, retrofitting or other appropriate actions can be taken to render the air conditioning central plant more energy efficient. In the event any action is to be taken to render the air conditioning central plant more energy efficient, SPH REIT will have to bear the costs and expenses arising therefrom. The expenditure to be incurred will be confirmed post completion of energy audit. The capital expenditure in relation to making the air conditioning central plant more energy efficient is not included in the current Profit Forecast, as this is a discretionary expenditure and will only be incurred if there is sufficient benefit in doing so. The Profit Forecast is not reliant on undertaking this capital expenditure. However, capital expenditure as indicated in the Profit Forecast write-up currently covers tenancy reconfiguration, mechanical and electrical and security and car park improvements which should be sufficient to cover the said expenditure.
Consent from HDB By its letter of 15 May 2013, HDB has granted its consent to CM Domains sale of the unexpired leasehold interest in respect of Clementi Mall to the Trustee based on the existing lease terms of Clementi Mall and on an as is where is basis subject to the following: (a) (b) (c) payment of a non-refundable administrative fee of $500 plus 7% GST; a copy of stamped Transfer and Notice of Transfer shall be forwarded to HDB; a copy of the executed Sale & Purchase Agreement with the Trustee in its capacity as the trustee of SPH REIT shall be forwarded to HDB for record purpose when it is available; and the Trustee in its capacity as the trustee of SPH REIT shall satisfy itself on its eligibility to purchase under the relevant legislation and to comply with the conditions, if any, imposed by the relevant authority.
(d)
Deed of Income Support On completion of the sale of Clementi Mall, CM Domain will enter into a Deed of Income Support with the Trustee. Pursuant to the terms of the Deed of Income Support, CM Domain will agree to provide the Income Support for the period from the Listing Date to the day immediately preceding the fifth anniversary date of the Listing Date. 193
Pursuant to the foregoing, in the event that the Net Property Income of Clementi Mall falls below S$31,000,000 per annum (pro-rated where the relevant financial period is less than a full financial year) ( Threshold Amount ), CM Domain will undertake to pay to SPH REIT an amount (including, for the avoidance of doubt, any income tax and/or GST (if applicable)) equivalent to the difference between the Threshold Amount and the Net Property Income of Clementi Mall, up to an aggregate amount of S$20,000,000. The payments will be made by CM Domain to SPH REIT on a quarterly basis, save that the first applicable period will be the period from the Listing Date to 30 November 2013, and the last applicable period will be the period from 1 June 2018 to the day immediately preceding the fifth anniversary date of the Listing Date. The Income Support amount is reviewed annually on a standalone basis and does not take into account the Net Property Income of Clementi Mall earned in previous financial years. For the purposes of determining the amount payable by CM Domain to SPH REIT under the Deed of Income Support, the Net Property Income of Clementi Mall will be based on the audited accounts of SPH REIT for the relevant financial year. Net Property Income would include all income and expenses earned and incurred at each Property level. Fair value gains and losses are excluded from Net Property Income. For the avoidance of doubt, if the aggregate of the top-up payments payable by CM Domain to SPH REIT under the Deed of Income Support amounts to less than S$20,000,000 at the end of the Income Support period of 5 years, CM Domain would have no obligation to pay SPH REIT the difference between S$20,000,000 and the aggregate of the top-up payments. CM Domain will also provide the Purchaser with security in the form of bankers guarantees and/or cash deposit in an escrow account for a sum of S$20,000,000 less the aggregate top-up payments paid out by CM Domain under the Deed of Income Support. Paragon Paragon Call Option Agreement Principal terms of the Paragon Call Option Agreement include, inter alia , the following: O290 and the Trustee, as trustee of SPH REIT, have entered into a call option agreement dated 9 July 2013 (the Paragon Call Option Agreement ) pursuant to which the Trustee was granted the right to require O290 to enter into a sale and purchase agreement (the Paragon Sale Agreement ) for the sale of (i) a 99-year leasehold interest in Paragon commencing on the date of completion together with the plant and equipment and the licensing to the Trustee of the right to use the trademark referred to in the IP Licence Agreement (referred to below) at the purchase price of S$2,500,000,000, and (ii) certain sculptures at Paragon at a purchase consideration which is the aggregate of S$1,018,500 and an amount equivalent to all payments (other than the purchase price and GST for the new sculpture referred to below to be installed at Paragon) made prior to completion by O290 pursuant to the New Sculpture Contract. The call option may only be exercised if the Trustee has also concurrently exercised the call option for Clementi Mall referred to above; If, after the date of the Paragon Call Option Agreement and prior to the exercise of the call option in respect of a 99-year leasehold interest in Paragon, Paragon and/or the plant and equipment or any part thereof is damaged, and such damage constitutes a Material Damage, the Trustee is not entitled to exercise the call option in respect of a 99-year leasehold interest in Paragon unless the Trustee confirms at the time of its exercise of such call option that it is prepared to bear all costs for the reinstatement of Paragon and/or the plant and equipment and without seeking any compensation or contribution for such reinstatement from O290. Material Damage means that there is damage to any part of Paragon and/or any part of the 194
plant and equipment which causes, or will cause, results or will result in, the amount of the aggregate loss of net property income of Paragon over the 12-month period following the completion date to exceed S$30,000,000; If Paragon and/or the plant and equipment or any part thereof is damaged, but such damage does not constitute a Material Damage, the Trustee may exercise the call option in respect of Paragon and O290 must, unless that damage has been repaired to the reasonable satisfaction of the Trustee before the exercise of the call option in respect of a 99-year leasehold interest in Paragon, at no cost to the Trustee repair that damage as soon as practicable after the exercise of the call option in respect of a 99-year leasehold interest in Paragon to the reasonable satisfaction of the Trustee and the provisions of the Paragon Sale Agreement relating to the carrying out of such works shall apply; O290 may enter into new tenancies or licences (i) where the term or period (including any options) would expire on or prior to the completion date, (ii) which are terminable with seven days (or less) notice, or (iii) where O290 is legally bound to renew any existing tenancy or licence in accordance with the terms of an existing tenancy or licence agreement provided that in the event of any such renewal (a) O290 gives written notice to the Trustee of any exercise of option by the relevant tenant or licensee, (b) provides the Trustee with full details of the renewal terms, and (c) where the rent or licence fee for the renewed term or period is to be agreed with the relevant tenant or licensee or is to be based on prevailing market rent, O290 shall ensure that the gross monthly rent or monthly licence fee is not lower than the applicable monthly rent or monthly licence fee specified in an agreed schedule of rent and licence fee rates unless O290 has first obtained the Trustees written consent to that rent or licence fee (such consent not to be unreasonably withheld or delayed); and O290 must during the period commencing from the date of the Paragon Call Option Agreement and ending on the earlier of (i) the date of expiry of the call option period specified in the Paragon Call Option Agreement, and (ii) the date of the Paragon Sale Agreement, give written notification to the Trustee of the occurrence of certain events specified in the Paragon Call Option Agreement (e.g. if O290 becomes aware of the occurrence of any event or of any matter that has arisen in relation to Paragon, which results or is likely to result in any of the warranties set out in the Paragon Sale Agreement being unfulfilled, untrue, misleading or incorrect in any respect).
Paragon Sale Agreement The Paragon Sale Agreement will be entered into by O290 (as vendor), the Trustee (as purchaser) and Times Properties (as guarantor). O290 has agreed that when the call option under the Paragon Call Option Agreement is exercised, O290 will enter into the Paragon Sale Agreement on the same day. It is intended that the call option will be exercised by the Trustee on the Listing Date and that completion of the sale and purchase of a 99-year leasehold interest in Paragon will also take place on the Listing Date. Principal terms of the Paragon Sale Agreement include, inter alia , the following: The purchase price of a 99-year leasehold interest in Paragon together with plant and equipment and the licensing to the Trustee of the right to use the trademark referred to in the IP Licence Agreement, is S$2,500,000,000; the purchase price is to be paid by the allotment and issue of 1,605,045,832 Units (the Consideration Units ) with the balance of the purchase price to be paid in cash to O290;
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The Consideration Units are to be issued to the following parties nominated by O290, such Consideration Units to be issued in the following proportions: (i) (ii) 1,123,532,083 Consideration Units in favour of Times Properties; and 481,513,749 Consideration Units in favour of TPR;
In addition to the purchase price for the 99-year leasehold interest in Paragon together with plant and equipment and the licensing to the Trustee of the right to use the trademark referred to in the IP Licence Agreement, the Trustee must, in relation to certain sculptures at Paragon, also pay to O290 on completion an aggregate of S$1,018,500 and an amount equivalent to all payments (other than the purchase price and GST for a new sculpture to be installed at Paragon) made prior to completion by O290 pursuant to the agreements entered into by O290 for the purchase of the said new sculpture; On completion, O290 and the Trustee will execute the New Sculpture Contract relating to the acquisition of a new sculpture for Paragon (referred to below) whereby O290 will assign to the Trustee, O290s rights and benefits under the New Sculpture Contract. The deed of assignment in respect of the New Sculpture Contract will also contain the Trustees covenant to observe, perform, take over, discharge and fulfil all obligations of O290 under the New Sculpture Contract in respect of the period from and including completion as well as a covenant by the Trustee to indemnify O290 from and against the Trustees breach of the provisions of the New Sculpture Contract after completion. Alternatively, if the consent of the counter party to the New Sculpture Contract is obtained, a novation agreement in respect of the New Sculpture Contract will be executed by O290, the Trustee and the counter party whereby the Trustee will, with effect from the date of completion, take over the performance and discharge of O290s liabilities and obligations under or by virtue of the New Sculpture Contract as if the Trustee were named in the New Sculpture Contract in lieu of O290. The other principal terms of the deed of assignment in relation to the New Sculpture Contract are set out below; Paragon and the plant and equipment are at the risk of O290 until completion but the foregoing shall not prejudice or affect the confirmation given by the Trustee under clause 6.1.1 of the Paragon Call Option Agreement, on or before the exercise of the call option that it is prepared to bear all costs for the reinstatement of any material damage that occurred prior to the exercise of the call option. Material Damage means that there is damage to any part of Paragon and/or any part of the plant and equipment which causes, or will cause, results or will result in, the amount of the aggregate loss of net property income of Paragon over the 12-month period following the completion date to exceed S$30,000,000; If there is any Material Damage prior to completion, the Trustee is entitled to either (a) rescind the Paragon Sale Agreement by giving written notice under the Paragon Sale Agreement, or (b) not to rescind the Paragon Sale Agreement on the ground of the occurrence of such Material Damage. In the event there is any Material Damage and the Trustee does not elect to rescind the Paragon Sale Agreement, O290 will be under no obligation to repair such Material Damage. Material Damage means that there is damage to any part of Paragon and/or any part of the plant and equipment which causes, or will cause, results or will result in, the amount of the aggregate loss of net property income of Paragon over the 12-month period following the completion date to exceed S$30,000,000;
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The 99-year leasehold interest in Paragon will be sold subject to and with the benefit of all existing tenancies and licence agreements as from the date of completion. On completion, O290 and the Trustee will execute a deed of assignment in respect of the existing tenancies and licence agreements whereby O290 will assign to the Trustee, O290s rights, benefits and covenants under the existing tenancies and licence agreements. The deed of assignment in respect of the existing tenancies and licence agreements will also contain the Trustees covenant to observe, perform, take over, discharge and fulfil all obligations of O290 under the existing tenancies and licence agreements in respect of the period from and including completion as well as a covenant by the Trustee to indemnify O290 from and against the Trustees breach of the provisions of the existing tenancies and licence agreements after completion; On completion, O290 and the Trustee will enter into the IP Licence Agreement in respect of the Mark. Principal terms of the IP Licence Agreement are set out below; On completion, O290 will execute and deliver to the Trustee a registrable 99-year lease in respect of Paragon (the Vendor Lease ) in favour of the Trustee. The term of the 99-year leasehold term will commence on the Listing Date and the other principal terms of the Vendor Lease are set out below; On completion, the security deposits held by O290 will be transferred to the Trustee, and all assignable bank/insurance company guarantees covering security deposits issued to O290 will be assigned to the Trustee. Subject to any lawful claim the Trustee may have under the terms of the relevant tenancy or licence agreement, the Trustee agrees to return the said guarantees to the relevant tenant or licensee. The Trustee covenants to indemnify O290 from and against any breach on the part of the Trustee in returning such guarantees to the relevant tenant or licensee; If prior to completion, the government acquires or gives notice of acquisition or intended acquisition affecting Paragon or any part thereof, the Trustee is entitled to rescind the Paragon Sale Agreement; The Trustee may in its discretion rescind the Paragon Sale Agreement if: (i) the occurrence of certain events specified in the Paragon Sale Agreement (e.g. notification from O290 of any notice of termination by any of the tenants of Paragon) and/or the breach of any of the representations and warranties made by O290 under the Paragon Sale Agreement, causes, or will cause, results or will result in, the aggregate loss of the Net Property Income of Paragon over the 12 month period following the completion date to exceed S$30,000,000; or there is any Material Breach of Warranty. Material Breach of Warranty means any breach of any of the warranties contained in a schedule to the Paragon Sale Agreement which causes, or will cause, results or will result in, the amount of the aggregate loss of Net Property Income of Paragon over the 12-month period following the completion date to exceed S$30,000,000.
(ii)
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The above rights of rescission are only applicable prior to completion; Certain limited representations and warranties are made by O290 as vendor in respect of the 99-year leasehold interest in Paragon and certain existing tenancies. However, the Trustees rights to claim against O290 for breach of such representations and warranties are subject to certain limitations including: (i) the maximum aggregate liability in respect of all claims (but excluding claims relating to certain warranties relating to title) shall not exceed 50.0% 1 of the purchase price; no claim under the representations and warranties shall be made against O290 unless notice of such claim was given to O290 on or prior to the date falling 18 months after completion of the sale of the 99-year leasehold interest in Paragon 2;
(ii)
(iii) no proceedings shall be commenced by or on behalf of the Trustee in relation to any alleged breach of representations and warranties unless proceedings are commenced no later than 24 months after completion of the sale of the 99-year leasehold interest in Paragon and for this purpose, proceedings shall not be deemed to have commenced unless they have been issued and served on O290; and (iv) if the Trustee is entitled to recover any sum (whether by payment, discount, credit or otherwise) from any third party in respect of any matter or event which could give rise to a claim against O290 under the representations and warranties, the Trustee shall use reasonable endeavours to recover such sum and any sum recovered (after deduction of all reasonable costs and expenses of the recovery) will be applied towards the amount of the claim and if the recovery is delayed until after the claim has been satisfied by O290, the Trustee shall account to O290 in respect of any amount so recovered (after deduction of all reasonable costs and expenses of the recovery) up to the amount of the claim; With respect to the warranty in the Paragon Sale Agreement whereby O290 has made certain representations and warranties in respect of (i) easement and third party rights relating to Paragon, the Disclosure Schedule to the Paragon Sale Agreement contains a disclosure against the said warranties i.e. O290 has disclosed that it is in discussion with representatives of the owners of the property at No. 15 Cairnhill Road (Lot 918K Town Subdivision 27) namely, CH Residential Pte Ltd and CH Commercial Pte Ltd in relation to a proposed construction of a link bridge to connect Paragon with the development that is in the course of construction at No. 15 Cairnhill Road (Lot 918K Town Subdivision 27) but no agreement has been reached in relation to the foregoing, and (ii) any unresolved disputes or litigation proceedings with its tenants or licensees, the Disclosure Schedule to the Paragon Sale Agreement contains a disclosure against the said warranty i.e. O290 has disclosed that certain tenants/licensees have made claims against the Vendor for loss or damage incurred by them and the Paragon Sale Agreement sets out brief particulars of such claims which O290 has referred to its insurers3;
The Sponsor views the 50.0% maximum aggregate liability as reasonable having regard to the quantum of the purchase consideration in the event of any breaches of the representations and warranties in the Paragon Sale Agreement. Recovery for breaches of representations and warranties that do not relate to the title to Paragon set out in the Paragon Sale Agreement will be limited to 50.0%. The maximum aggregate liability of 50.0% of the purchase consideration does not apply to claims relating to representations and warranties relating to the title to Paragon set out in the Paragon Sale Agreement. Under the Paragon Sale Agreement, SPH REIT is entitled, at any time prior to Completion, to rescind the Paragon Sale Agreement (without prejudice to any claims for antecedent breaches) if it shall be found that there is any Material Breach of Warranty. For the avoidance of doubt, SPH REIT may make a claim for breach of warranty within the 18-month period following the date of completion provided that it gives notice of such claim to O290 within the same 18-month period. These are claims which tenants have submitted to O290 but the amount of such claims are not known as yet and these claims have been referred to O290s insurers. SPH REIT is not liable to pay for any of these claims which have been made against O290 and relate to the period before completion.
2 3
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Completion of the sale and purchase of a 99-year leasehold interest in Paragon is conditional upon the listing of the Units on the Listing Date and commencement of trading of such Units on the SGX-ST; and Times Properties will, following the Trustees exercise of the call option in accordance with the Paragon Call Option Agreement, enter into the Paragon Sale Agreement as guarantor. As guarantor, Times Properties guarantees to the Trustee O290s due and punctual payment of all amounts payable by O290 under the Paragon Sale Agreement and the due and punctual performance and observance by O290 of all its obligations, commitments, undertakings, warranties and indemnities under or pursuant to the Paragon Sale Agreement (in this paragraph referred to as the Guaranteed Obligations ) and agrees to indemnify the Trustee against all losses, liabilities, costs (including legal costs), charges, expenses, actions, proceedings, claims and demands which the Trustee or SPH REIT may suffer as a result of any breach by O290 of the Guaranteed Obligations. The limitations in the Paragon Sale Agreement to the Trustees rights to claim against O290 for breach by O290 of its representations and warranties are similarly available to Times Properties.
Vendor Lease On completion of the sale and purchase of a 99-year leasehold interest in Paragon, O290 will execute the Vendor Lease in favour of SPH REIT 1. Principal terms of the Vendor Lease include, inter alia , the following: Pursuant to the Vendor Lease to be issued by O290 to the Trustee, SPH REIT will in respect of Paragon, acquire a registrable 99-year leasehold title commencing on the Listing Date; The Vendor Lease, inter alia , requires SPH REIT as the lessee: (i) (ii) to pay an annual rent of $1.00 (waived until further notice); to pay all rates, taxes (including property tax), charges, assessments, outgoings and impositions from time to time charged, assessed or imposed on or in respect of the property;
(iii) to pay all fees and charges (including development charges and differential premium) in connection with any application by the lessee to increase the plot ratio and/or any development undertaken by the lessee at the property; (iv) not to use the property otherwise than as a retail/shopping mall with offices and medical suites; (v) to observe and perform the terms and conditions in the Grants in Fee Simple and the Further Grant in Fee Simple relating to the property (the Head Grants ) but the lessee is not required to purchase any additional State land from the Grantor where required by the Grantor pursuant to the provisions of Special Condition (c) set forth in Grant in Fee Simple No. 2967;
With respect to the final survey for the two lots of Paragon, namely Lot 981T (with an offered area of 561.0 sq m) and Lot 1273N (with an offered area of 156.4 sq m), there are no obligations under the Paragon title requiring O290 to conduct a final survey of such lots and O290 has not received any notice from the State to do so. It is therefore entirely up to the State to carry out these surveys. Given the relatively small areas involved, it is not envisaged that the outcome of any such survey would have a significant impact on SPH REIT. In any event, any payment to be made to the State for any additional land in excess of what was originally offered under the Paragon title is to be paid by O290 and not SPH REIT.
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(vi) in the event the lessor is required to surrender to the Grantor any part of the property held under Grant in Fee Simple No. 2967 pursuant to the provisions of Special Condition (c) set forth in Grant in Fee Simple No. 2967, the lessee is required to yield up such part of the property in its existing state and condition and the lessee shall not have any claim or demand against the lessor for any costs, damages, compensation or otherwise (including, without limitation, for any refund of any part of the consideration paid by the lessee to the lessor on or before the commencement date of the Vendor Lease) 1; and (iv) to deliver to the lessor possession of the property together with the building and all plant and equipment therein in the state and condition as at date of such delivery of possession, at the end of the Vendor Lease, and requires O290 as lessor: (a) to perform and observe the covenants on the lessors part contained in the Head Grants and where the President of the Republic of Singapore requires the lessor to purchase any additional State land pursuant to the provisions of Special Condition (c) set forth in Grant in Fee Simple No. 2967, the lessor shall pay the purchase price so payable to the Grantor for such additional State land and the lessor shall not require the lessee to make any contribution towards the purchase price for such additional State land; not to amend or modify any terms of the Head Grants in any respect which may have an adverse effect on the lessees rights; and not to do or omit any act or thing which is likely to cause a forfeiture of its interest under the Head Grants.
(b)
(c)
PROPERTY MANAGEMENT AGREEMENT The Properties which comprise the initial portfolio of SPH REIT and all properties located in Singapore subsequently acquired by SPH REIT (provided that the Trustee has the right to appoint or require the appointment of the Property Manager as the property manager of such properties 2), whether such properties are directly or indirectly held by SPH REIT, or are wholly or partly owned by SPH REIT, will be managed by the Property Manager in accordance with the terms of the Property Management Agreement; The Property Management Agreement was entered into on 9 July 2013 by the Trustee, the Manager and the Property Manager pursuant to which the Property Manager was appointed to operate, maintain, manage and market the properties and all subsequently acquired properties of SPH REIT located in Singapore as long as the Trustee has a right of appointment of the property manager thereof, subject to the overall management of the Manager; The Property Management Agreement provides that in respect of each property and each subsequently acquired property located in Singapore which the Trustee has a right of appointment of the property manager thereof, the Trustee, the Manager and the Property Manager will enter into a separate property management agreement substantially in the form
Under the Land Acquisition Act, SPH REIT can make its own claim under the said Act for compensation in its own name as it is a long lessee of the acquired property and in respect of the remainder of its leasehold term. O290 will make its own claim under the said Act for compensation as the owner of the reversionary interest in the acquired property. An example of a circumstance where the Trustee would not have such a right will be where SPH REIT is a partial owner of a property or is an owner through a special purpose vehicle and the Trustee is one of the shareholders of such special purpose vehicle.
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set out in a schedule to the Property Management Agreement (with such modifications as may be agreed by the parties), in order to incorporate the specific terms set out in the Property Management Agreement in their application to each of such properties; The initial term of the Property Manager under the Property Management Agreement is 10 years from the Listing Date; 12 months before the expiry of the initial term of the Property Manager under the Property Management Agreement, the Property Manager may request to extend its appointment for a further term of ten years, on terms and conditions be mutually agreed by the Trustee, the Manager and the Property Manager and the revision of all fees payable to the Property Manager to the market rates prevailing at the time of such extension; The Trustee will at least ten months before the expiry of the initial term decide the prevailing market rates for the extension term, based on the recommendation of the Manager. If the Property Manager disagrees with the Trustees decision on the prevailing market rates for the extension term, the matter will be referred to an independent expert whose determination of the prevailing market rates shall be final and binding on the parties. The fees of the expert will be shared equally by the parties; Subject to the Property Manager and the Trustee (acting on the recommendation of the Manager) having agreed upon the terms and conditions (other than the fees payable to the Property Manager) for the appointment of the Property Manager for the extension term at least six months before the expiry of the initial term, the Trustee will agree to extend the appointment of the Property Manager on the revised fees (determined in accordance with the above paragraph) subject to the approval of the Unitholders, if such approval is required pursuant to any applicable legislation or regulations including regulatory requirements relating to interested person/party transactions relating to real estate investment trusts; and If the Property Manager and the Trustee (acting on the recommendation of the Manager) are unable to agree on the terms and conditions (other than the fees payable to the Property Manager) for the appointment of the Property for the extension term by the date falling six months before the expiry of the Term or in the event the conditions referred to in the above paragraph are not fulfilled, the Trustee shall not be obliged to extend the appointment of the Property Manager for the extension term and the appointment of the Property Manager herein shall terminate upon the expiry of the term.
Property Managers Services The services to be provided by the Property Manager for each property under its management include the following: (i) property management services, including (i) establishing (for the approval of the Trustee, following the recommendation of the Manager) annual budgets for the operation, maintenance, management and marketing of the property, (ii) operating and maintaining the property in accordance with such annual budgets, (iii) co-ordinating, reviewing and maintaining at all times insurance coverage with the assistance of insurance advisers, and (iv) maintaining books of accounts and records in respect of the operation of the property; lease management services, including (i) recommending leasing strategy and negotiating leases, licences and concessions, (ii) supervising and controlling all collections and receipts, payments and expenditure relating to the property, and (iii) lease administration;
(ii)
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(iii) project management services in relation to the development or redevelopment (if not prohibited by the Property Funds Guidelines or if otherwise permitted by the MAS), the refurbishment, retrofitting and renovation works to a property, including recommendation of project budget and project consultants, monitoring progress of work based on schedule and monitoring and evaluating cost variations. If in compliance with applicable regulatory requirements relating to Related Party Transactions, the approval of Unitholders is required for payment of fees to the Property Manager for project management services, such payment will be subject to the obtaining of such Unitholders approval, and if such approval is not obtained, the Property Manager shall not be obliged to undertake the relevant project management services and the Trustee shall be entitled to engage other consultants to undertake the relevant project management services; and (iv) marketing and marketing co-ordination services including planning and co-ordinating marketing and promotional programmes. Fees Under the Property Management Agreement, the Property Manager is entitled to the following fees, for each property under its management: (i) (ii) a fee of 2.0% per annum of the gross revenue for each property; a fee of 2.0% per annum of the Net Property Income for each property (calculated before accounting for the property management fee in that financial period); and
(iii) a fee of 0.5% per annum of the Net Property Income for each property (calculated before accounting for the property management fee in that financial period), in lieu of leasing commissions otherwise payable to the Property Manager and/or third party agents. The Manager may elect to pay the property management fee in cash or Units or a combination of cash and Units (as the Manager may in its sole discretion determine). Project Management fee For the project management services, the Trustee will pay the Property Manager the following fees for the development or redevelopment (if not prohibited by the Property Funds Appendix or if otherwise permitted by the MAS), the refurbishment, retrofitting and renovation works on a property: (i) where the construction costs equal or exceed S$100,000 but do not exceed S$500,000, a fee of 5.0% of the construction costs; where the construction costs exceed S$500,000 but do not exceed S$1,000,000, a fee of 2.0% of the construction costs;
(ii)
(iii) where the construction costs exceed S$1,000,000 but are below S$10,000,000, a fee of 1.5% of the construction costs; and (iv) where the construction costs equal or exceed S$10,000,000 but do not exceed S$25,000,000, a fee of 1.25% of the construction costs. Where the construction costs are below S$100,000, no fee is payable;
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For the purpose of calculating the fees payable to the Property Manager, construction costs means all construction costs and expenditure valued by the quantity surveyor engaged by the Trustee for the project, excluding development charges, differential premiums, statutory payments, consultants professional fees and GST; and The Manager may elect to pay the fees payable to the Property Manager under the Property Management Agreement in cash or Units or a combination of cash and Units (as the Manager may in its sole discretion determine).
Expenses The Property Manager is authorised to utilise funds deposited in operating accounts maintained in the name of the Trustee, to make payment of all costs and expenses incurred in the operation, maintenance, management and marketing of each property, within each annual budget approved by the Trustee on the recommendation of the Manager.
Termination The Trustee or the Manager may terminate the appointment of the Property Manager under the Property Management Agreement in relation to all the properties of SPH REIT under the management of the Property Manager on the occurrence of certain specified events, which include: (i) the liquidation or cessation of business of the Property Manager; or (ii) if the Property Manager is voluntarily or involuntarily dissolved or declared bankrupt, insolvent, or commits an act of bankruptcy or if an order is made or resolution is passed or a notice is issued convening a meeting for the purpose of passing a resolution or any analogous proceedings are taken for the appointment of an administrator or judicial manager of or the winding up of the Property Manager, other than a members voluntary liquidation solely for the purpose of a bona fide amalgamation or reconstruction, or the Property Manager compounds with its creditors or has a receiver appointed over all or any part of its assets or a judicial manager is appointed in respect of the Property Manager. In the event of the sale or disposal of a Property managed by the Property Manager, the Trustee will be entitled to terminate the appointment of the Property Manager under the Property Management Agreement but only in respect of such Property, by giving not less than 30 days prior written notice to the Property Manager, but the terms of the Property Management Agreement will continue to apply with respect to the remaining properties managed by the Property Manager; In addition, if the Property Manager is in breach of its obligations under the Property Management Agreement and if the breach is capable of remedy, fails to cure the breach within 90 days of its receipt of a notice in writing from the Trustee or the Manager to remedy the said breach to the reasonable satisfaction of the Trustee or the Manager, the Trustee or the Manager shall have the right to terminate the appointment of the Property Manager in relation only to the Property in respect of which the breach relates, upon giving not less than 30 days prior notice in writing to the Property Manager; If the Trustee or the Manager within 90 days of receipt of written notice fails to remedy any breach (which is capable of remedy) of its obligations in relation to a property, the Property Manager may terminate its appointment as property manager in relation to the property in respect of which the breach relates upon giving not less than 30 days written notice to the Trustee or the Manager (as the case may be); The Property Manager will not be entitled to compensation for the termination of his appointment unless provided otherwise in the Property Management Agreement. Save for the requirement to pay all amounts due and owing by any party under the Property 203
Management Agreement in relation to a Property within 30 days commencing from such termination, there is no compensation payable for the termination of the Property Management Agreement in accordance with the terms thereof; and On the termination of the appointment of the Property Manager, the Manager shall, as soon as practicable, recommend to the Trustee the appointment of a replacement property manager for the affected property.
Novation The Trustee and the Manager are entitled to novate their respective rights, benefits and obligations to a new trustee of SPH REIT or a new manager of SPH REIT appointed in accordance with the terms of the Trust Deed. With the prior written approval of the Trustee, which approval shall not be unreasonably withheld, the Property Manager is also entitled to novate its rights, benefits and obligations under the Property Management Agreement to any wholly-owned, direct or indirect subsidiary of the Sponsor.
Exclusion of liability In the absence of fraud, negligence, wilful default or breach of the Property Management Agreement by the Property Manager, the Property Manager shall not incur any liability by reason of any error of law or any matter or thing done or suffered or omitted to be done by it in good faith under the Property Management Agreement; and In addition, the Trustee shall indemnify the Property Manager against any actions, costs, claims, damages, expenses or demands which the Property Manager may suffer or incur as property manager, save where such action, cost, claim, damage, expense or demand is occasioned by the fraud, negligence, wilful default or breach of the Property Management Agreement by the Property Manager, its employees or agents.
No restriction on property manager The Property Manager may provide services similar to those contemplated under the Property Management Agreement to other parties operating in the same or similar business as SPH REIT, or in other businesses provided that the Property Manager undertakes to the Trustee and the Manager that it shall at all times act in the best interest of SPH REIT and will not place itself in a conflict of interest position with regard to the provision of services to SPH REIT.
IP LICENCE AGREEMENT On completion of the sale of Paragon, O290 will execute the IP Licence Agreement in respect of the Mark. Principal terms of the IP Licence Agreement include, inter alia , the following: The licence for the Mark shall be granted to the Trustee on an exclusive and non-transferable basis, and strictly for the use of such Mark in Singapore as the building name of Paragon and for the various services in relation to Paragon comprising real estate leasing and renting of commercial premises, offices and premises for retail purposes; The term of the licence shall be for so long as the Trustee retains legal ownership of the 99-year leasehold interest in Paragon, unless terminated earlier in accordance with the terms of the IP Licence Agreement;
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O290 may terminate the licence on the occurrence of certain specified events, which include the liquidation or cessation of business of the Trustee. O290 may also terminate the licence if the Trustee commits a breach of the IP Licence Agreement and where such breach is capable of remedy, if the breach is not remedied within 30 days of O290s written notice. Other termination events include any challenge by the Trustee of the validity of the Mark and any cessation of use of the Mark by the Trustee as the building name of Paragon or for the services in relation to Paragon; On termination, the Trustee shall immediately cease use of the Mark as the building name and services in relation to Paragon and return to O290 all confidential or proprietary information supplied by O290 and relating to the Mark, and shall take the necessary steps at its own expense to obtain the regulatory approvals for the change of the building name of Paragon and to remove any signage at Paragon bearing the Mark; The Trustee is required to perform and observe certain obligations under the IP Licence Agreement in connection with the licence of the Mark, and these include: (i) the Trustee shall not at any time impair O290s rights and title to the Mark and goodwill of the Mark (or register or make any application to register the Mark). All goodwill resulting from the use by the Trustee of the Mark shall inure to the benefit of O290; the Trustee shall not adopt or use any trade mark, symbol or device which incorporates or is confusingly similar to, or is a simulation or colourable imitation of, the Mark, or unfairly competes with the Mark;
(ii)
(iii) the Trustee shall not use the Mark in any way which would tend to allow it to become generic, lose its distinctiveness, become liable to mislead the public, or be materially detrimental to or inconsistent with the good name, goodwill, reputation and image of O290, and shall also not use the Mark accompanied by any other trade marks or words describing the various services in respect of Paragon and shall observe any reasonable directions given by O290 as to the colours and size of representations of the Mark and the manner and disposition in relation to the services and all advertising, promotional and other documentary material which makes use of the Mark; (iv) the Trustee shall, on becoming aware of any challenge to the validity of the Mark or any infringement in Singapore of the Mark, promptly notify O290, and shall reasonably co-operate with O290 in taking all steps as reasonably required by it in connection with any such infringement, including, without limitation, legal proceedings in the name of O290 or in the joint names of O290 and the Trustee, provided that O290 shall be entitled to any damages, account of profits and awards of costs recovered; (v) the Trustee agrees that O290 shall be entitled to assign the Mark subject to the rights and licences granted to the Trustee under the IP Licence Agreement and the Trustee shall be required to enter into a novation agreement with such third party to whom O290 wishes to assign its rights under the IP Licence Agreement; and
(vi) if requested by O290, the Trustee shall at its own cost and expense, execute any and all documents and extend its full co-operation to O290 in connection with all registration or recordal with the Intellectual Property Office of Singapore, in order to preserve, protect and record O290s proprietary rights in the Mark, or give effect to the licence granted by the IP Licence Agreement. The right to use the Mark is included in the 99-year leasehold interest in Paragon purchased by SPH REIT and therefore there is no separate fee for the use of the Mark. There are no recurring fees to be paid by SPH REIT during the course of the licence period. 205
There is no specific clause in the IP Licence agreement compelling SPH REIT to use the Mark though the IP Licence Agreement may be terminated by the Licensor if the Licensee ceases to use the Mark as, or as part of the Paragons name, and/or ceases to use the Mark in relation to Paragon. If passing off or infringement proceedings are brought against the use of the Mark in relation to Paragon, costs, damages or account of profits may be ordered against the user of the Mark as identified in the hypothetical proceedings commenced by the third party. THE NEW SCULPTURE CONTRACT As part of the Trustees purchase of Paragon, the Trustee will, pursuant to the Paragon Sale Agreement referred to above, also purchase certain sculptures presently located at Paragon as well as a new sculpture by Jean-Michel, known as Noeud Rouge (the New Sculpture ) which will be installed at Paragon in due course. On completion of the sale and purchase of Paragon, the Trustee and O290 will execute (a) a deed of assignment in respect of the agreements (collectively the New Sculpture Contract ) relating to the acquisition of the New Sculpture whereby O290 will assign to the Trustee, O290s rights and benefits under the New Sculpture Contract. The deed of assignment in respect of the New Sculpture Contract will also contain the Trustees covenant to observe, perform, take over, discharge and fulfil all obligations of O290 under the New Sculpture Contract in respect of the period from and including completion as well as a covenant by the Trustee to indemnify O290 from and against the Trustees breach of the provisions of the New Sculpture Contract after completion. Alternatively, if the consent of the counter party to the New Sculpture Contract is obtained, a novation agreement (in lieu of the abovementioned deed of assignment) in respect of the New Sculpture Contract will be executed by O290, the Trustee and the counter party whereby the Trustee will, with effect from the date of completion, take over the performance and discharge of O290s liabilities and obligations under or by virtue of the New Sculpture Contract as if the Trustee is the party named in the New Sculpture Contract in lieu of O290. The amount payable for the New Sculpture is S$253,500 (excluding GST and other expenses such as expenses for supervision of the installation of the New Sculpture, shipping costs, storage). The New Sculpture is being transferred to SPH REIT at the same cost of acquisition by O290. O290 acquired the New Sculpture from a renowned art gallery and through a reputable art agent after studying the market price of similar art pieces and sculptures by the same French artist who has his works exhibited in museums and art galleries around the world as well as in some private collections of French fashion houses. The consideration of the New Sculpture includes the installation cost for the New Sculpture (where such cost has been incurred prior to completion). This installation cost will be determined after a tender process, from which the most competitive contractor will be selected to carry out the installation works. The Manager is therefore assured that the entire process is at complete arms length and on commercial terms.
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TAXATION
The following summary of certain tax consequences in Singapore of the purchase, ownership and disposition of the Units is based upon laws, regulations, rulings and decisions now in effect, all of which are subject to change (possibly with retroactive effect). The summary does not purport to be a comprehensive description of all the tax considerations that may be relevant to a decision to purchase, own or dispose of the Units and does not purport to apply to all categories of investors, some of which may be subject to special rules. Investors should consult their own tax advisers concerning the application of Singapore tax laws to their particular situations as well as any consequences of the purchase, ownership and disposition of the Units arising under the laws of any other tax jurisdictions. INCOME TAX Tax transparency treatment SPH REIT has obtained approval for tax transparency treatment from the IRAS. Under this tax treatment, Specified Taxable Income derived by SPH REIT will not be assessed to tax in the hands of the Trustee to the extent of the amount distributed to Unitholders. Instead, Unitholders will be subject to tax on Taxable Income Distributions, either directly or by way of tax deduction at source, depending on their own tax status. For the purpose of applying for the tax transparency treatment, the Trustee and the Manager have given a joint undertaking to the IRAS to comply with certain conditions. One of those conditions requires SPH REIT to distribute at least 90.0% of its Specified Taxable Income to Unitholders in the same year in which the income is derived. Taxation of SPH REIT The taxable income of SPH REIT will be ascertained in accordance with the provisions of the Income Tax Act (Chapter 134 of Singapore) (the Income Tax Act ), after deduction of all allowable expenses and any other allowances permitted under that Act. Subject to meeting the conditions specified in the joint undertaking that was given for the tax transparency treatment, the Trustee will not be assessed to tax on the Specified Taxable Income of SPH REIT to the extent of the amount distributed, provided that at least 90.0% of Specified Taxable Income is distributed within the year in which the income is derived. Instead, the Trustee and the Manager will deduct income tax at the prevailing corporate tax rate, currently 17.0%, from Taxable Income Distributions to Unitholders. However, where the beneficial owners of the Units are Qualifying Unitholders (as defined herein), the Trustee and the Manager will make the distributions to such Unitholders without deducting any income tax. In addition, where the beneficial owners are Qualifying Non-resident Non-individual Unitholders (as defined herein), the Trustee and the Manager will deduct Singapore income tax at the reduced rate of 10.0% for distributions made on or before 31 March 2015. A Qualifying Unitholder is a Unitholder who is: an individual; a company incorporated and tax resident in Singapore; a body of persons, other than a company or a partnership, incorporated or registered in Singapore (for example, a town council, a statutory board, a registered charity, a registered co-operative society, a registered trade union, a management corporation, a club and a trade and industry association); or 207
a Singapore branch of a foreign company which has presented a letter of approval from the IRAS granting a waiver from tax deduction at source in respect of distributions from SPH REIT.
A Qualifying Non-resident Non-individual Unitholder is a person who is neither an individual nor a resident of Singapore for income tax purposes and: who does not have a permanent establishment in Singapore; or who carries on any operation in Singapore through a permanent establishment in Singapore, where the funds used by that person to acquire the Units are not obtained from that operation.
To receive distributions without tax deduction at source, Unitholders who are Qualifying Unitholders (other than those who are individuals) must disclose their status in a prescribed form provided by the Manager. Similarly, to receive distributions with tax deduction at the reduced rate of 10.0% for distributions made on or before 31 March 2015, Qualifying Non-resident Nonindividual Unitholders must disclose their status in a prescribed form provided by the Manager (see Appendix D, Independent Taxation Report for further details). Where the Units are held in joint names, the Trustee and the Manager will deduct income tax at the prevailing corporate tax rate, currently 17.0%, from Taxable Income Distributions, unless all the joint Unitholders are individuals. Where the Units are held through a nominee, the Trustee and the Manager will deduct income tax at the prevailing corporate tax rate, currently 17.0%, from Taxable Income Distributions, except in the following situations: where the Units are held for beneficial owners who are Qualifying Unitholders, tax may not be deducted at source where a declaration is made by the nominee of the beneficial owners status (which includes the provision of certain particulars of the beneficial owners) in a prescribed form to the Trustee and the Manager; where the Units are held for beneficial owners who are Qualifying Non-resident Nonindividual Unitholders, tax may be deducted at source at the reduced rate of 10.0% for distributions made on or before 31 March 2015 where a declaration is made by the nominee of the beneficial owners status (which includes the provision of certain particulars of the beneficial owners) in a prescribed form to the Trustee and the Manager; and where the Units are held by the nominees as agent banks or the Supplementary Retirement Scheme ( SRS ) operators acting for individuals who purchased the Units within the CPF Investment Scheme or the SRS respectively, tax will not be deducted at source for distributions made in respect of these Units.
The tax transparency treatment does not apply to any amount of Specified Taxable Income that is not distributed to Unitholders and any income that is not Specified Income, for example, gains from the disposal of immovable properties which are considered trading gains. The Trustee will be assessed to tax on such income. Any distribution made out of such income (i.e. income in respect of which tax has been assessed on the Trustee) will not be subject to deduction of tax at source by the Trustee and the Manager.
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Taxation of Unitholders SPH REIT Distributions Individuals who hold Units as investment assets Individuals who hold Units as investment assets and not as trading assets, excluding individuals who hold Units through a partnership in Singapore, are exempt from income tax on Taxable Income Distributions, regardless of their nationality or tax residence status. Individuals who hold Units as trading assets or through a partnership in Singapore Individuals who hold Units as trading assets or through a partnership in Singapore are subject to income tax on Taxable Income Distributions. The gross amount of such distributions (i.e. before tax deducted at source (if any)) is taxable in the hands of the individuals at their own applicable income tax rates. Non-individuals (other than Qualifying Non-resident Non-individuals) Non-individual Unitholders are subject to Singapore income tax on Taxable Income Distributions, regardless of whether the Trustee and the Manager had deducted tax from the distributions. The gross amount of such distributions (i.e. before tax deducted at source (if any)) is taxable at the prevailing corporate tax rate (currently 17.0%). Qualifying Non-resident Non-individuals Qualifying Non-resident Non-individual Unitholders are subject to Singapore income tax on Taxable Income Distributions. The tax is imposed on the gross amount of such distributions (i.e. before tax deducted at source) and the tax is deducted at source at the prevailing corporate tax rate (currently 17.0%) except for distributions made on or before 31 March 2015 where the tax rate is reduced to 10.0%. Tax deducted at source Where tax had been deducted at source at the prevailing corporate tax rate (currently 17.0%), the tax deducted is not a final tax. Unitholders can use such tax deducted at source to set-off against their Singapore income tax liabilities. However, the tax at 10.0% on distributions to Qualifying Non-resident Non-individual Unitholders on or before 31 March 2015 is a final tax. Distributions made out of income subject to tax on the Trustee Distributions made out of income that has been assessed to tax at the Trustee level (for example, Specified Taxable Income that was not distributed or gains from the disposal of immovable properties which are considered as trading gains) are treated as capital in nature and will not be subject to tax in the hands of Unitholders. Distributions made out of capital gains Distributions made out of gains or profits arising from disposal of immovable properties that have been determined to be capital gains are not taxable in the hands of Unitholders.
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Disposal of Units Any gains on disposal of Units are not liable to Singapore income tax provided the Units are not held as trading assets or as assets in the ordinary course of a trade or business carried on in Singapore. STAMP DUTY By virtue of the Stamp Duties (Real Estate Investment Trusts) (Remission) Rules 2010, stamp duty (except for stamp duty chargeable under section 22A of the Stamp Duties Act, Chapter 312 of Singapore ( Stamp Duties Act )) on any contract, agreement or instrument executed during the period from 12 January 2013 to 31 March 2015 (both dates inclusive) relating to the conveyance, assignment or transfer on sale of any Singapore immovable property or of any interest thereof to REITs listed on the SGX-ST would be remitted. Accordingly, stamp duty payable by SPH REIT on the contracts for the acquisition of Singapore immovable properties will be remitted if the contracts were executed on or before 31 March 2015. IRAS has, by way of its letter dated 3 May 2013, given in-principle approval of remission of stamp duty (except for stamp duty chargeable under section 22A of the Stamp Duties Act) under the Stamp Duties (Real Estate Investment Trusts) (Remission) Rules 2010 for the Paragon Sale Agreement and the Vendor Lease in relation to the acquisition of Paragon, provided that SPH REIT is listed on the SGX-ST within 6 months from the execution of the Paragon Sale Agreement. In addition, stamp duty chargeable on the Clementi Mall Sale Agreement relating to the acquisition of Clementi Mall (except for stamp duty chargeable under section 22A of the Stamp Duties Act) will be remitted if the Clementi Mall Sale Agreement is executed on or before 31 March 2015 and SPH REIT is listed on the SGX-ST within 6 months of the execution of the Clementi Mall Sale Agreement. Section 22A of the Stamp Duties Act relates to a vendors obligation to pay stamp duty on the disposal of certain immovable property by the vendor and under certain conditions ( Sellers Stamp Duty ). In this regard, the IRAS has, based on the facts presented to the IRAS (including the current use of Paragon and Clementi Mall), by way of its letter dated 14 May 2013 agreed that Sellers Stamp Duty is not payable on the disposal of Clementi Mall and Paragon. Stamp duty will not be imposed on instruments of transfers relating to the Units. In the event of a change of trustee for SPH REIT, any document effecting the appointment of a new trustee and the transfer of Deposited Property from the incumbent trustee to the new trustee will also not be subject to stamp duty.
GOODS AND SERVICES TAX The issue of Units is not subject to GST. The sale of the Units by a GST-registered investor belonging in Singapore for GST purposes through a SGX-ST member or to another person belonging in Singapore for GST purposes is an exempt supply not subject to GST. Any input GST (for example, GST on brokerage) incurred by the GST-registered investor in making such an exempt supply is generally not recoverable from the Singapore Comptroller of GST unless the investor satisfies the conditions prescribed under the GST legislation or under certain GST concessions. Where the Units are sold by a GST-registered investor contractually to and for the direct benefit of a person belonging outside Singapore (and who is outside of Singapore at the time of supply), the sale is a taxable supply subject to GST at 0%. Any input GST (for example, GST on brokerage) 210
incurred by him in the making of this zero-rated supply for the purpose of his business will, subject to the provisions under the GST legislation, be recoverable as an input tax credit in his GST returns. Investors should seek their own tax advice on the recoverability of GST incurred on expenses in connection with the purchase and disposition of the Units. Services such as brokerage and advisory services rendered by a GST-registered person to an investor belonging in Singapore for GST purposes in connection with the investors purchase, ownership or disposition of the Units will be subject to GST at the standard rate of 7.0%. Similar services rendered contractually to and for the direct benefit of an investor belonging outside Singapore for GST purposes (and who is outside Singapore at the time of supply) will be subject to GST at 0%.
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PLAN OF DISTRIBUTION
The Manager is making an offering of 308,884,000 Units (representing 12.4% of the total number of Units in issue after the Offering) for subscription at the Offering Price under the (i) Placement Tranche and (ii) the Public Offer. 224,902,000 Units will be offered under the Placement Tranche and 83,982,000 Units will be offered under the Public Offer. Units may be re-allocated between the Placement Tranche and the Public Offer at the discretion of the Joint Bookrunners (in consultation with the Manager, subject to the minimum unitholding and distribution requirements of the SGX-ST) in the event of an excess of applications in one and a deficit in the other. The Public Offer is open to members of the public in Singapore. Under the Placement Tranche, the Manager intends to offer the Units by way of an international placement through the Joint Bookrunners to investors, including institutional and other investors in Singapore and elsewhere, in reliance on Regulation S. Subject to the terms and conditions set forth in the underwriting agreement entered into between the Joint Bookrunners, the Manager, the Sponsor and TPR on (the Underwriting Agreement ), the Manager is expected to effect for the account of SPH REIT the issue of, and the Joint Bookrunners are expected to severally (and not jointly) procure subscribers, and failing which to subscribe, for, 559,884,000 Units (which includes the Units to be issued pursuant to the Offering, and the Cornerstone Units), in the proportions set forth opposite their respective names below: Joint Bookrunners Credit Suisse (Singapore) Limited . . . . . . . . . . . . . . . . . . . . . . . . . . DBS Bank Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Oversea-Chinese Banking Corporation Limited . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Number of Units 347,717,432 106,083,284 106,083,284 559,884,000
The Units will initially be offered at the Offering Price Range. The Offering Price per Unit in the Placement Tranche and the Public Offer will be identical. The Joint Bookrunners have agreed to severally (and not jointly), procure subscription, and failing which to subscribe, for 559,884,000 Units at the Offering Price, less the Underwriting, Selling and Management Commission (as defined herein) to be borne by SPH REIT. The Offering Price will be determined, following a book-building process, by agreement between the Joint Bookrunners and the Manager on the Price Determination Date, which is expected to be , subject to change. Among the factors that will be considered in determining the Offering Price are the level of investor demand for the Units and the prevailing market conditions in the securities markets. The Manager and the Sponsor have agreed in the Underwriting Agreement to indemnify, amongst others, the Joint Bookrunners against certain liabilities, to the extent permitted by law. The indemnity under the Underwriting Agreement provides that where the indemnification is unavailable to or insufficient to hold harmless, among others, the Joint Bookrunners in respect of any losses, claims, damages or liabilities (or actions in respect thereof), then the Manager and the Sponsor shall contribute to the amount paid or payable by, among others, the Joint Bookrunners as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Manager or the Sponsor, as the case may be, on the one hand and the Joint Bookrunners on the other from the offering of the Units. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law, then the Manager and the Sponsor shall contribute to such amount paid or payable by, among others, the Joint Bookrunners in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Manager or 212
the Sponsor, as the case may be, on the one hand and the Joint Bookrunners on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Manager or the Sponsor, on the one hand and the Joint Bookrunners on the other shall be deemed to be in the same proportion as the total net proceeds from the Offering and the Cornerstone Units (before deducting expenses) received by the Manager or the Sponsor, as the case may be, bear to the total underwriting discounts and commissions received by the Joint Bookrunners, in each case as set forth in the table above. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Manager or the Sponsor on the one hand or the Joint Bookrunners on the other and the parties relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. No Joint Bookrunners shall be required to contribute any amount in excess of the amount by which the total price at which the Units underwritten by it and distributed to the public were offered to investors exceeds the amount of any damages which such Joint Bookrunners has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. The Underwriting Agreement also provides for the obligations of the Joint Bookrunners to severally (and not jointly), procure the subscription, and failing which to subscribe, for the Units in the Offering subject to certain conditions contained in the Underwriting Agreement. The Underwriting Agreement may be terminated by the Joint Bookrunners at any time prior to issue and delivery of the Units upon the occurrence of certain events including, among others, certain force majeure events pursuant to the terms of the Underwriting Agreement. Subscribers of the Units may be required to pay brokerage (and if so required, such brokerage will be up to 1.0% of the Offering Price) and applicable stamp duties, taxes and other similar charges (if any) in accordance with the laws and practices of the country of subscription, in addition to the Offering Price. Each of the Global Coordinator, the Joint Bookrunners and their associates may engage in transactions with, and perform services for, the Trustee, the Manager, the Sponsor and SPH REIT in the ordinary course of business and have engaged, and may in the future engage, in commercial banking, investment banking transactions and/or other commercial transactions with the Trustee, the Manager, the Sponsor and SPH REIT, for which they have received or made payment of, or may in the future receive or make payment of, customary compensation. In particular, it should be noted that DBS Bank Ltd. and Oversea-Chinese Banking Corporation Limited are also acting as the Lenders in relation to the Facility obtained by SPH REIT and DBS Trustee Limited, a subsidiary of DBS Bank Ltd., is performing the role of the Trustee of SPH REIT. See Capitalisation Indebtedness for further details on the Facility. Each of the Global Coordinator, the Joint Bookrunners and their associates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers in the ordinary course of business, and such investment and securities activities may involve securities and instruments, including Units. The Global Coordinator, the Joint Bookrunners and their associates may also make investment recommendations and/or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to their clients that they acquire, long and/or short positions in such securities and instruments.
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OVER-ALLOTMENT AND STABILISATION The Unit Lender has granted the Over-Allotment Option to the Joint Bookrunners for the purchase of up to an aggregate of 55,988,000 Units at the Offering Price. The number of Units subject to the Over-Allotment Option will not be more than 18.1% of the number of Units under the Placement Tranche and the Public Offer. The Stabilising Manager (or any of its affiliates or other persons acting on behalf of the Stabilising Manager), in consultation with the other Joint Bookrunners, may exercise the Over-Allotment Option in full or in part, on one or more occasions, only from the Listing Date but no later than the earliest of (i) the date falling 30 days from the Listing Date; or (ii) the date when the Stabilising Manager (or any of its affiliates or other persons acting on behalf of the Stabilising Manager) has bought, on the SGX-ST, an aggregate of 55,988,000 Units, to undertake stabilising actions to purchase up to an aggregate of 55,988,000 Units, at the Offering Price. In connection with the Over-Allotment Option, the Stabilising Manager and the Unit Lender have entered into a unit lending agreement (the Unit Lending Agreement ) dated pursuant to which the Stabilising Manager (or any of its affiliates or other persons acting on behalf of the Stabilising Manager) may borrow up to an aggregate of 55,988,000 Units from the Unit Lender for the purpose of facilitating settlement of the over-allotment of Units in connection with the Offering. The Stabilising Manager (or any of its affiliates or other persons acting on behalf of the Stabilising Manager) will re-deliver to the Unit Lender such number of Units which have not been purchased pursuant to the exercise of the Over-Allotment Option. In connection with the Offering, the Stabilising Manager (or its affiliates or other persons acting on behalf of the Stabilising Manager) may, in consultation with the other Joint Bookrunners and at its discretion, over-allot or effect transactions which stabilise or maintain the market price of the Units at levels which might not otherwise prevail in the open market. Such transactions may be effected on the SGX-ST and in other jurisdictions where it is permissible to do so, in each case in compliance with all applicable laws and regulations including the SFA and any regulations hereunder. However, there is no assurance that the Stabilising Manager (or any of its affiliates or other persons acting on behalf of the Stabilising Manager) will undertake stabilising action. Any profit after expenses derived, or any loss sustained as a consequence of the exercise of the Over-Allotment Option or the undertaking of any stabilising activities shall be for the account of the Joint Bookrunners. None of the Manager, the Sponsor, the Unit Lender, the Joint Bookrunners or the Stabilising Manager (or any of its affiliates or other persons acting on behalf of the Stabilising Manager) makes any representation or prediction as to the magnitude of any effect that the transactions described above may have on the price of the Units. In addition, none of the Manager, the Sponsor, the Unit Lender, the Joint Bookrunners or the Stabilising Manager (or any of its affiliates or other persons acting on behalf of the Stabilising Manager) makes any representation that the Stabilising Manager (or any of its affiliates or other persons acting on behalf of the Stabilising Manager) will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice (unless such notice is required by law). The Stabilising Manager will be required to make a public announcement via SGXNET in relation to the total number of Units purchased by the Stabilising Manager (or its affiliates or other persons acting on behalf of the Stabilising Manager), not later than 12 noon on the next trading day of the SGX-ST after the transactions are effected. The Stabilising Manager will also be required to make a public announcement through the SGX-ST in relation to the cessation of stabilising action and the number of Units in respect of which the Over-Allotment Option has been exercised not later than 8.30 a.m. on the next trading day of the SGX-ST after the cessation of stabilising action.
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LOCK-UP ARRANGEMENTS The Sponsor Subject to the exception described below, the Sponsor has agreed with the Joint Bookrunners that it will not, without the prior written consent of the Joint Bookrunners (such consent not to be unreasonably withheld or delayed), directly or indirectly, offer, issue, sell, contract to issue or sell, grant any option to purchase, grant security over, swap, hedge, transfer, encumber or otherwise dispose of any or all of its indirect effective interest in the Lock-up Units (or any securities convertible into or exchangeable for Lock-up Units or which carry rights to subscribe or purchase any such Lock-up Units or part thereof), enter into any transaction (including a derivative transaction) with a similar economic effect to the foregoing; deposit any Lock-up Units (or any securities convertible into or exchangeable for Lock-up Units or which carry rights to subscribe for or purchase any such Lock-up Units or part thereof) in any depository receipt facility; enter into a transaction which is designed or which may reasonably be expected to result in any of the above or publicly announce any intention to do any of the above during the Lock-up Period. For the avoidance of doubt, any Units returned under the Unit Lending Agreement will be subject to the lock-up arrangements described above. The restriction described in the preceding paragraph does not apply to: the creation of a charge over the Lock-up Units or otherwise grant of security over or creation of any encumbrance over the Lock-up Units, provided that such charge, security or encumbrance can only be enforced after the end of the Lock-up Period; any securities lending arrangement with the Joint Bookrunners or any sale or transfer of the Lock-up Units by the Unit Lender pursuant to the exercise of the Over-Allotment Option; or the transfer of any Lock-up Units to and between any wholly-owned subsidiaries of the Sponsor provided that the Sponsor has procured that such subsidiary has executed and delivered to the Joint Bookrunners an undertaking to the effect that it will undertake to comply with the foregoing restrictions, to remain in effect for the remaining period of the Lock-up Period.
If, for any reason, the Offering is not completed by 31 July 2013, the lock-up arrangements described above will be terminated. Times Properties and TPR Subject to the exception described below, each of Times Properties and TPR has agreed with the Joint Bookrunners that it will not, without the prior written consent of the Joint Bookrunners (such consent not to be unreasonably withheld or delayed), directly or indirectly, offer, sell or contract to sell, grant any option to purchase, grant security over, swap, hedge, transfer, encumber or otherwise dispose of any or all of its interest in the Lock-up Units (or any securities convertible into or exchangeable for Lock-up Units or which carry rights to subscribe and purchase any such Lock-up Units or part thereof), enter into any transaction (including a derivative transaction) with a similar economic effect to the foregoing; deposit any Lock-up Units (or any securities convertible into or exchangeable for Lock-up Units or which carry rights to subscribe for or purchase any such Lock-up Units or part thereof) in any depository receipt facility; enter into a transaction which is designed or which may reasonably be expected to result in any of the above or publicly announce any intention to do any of the above during the Lock-up Period. The restriction described in the preceding paragraph does not apply to: the creation of a charge over the Lock-up Units or otherwise grant of security over or creation of any encumbrance over the Lock-up Units, provided that such charge, security or encumbrance can only be enforced after the end of the Lock-up Period; 215
(in the case of TPR) the entry into any securities lending arrangement with the Joint Bookrunners or any sale or transfer of the Lock-up Units by the Unit Lender pursuant to the exercise of the Over-Allotment Option; or the transfer of any Lock-up Units to and between any wholly-owned subsidiaries of the Sponsor provided that the Sponsor has procured that such subsidiary has executed and delivered to the Joint Bookrunners an undertaking to the effect that it will undertake to comply with the foregoing restrictions, to remain in effect for the remaining period of the Lock-up Period.
If, for any reason, the Offering is not completed by 31 July 2013, the lock-up arrangements described above will be terminated. For the avoidance of doubt, any Units returned to the Unit Lender pursuant to the Unit Lending Agreement shall be subject to the lock-up arrangements described above. The Manager Subject to the exceptions described below, the Manager has agreed with the Joint Bookrunners that it will not (and will not cause or permit SPH REIT to), for the Lock-up Period, directly or indirectly, without the prior written consent of the Joint Bookrunners (such consent not to be unreasonably withheld or delayed), offer, issue, sell, contract to issue or sell, grant any option to purchase, grant security over, swap, hedge, transfer, encumber or otherwise dispose of any Units (or any securities convertible into or exchangeable for Units or which carry rights to subscribe for or purchase Units or part thereof), enter into any transaction (including a derivative transaction) with a similar economic effect to the foregoing; deposit any Units (or any securities convertible into or exchangeable for Units or which carry rights to subscribe for or purchase Units) in any depository receipt facility; enter into a transaction which is designed or which may reasonably be expected to result in any of the above or publicly announce any intention to do any of the above. The restrictions described in the preceding paragraph do not apply to the issuance of (i) Units to be offered under the Offering; (ii) the Sponsor Initial Unit; (iii) the Consideration Units (iv) the Cornerstone Units; (v) the Units to be issued to the Manager in payment of any fees payable to the Manager under the Trust Deed; and (vi) the Units to be issued to the Property Manager in payment of any fees payable to the Property Manager under the Property Management Agreement. If, for any reason, the Offering is not completed within 31 July 2013, the lock-up arrangements described above will be terminated. SGX-ST LISTING SPH REIT has received a letter of eligibility from the SGX-ST for the listing and quotation of the Units on the Main Board of the SGX-ST. The SGX-ST assumes no responsibility for the correctness of any statements or opinions made or reports contained in this Prospectus. Admission to the Official List of the SGX-ST is not to be taken as an indication of the merits of the Offering, SPH REIT, the Manager or the Units. It is expected that the Units will commence trading on the SGX-ST on a ready basis on or about . Prior to this Offering, there has been no trading market for the Units. There can be no assurance that an active trading market will develop for the Units, or that the Units will trade in the public market subsequent to this Offering at or above the Offering Price. (See Risk Factors Risks Relating to an Investment in the Units The Units have never been publicly traded and the listing of the Units on the Main Board of the SGX-ST may not result in an active or liquid market for the Units for further details.)
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ISSUE EXPENSES The estimated amount of expenses in relation to the Offering and the issuance of Cornerstone Units of S$21 million (using an assumed Maximum Offering Price of S$0.90 and assuming that the Over-Allotment Option is exercised in full) includes the Underwriting, Selling and Management Commission, professional and other fees and all other incidental expenses in relation to the Offering and the issuance of Cornerstone Units, which will be borne by SPH REIT. A breakdown of these estimated expenses is as follows: Estimated Expenses (1) (S$000) Professional and other fees (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Underwriting, Selling and Management Commission
(3)
3,034 13,344 4,144
...........
Miscellaneous Offering expenses (4) . . . . . . . . . . . . . . . . . . . . . . . . . . Total estimated expenses of the Offering and issuance of the Cornerstone Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes: (1) (2) (3) (4) Includes applicable GST.
20,522
Includes solicitors fees and fees for the Reporting Auditors, the Independent Tax Adviser (all as defined herein), both of the Independent Valuers and other professionals fees and other expenses. Such commission represent a maximum of 2.25% of the total proceeds of the Offering (assuming the Maximum Offering Price) and the proceeds raised from the issuance of Cornerstone Units assuming the Over-Allotment Option is exercised in full. Includes cost of prospectus production, road show expenses and certain other expenses incurred or to be incurred in connection with the Offering.
DISTRIBUTION AND SELLING RESTRICTIONS None of the Manager, the Sponsor or the Joint Bookrunners have taken any action, or will take any action, in any jurisdiction other than Singapore that would permit a public offering of Units, or the possession, circulation or distribution of this Prospectus or any other material relating to the Offering in any jurisdiction other than Singapore where action for that purpose is required. Accordingly, each purchaser of the Units may not offer or sell, directly or indirectly, any Units and may not distribute or publish this Prospectus or any other offering material or advertisements in connection with the Units in or from any country or jurisdiction except in compliance with any applicable rules and regulations of such country or jurisdiction. Each purchaser of the Units is deemed to have represented and agreed that it will comply with the selling restrictions set out below for each of the following jurisdictions: Selling Restrictions Australia Any offer, invitation, transfer or issue of Units to any person located in, or a resident of, Australia may not occur unless the person is professional investor or sophisticated investor for the purposes of Chapter 6D, or a wholesale client for the purposes of Part 7.9, of the Corporations Act 2001 (Cth) (the Australian Corporations Act). This document has not been, and will not be, lodged with the Australian Securities and Investments Commission, Australian Securities Exchange or any other regulatory body or agency in Australia as a prospectus or product disclosure statement for
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the purposes of the Australian Corporations Act and is not required to, and does not, contain all the information which would be required in a prospectus or product disclosure statement under Australian law. Any Units issued upon acceptance of the Offering may not be offered for sale (or transferred, assigned or otherwise alienated) to any person located in, or a resident of, Australia for at least 12 months after their issue, except in circumstances where the person is a person to whom a disclosure document is not required to be given under Chapter 6D or Part 7.9 of the Australian Corporations Act. Accordingly, each investor acknowledges these restrictions and, by applying for Units under this document, gives an undertaking not to sell those Units (except in the circumstances referred to above) for 12 months after their issue. SPH REIT has not been and will not be registered as a managed investment scheme under Chapter 5C of the Australian Corporations Act. Neither SPH REIT nor the Manager holds an Australian financial services licence and they are not licensed to provide financial product advice in relation to the Units. Investors in SPH REIT do not have cooling off rights under Australian law. This document does not take into account the investment objectives, financial situation or needs of any particular person. Accordingly, before making any investment decision in relation to this document, you should assess whether the acquisition of the Units is appropriate in light of your own financial circumstances or seek professional advice. Canada The Units will not be sold in Canada or to residents of Canada other than in compliance with applicable Canadian securities laws. The Offering in Canada is being made on a private placement basis. This Prospectus is not, and under no circumstances is to be construed as, an advertisement or a public offering of the Units in Canada. No securities commission or similar authority in Canada has reviewed or in any way passed upon this Prospectus or the merits of the Units, and any representation to the contrary is an offence. European Union In relation to each Member State of the European Economic Area 1 which has implemented the Prospectus Directive (each, a Relevant Member State), no prospectus within the meaning of Article 3 of the Prospectus Directive has been published or is expected to be published. Accordingly, in addition to any other applicable rules or restrictions that may apply to the issue or distribution of this Prospectus in any Relevant Member State, an offer to the public of any Units which are the subject of the Offering contemplated by this document may only be made under the following exemptions from the Prospectus Directive, if they have been implemented in that Relevant Member State: (a) (b) to any legal entity which is a qualified investor, as defined under the Prospectus Directive; by the Manager to fewer than 100, or, if the Relevant Member State has implemented the relevant provisions of the 2010 PD Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the Prospectus Directive) as permitted under the Prospectus Directive, subject to obtaining the prior consent of the Joint Bookrunners for any such offer; or in any other circumstances falling within Article 3(2) of the Prospectus Directive,
(c)
The European Union plus Iceland, Norway and Liechtenstein.
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provided that no such offer of Units shall result in a requirement for the Manager to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive. For the purposes of this provision, the expression an offer to the public in relation to any Units in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the Offering and any Units to be offered so as to enable an investor to decide to purchase any Units, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State, and the expression Prospectus Directive means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in each Relevant Member State and the expression 2010 PD Amending Directive means Directive 2010/73/EU. Hong Kong This document has not been approved by the Securities and Futures Commission in Hong Kong. Accordingly: (a) Units may not be offered or sold in Hong Kong by means of this document or any other document other than to professional investors within the meaning of Part I of Schedule I to the Securities and Futures Ordinance (Cap. 571) (SFO) and any rules made under the SFO; and no person shall issue or possess for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement, invitation or document relating to the Units which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to Units which are or are intended to be disposed of only to persons outside Hong Kong or only to professional investors as defined in the SFO and any rules made under the SFO.
(b)
Malaysia No offer of Units or invitation to purchase is being made to any person in Malaysia under this Prospectus except to persons falling within any of paragraphs 2(g)(i) to (xi) of Schedule 5 of the Capital Markets and Services Act 2007 of Malaysia (CMSA); provided that the distribution of such Units is made by a holder of a Capital Markets Services Licence who carries on the business of dealing in securities. This Prospectus does not constitute and may not be used for the purpose of a public offering or an issue, offer for subscription or purchase, invitation to subscribe for or purchase any securities requiring the registration of a prospectus with the Securities Commission of Malaysia under the CMSA. Peoples Republic of China This Prospectus may not be circulated or distributed in the Peoples Republic of China (excluding, for the purposes of this paragraph, the Hong Kong and Macau Special Administrative Regions and Taiwan Province) and the Units may not be offered or sold directly or indirectly to any resident of the Peoples Republic of China, or offered or sold to any person for reoffering or re-sale directly or indirectly to any resident of the Peoples Republic of China except under applicable laws and regulations of the Peoples Republic of China.
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Switzerland The Units may not be publicly offered, distributed or re-distributed on a professional basis in or from Switzerland and neither this document nor any other solicitation for investments in SPH REIT may be communicated or distributed in Switzerland in any way that could constitute a public offering within the meaning of Articles 1156/652a of the Swiss Code of Obligations (CO). This document may not be copied, reproduced, distributed or passed on to others without the Joint Bookrunners prior written consent. This document is not a prospectus within the meaning of Articles 1156/652a of the CO and SPH REIT will not be listed on the SIX Swiss Exchange. Therefore, this document may not comply with the disclosure standards of the CO and/or the listing rules (including any prospectus schemes) of the SIX Swiss Exchange set forth in art. 27 et seq. of the SIX Listing Rules. In addition, it cannot be excluded that SPH REIT could qualify as a foreign collective investment scheme pursuant to Article 119 of the Swiss Federal Act on Collective Investment Schemes, as amended (CISA). SPH REIT will not be licensed for distribution in and from Switzerland. Therefore, Units may only be distributed to so-called qualified investors in and from Switzerland in accordance with Articles 10 and 120 CISA and Article 6 of the implementing ordinance, as amended, to the CISA. Taiwan The offering of the Units has not been and will not be registered with the Financial Supervisory Commission of Taiwan, the Republic of China, pursuant to relevant securities laws and regulations, and the Units may not be offered or sold in Taiwan, the Republic of China through a public offering, or in any circumstance that constitutes an offer within the meaning of the Securities and Exchange Act of Taiwan, the Republic of China that requires registration or approval of the Financial Supervisory Commission of Taiwan, the Republic of China. No person or entity in Taiwan, the Republic of China has been authorized to offer or sell the Units in Taiwan, the Republic of China. United Kingdom The Units in SPH REIT are units in a collective investment scheme as defined in the Financial Services and Markets Act 2000 (FSMA) of the United Kingdom (UK). SPH REIT has not been authorised, or otherwise recognised or approved by the UK Financial Services Authority (FSA) and, as an unregulated collective investment scheme, accordingly cannot be marketed in the UK to the general public. The issue or distribution of this document in the UK, (a) if made by a person who is not an authorised person under FSMA, is being made only to, or directed only at, persons who (i) are investment professionals falling within Article 19 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the FPO Order) who meet the requirements thereunder; or (ii) are high net worth companies (and certain other entities) falling within Article 49 of the FPO Order who meet the requirements thereunder; or (iii) persons to whom it may otherwise lawfully be distributed under the FPO Order (all such persons together being referred to as FPO persons); and (b) if made by a person who is an authorized person under FSMA, is being made only to, or directed only at, (i) investment professionals falling within Article 14 of the Financial Services and Markets Act 2000 (Promotion of Collective Investment Schemes) (Exemptions) Order 2001 (the CIS Order) who meet the requirements thereunder; or (ii) high net worth companies (and certain other entities) falling within Article 22 of the CIS Order who meet the requirements thereunder; or (iii) persons to whom it may otherwise lawfully be distributed under the CIS Order or Section 4.12 of the FSAs Conduct of Business Sourcebook (all such persons together being referred to as PCIS persons and, together with the FPO persons, the relevant persons). This document must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this document relates is available only to relevant persons and will be engaged in only with relevant persons. 220
Potential investors in the UK are advised that all, or most, of the protections afforded by the UK regulatory system will not apply to an investment in SPH REIT and that compensation will not be available under the UK Financial Services Compensation Scheme. United States The Units have not been, and will not be registered under the Securities Act and may not be offered or sold within the United States (as defined in Regulation S) except in certain transactions exempt from, or not subject to, the registration requirements of the Securities Act. The Units are being offered and sold outside the United States in offshore transactions as defined in, and in reliance on, Regulation S. Until 40 days after the commencement of the Offering, an offer or sale of the Units within the United States by a dealer (whether or not participating in the Offering) may violate the registration requirements of the Securities Act if such offer or sale is made otherwise than in accordance with an exemption from registration under the Securities Act. Transfer Restrictions Each purchaser of the Units offered hereby in reliance on Regulation S will be deemed to have represented and agreed that it has received a copy of this document and such other information as it deems necessary to make an investment decision and that: (a) it is aware that the Units have not been and will not be registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction of the United States; it is purchasing the Units in an offshore transaction meeting the requirements of Regulation S; and it will not offer, sell, pledge or transfer any Units, except in accordance with the Securities Act and any applicable laws of any state of the United States and any other jurisdiction.
(b)
(c)
Terms used in this subsection that are defined in Regulation S are used herein as defined therein. General Each applicant for Units in the Offering will be deemed to have represented and agreed that it is relying on this Prospectus and not on any other information or representation not contained in this Prospectus and none of SPH REIT, the Manager, the Sponsor, the Joint Bookrunners or any other person responsible for this Prospectus or any part of it will have any liability for any such other information or representation.
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CLEARANCE AND SETTLEMENT

INTRODUCTION A letter of eligibility has been obtained from the SGX-ST for the listing and quotation of the Units. For the purpose of trading on the SGX-ST, a board lot for the Units will comprise 1,000 Units. Upon listing and quotation on the SGX-ST, the Units will be traded under the electronic book-entry clearance and settlement system of CDP. All dealings in and transactions of the Units through the SGX-ST will be effected in accordance with the terms and conditions for the operation of Securities Accounts, as amended from time to time. CDP, a wholly-owned subsidiary of Singapore Exchange Limited, is incorporated under the laws of Singapore and acts as a depository and clearing organisation. CDP holds securities for its account-holders and facilitates the clearance and settlement of securities transactions between account-holders through electronic book-entry changes in the Securities Accounts maintained by such accountholders with CDP. It is expected that the Units will be credited into the Securities Accounts of applicants for the Units within four Market Days after the closing date for applications for the Units. CLEARANCE AND SETTLEMENT UNDER THE DEPOSITORY SYSTEM The Units will be registered in the name of CDP or its nominee and held by CDP for and on behalf of persons who maintain, either directly or through depository agents, Securities Accounts with CDP. Persons named as direct Securities Account holders and depository agents in the depository register maintained by CDP will be treated as Unitholders in respect of the number of Units credited to their respective Securities Accounts. Transactions in the Units under the book-entry settlement system will be reflected by the sellers Securities Account being debited with the number of Units sold and the buyers Securities Account being credited with the number of Units acquired and no transfer stamp duty is currently payable for the transfer of Units that are settled on a book-entry basis. Units credited to a Securities Account may be traded on the SGX-ST on the basis of a price between a willing buyer and a willing seller. Units credited into a Securities Account may be transferred to any other Securities Account with CDP, subject to the terms and conditions for the operation of Securities Accounts and a S$10.00 transfer fee payable to CDP. All persons trading in the Units through the SGX-ST should ensure that the relevant Units have been credited into their Securities Account, prior to trading in such Units, since no assurance can be given that the Units can be credited into the Securities Account in time for settlement following a dealing. If the Units have not been credited into the Securities Account by the due date for the settlement of the trade, the buy-in procedures of the SGX-ST will be implemented. CLEARING FEE A clearing fee for the trading of Units on the SGX-ST is payable at the rate of 0.04% of the transaction value, subject to a maximum of S$600.00 per transaction. The clearing fee, deposit fee and unit withdrawal fee may be subject to the prevailing GST. Dealings in the Units will be carried out in Singapore dollars and will be effected for settlement in CDP on a scripless basis. Settlement of trades on a normal ready basis on the SGX-ST generally takes place on the third Market Day following the transaction date. CDP holds securities on behalf of investors in Securities Accounts. An investor may open a direct account with CDP or a sub-account with any CDP depository agent. A CDP depository agent may be a member company of the SGX-ST, bank, merchant bank or trust company. 222
EXPERTS
KPMG LLP, the Reporting Auditors, were responsible for preparing the Reporting Auditors Report on the Profit Forecast and Profit Projections and the Reporting Auditors Report on the Unaudited Pro Forma Financial Information for the Relevant Period found in Appendix A and Appendix B of this Prospectus respectively. Ernst & Young Solutions LLP, the Independent Tax Adviser, was responsible for preparing the Independent Taxation Report found in Appendix D of this Prospectus. CBRE Pte. Ltd. and DTZ Debenham Tie Leung (SEA) Pte Ltd, the Independent Valuers, were responsible for preparing the Independent Property Valuation Summary Reports found in Appendix E of this Prospectus. Urbis Pty Ltd, the Independent Market Research Consultant, was responsible for preparing the Independent Retail Property Market Research Report found in Appendix F of this Prospectus. The Independent Tax Adviser, the Independent Valuers and the Independent Market Research Consultant have each given and have not withdrawn their written consents to the issue of this Prospectus with the inclusion herein of their names and their respective write-ups and reports and all references thereto in the form and context in which they respectively appear in this Prospectus, and to act in such capacity in relation to this Prospectus. None of Allen & Gledhill LLP, WongPartnership LLP, Sidley Austin LLP or Shook Lin & Bok LLP, makes, or purports to make, any statement in this Prospectus and none of them is aware of any statement in this Prospectus which purports to be based on a statement made by it and it makes no representation, express or implied, regarding, and takes no responsibility for, any statement in or omission from this Prospectus.
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REPORTING AUDITORS
KPMG LLP, the Reporting Auditors, have given and have not withdrawn their consent to the issue of this Prospectus for the inclusion herein of: their name; the Reporting Auditors Report on the Profit Forecast and Profit Projection set out in Appendix A; and the Reporting Auditors Report on the Unaudited Pro Forma Financial Information set out in Appendix B,
in the form and context in which they appear in this Prospectus, and references to its name and such reports in the form and context which they appear in this Prospectus and to act in such capacity in relation to this Prospectus.
224
GENERAL INFORMATION
RESPONSIBILITY STATEMENT BY THE DIRECTORS (1) The Directors collectively and individually accept full responsibility for the accuracy of the information given in this Prospectus and confirm after making all reasonable enquiries that, to the best of their knowledge and belief, this Prospectus constitutes full and true disclosure of all material facts about the Offering and SPH REIT and the Directors are not aware of any facts the omission of which would make any statement in this Prospectus misleading, and the Directors are satisfied that the Profit Forecast and Profit Projection contained in Profit Forecast and Profit Projection have been stated after due and careful enquiry. Where information in this Prospectus has been extracted from published or otherwise publicly available sources or obtained from a named source, the sole responsibility of the Directors has been to ensure that such information has been accurately and correctly extracted from those sources and/or reproduced in this Prospectus in its proper form and context.
MATERIAL BACKGROUND INFORMATION (2) There are no legal or arbitration proceedings pending or, so far as the Directors are aware, threatened against the Manager the outcome of which, in the opinion of the Directors, may have or have had during the 12 months prior to the date of this Prospectus, a material adverse effect on the financial position of the Manager. There are no legal or arbitration proceedings pending or, so far as the Directors are aware, threatened against SPH REIT the outcome of which, in the opinion of the Directors, may have or have had during the 12 months prior to the date of this Prospectus, a material adverse effect on the financial position (on a pro forma basis) of SPH REIT. The name, age and address of each of the Directors are set out in The Manager and Corporate Governance Board of Directors of the Manager. A list of the present and past directorships of each Director and executive officer of the Manager over the last five years preceding the Latest Practicable Date is set out in Appendix H, List of Present and Past Principal Directorships of Directors and Executive Officers. There is no family relationship among the Directors and executive officers of the Manager. None of the Directors or executive officers of the Manager is or was involved in any of the following events: (i) at any time during the last 10 years, an application or a petition under any bankruptcy laws of any jurisdiction filed against him or against a partnership of which he was a partner at the time when he was a partner or at any time within two years from the date he ceased to be a partner; at any time during the last 10 years, an application or a petition under any law of any jurisdiction filed against an entity (not being a partnership) of which he was a director or an equivalent person or a key executive, at the time when he was a director or an equivalent person or a key executive of that entity or at any time within two years from the date he ceased to be a director or an equivalent person or a key executive of that entity, for the winding up or dissolution of that entity or, where that entity is the trustee of a business trust, that business trust, on the ground of insolvency;
(3)
(4)
(5) (6)
(ii)
(iii) any unsatisfied judgment against him;
225
(iv) a conviction of any offence, in Singapore or elsewhere, involving fraud or dishonesty which is punishable with imprisonment, or has been the subject of any criminal proceedings (including any pending criminal proceedings of which he is aware) for such purpose; (v) a conviction of any offence, in Singapore or elsewhere, involving a breach of any law or regulatory requirement that relates to the securities or futures industry in Singapore or elsewhere, or has been the subject of any criminal proceedings (including any pending criminal proceedings of which he is aware) for such breach;
(vi) at any time during the last 10 years, judgment been entered against him in any civil proceedings in Singapore or elsewhere involving a breach of any law or regulatory requirement that relates to the securities or futures industry in Singapore or elsewhere, or a finding of fraud, misrepresentation or dishonesty on his part, or any civil proceedings (including any pending civil proceedings of which he is aware) involving an allegation of fraud, misrepresentation or dishonesty on his part; (vii) a conviction in Singapore or elsewhere of any offence in connection with the formation or management of any entity or business trust; (viii) disqualification from acting as a director or an equivalent person of any entity (including the trustee of a business trust), or from taking part directly or indirectly in the management of any entity or business trust; (ix) any order, judgment or ruling of any court, tribunal or governmental body permanently or temporarily enjoining him from engaging in any type of business practice or activity; (x) to his knowledge, been concerned with the management or conduct, in Singapore or elsewhere, of the affairs of: (a) any corporation which has been investigated for a breach of any law or regulatory requirement governing corporations in Singapore or elsewhere; any entity (not being a corporation) which has been investigated for a breach of any law or regulatory requirement governing such entities in Singapore or elsewhere; any business trust which has been investigated for a breach of any law or regulatory requirement governing business trusts in Singapore or elsewhere; or any entity or business trust which has been investigated for a breach of any law or regulatory requirement that relates to the securities or futures industry in Singapore or elsewhere,
(b)
(c)
(d)
in connection with any matter occurring or arising during the period when he was so concerned with the entity or business trust; or (xi) the subject of any current or past investigation or disciplinary proceedings, or has been reprimanded or issued any warning, by the Authority or any other regulatory authority, exchange, professional body or government agency, whether in Singapore or elsewhere.
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MATERIAL CONTRACTS (7) The dates of, parties to, and general nature of every material contract which the Trustee has entered into within the two years preceding the date of this Prospectus (not being contracts entered into in the ordinary course of the business of SPH REIT) are as follows: (i) (ii) the Trust Deed; the Clementi Mall Call Option Agreement;
(iii) the Clementi Mall Sale Agreement; (iv) the Deed of Income Support; (v) the Paragon Call Option Agreement;
(vi) the Paragon Sale Agreement; (vii) the Property Management Agreement; (viii) the Right of First Refusal Agreement; (ix) the Vendor Lease; and (x) the IP Licence Agreement.
DOCUMENTS FOR INSPECTION (8) Copies of the following documents are available for inspection at the registered office of the Manager at 1000 Toa Payoh North, News Centre, Singapore 318994, for a period of six months from the date of this Prospectus: (i) the material contracts referred to in paragraph 7 above, save for the Trust Deed (which will be available for inspection for so long as SPH REIT is in existence); the Underwriting Agreement;
(ii)
(iii) the Reporting Auditors Report on the Profit Forecast and Profit Projection as set out in Appendix A of this Prospectus; (iv) the Reporting Auditors Report on the Unaudited Pro Forma Financial Information as set out in Appendix B of this Prospectus; (v) the Independent Taxation Report as set out in Appendix D of this Prospectus;
(vi) the Independent Property Valuation Summary Reports as set out in Appendix E of this Prospectus as well as the full valuation reports for each of the Properties; (vii) the Independent Retail Property Market Research Report set out in Appendix F of this Prospectus; (viii) the written consents of the Reporting Auditors, both the Independent Valuers, the Independent Market Research Consultant and the Independent Tax Adviser (see Experts and Reporting Auditors for further details);
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(ix) the Cornerstone Subscription Agreements (as defined herein); and (x) the Depository Services Terms and Conditions.
CONSENTS OF THE GLOBAL COORDINATOR AND JOINT BOOKRUNNERS (9) Credit Suisse (Singapore) Limited have given and not withdrawn its written consent to being named in this Prospectus as the Sole Global Coordinator and Issue Manager to the Offering.
(10) Credit Suisse (Singapore) Limited, DBS Bank Ltd. and Oversea-Chinese Banking Corporation Limited, have each given and not withdrawn its written consent to being named in this Prospectus as a Joint Bookrunner and Underwriter to the Offering. WAIVERS FROM THE SGX-ST (11) The Manager has obtained from the SGX-ST waivers from compliance with the following Listing Rules under the Listing Manual: (i) Rule 404(3), which relates to restrictions on investments subject to compliance with the CIS Code; Rule 404(5), which requires the management company to be reputable and have an established track record in managing investments subject to the management team in the Manager, which is the entity responsible for managing the assets held by SPH REIT, having the relevant experience;
(ii)
(iii) Rule 407(4), which requires the submission of the financial track record of the investment manager and investment adviser and the persons employed by them; (iv) Rule 609(b), which requires three-year pro forma financial information to be included in this Prospectus subject to the disclosure of the following: (a) pro forma historical statements of total return of the Initial Portfolio for a period of three years from 1 September 2009 to 31 August 2012 and for each of the six-month period ended 29 February 2012 and 28 February 2013, save that such financial information will only cover, in respect of Clementi Mall, financial information from the time when Clementi Mall received the second TOP on 14 March 2011; unaudited pro forma balance sheet as at 31 August 2012 and as at 28 February 2013; unaudited cash flows statement for the financial year ended 31 August 2012 and for each of the six-month period ended 29 February 2012 and 28 February 2013; profit forecast for the financial period from 1 March 2013 to 31 August 2013 and a profit projection for the financial year from 1 September 2013 to 31 August 2014; and full disclosure on the reasons why the full three-year pro forma financial information of SPH REIT only incorporates historical financial information of Clementi Mall from March 2011, and the waiver granted by the SGX-ST;
(b)
(c)
(d)
(e)
(v)
Rule 705(1) for the period ended 31 August 2013 which requires an issuer to announce the financial statements for the full financial year immediately after the figures are 228
available, but in any event not later than 60 days after the relevant financial period subject to SPH REIT announcing its first quarter results from the Listing Date to 30 November 2013; and (vi) Rule 707(1) and (2) for the period ended 31 August 2013 set out the requirements for the holding of annual general meetings and the issuance of annual reports subject to SPH REIT preparing its first annual report commencing from the period from the Listing Date to 31 August 2014. WAIVER FROM THE MAS (12) The Manager has obtained from the MAS a waiver from paragraph 11(c)(ii) of the Property Funds Appendix which requires SPH REIT to disclose in its annual report the identities and contributions of the top 10 tenants in respect of SPH REITs properties, subject to the condition that SPH REIT discloses in its future annual reports: (i) the top 10 tenants (except for the tenant whose tenancy agreement contains a confidentiality provision and who had not consented to the disclosure of its tenancy agreement); and the percentage of gross rental income attributable to each of the top 10 tenants,
(ii)
save that the information in (i) and (ii) need not be matched. MISCELLANEOUS (13) The financial year-end of SPH REIT is 31 August. The annual audited financial statements of SPH REIT will be prepared and sent to Unitholders within four months of the financial year-end and at least 14 days before the annual general meeting of the Unitholders. (14) A full valuation of each of the real estate assets held by SPH REIT will be carried out at least once a year in accordance with the Property Funds Appendix. Generally, where the Manager proposes to issue new Units (except in the case where new Units are being issued in payment of the Managers management fees) or to redeem existing Units, a valuation of the real properties held by SPH REIT must be carried out in accordance with the Property Funds Appendix. The Manager or the Trustee may at any other time arrange for the valuation of any of the real properties held by SPH REIT if it is of the opinion that it is in the best interest of Unitholders to do so. (15) While SPH REIT is listed on the SGX-ST, investors may check the SGX-ST website http://www.sgx.com for the prices at which Units are being traded on the SGX-ST. Investors may also check one or more major Singapore newspapers such as The Straits Times, The Business Times and Lianhe Zaobao , for the price range within which Units were traded on the SGX-ST on the preceding day. (16) The Manager does not intend to receive soft dollars (as defined in the CIS Code) in respect of SPH REIT. Save as disclosed in this Prospectus, unless otherwise permitted under the Listing Manual, neither the Manager nor any of its Associates will be entitled to receive any part of any brokerage charged to SPH REIT, or any part of any fees, allowances or benefits received on purchases charged to SPH REIT.
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GLOSSARY
% 9/11 Aggregate Leverage : : : Percentage Terrorist attacks of September 11, 2001 The percentage of total borrowings and deferred payments (if any) for assets of SPH REIT to the value of the Deposited Property Agreement to Lease dated 7 January 2010 The printed application forms to be used for the purpose of the Offering and which form part of this Prospectus The list of applicants subscribing for Units which are the subject of the Public Offer Has the meaning ascribed to it in the Listing Manual Automated teller machine The audit and risk committee of the Board
Agreement to Lease Application Forms
: :
Application List
Associate ATM Audit and Risk Committee Authorised Investments Authority or MAS AYE Base Case
: : :
: : : :
Has the meaning ascribed to it in the Trust Deed Monetary Authority of Singapore Ayer Rajah Expressway For the purposes of sensitivity analysis, the base case shown therein is based on the Profit Forecast and Profit Projection and the assumptions outlined in Profit Forecast and Profit Projection, unless otherwise indicated 0.25% per annum of the value of SPH REITs Deposited Property In relation to the ROFR, means a binding commitment (in the form of a sale and purchase agreement or a put and call option agreement, whether conditional or unconditional) The board of directors of the Manager Any day (other than a Saturday, Sunday or gazetted public holiday) on which commercial banks are open for business in Singapore and the SGX-ST is open for trading Compounded annual growth rate CBRE Pte. Ltd. The Central Depository (Pte) Limited The Code on Collective Investment Schemes issued by the MAS
Base Fee
Binding Commitment
Board Business Day
: :
CAGR CBRE CDP CIS Code
: : : :
230
Clementi Mall
A 99-year leasehold interest commencing on 31 August 2010
in
The
Clementi
Mall
Clementi Mall Call Option Agreement Clementi Mall Lease
Call option agreement dated 9 July 2013 entered into between CM Domain and the Trustee, as trustee of SPH REIT Lease No. ID/514616Q dated 12 April 2013 granted by the Housing and Development Board as lessor under which Clementi Mall is being held Sale and purchase agreement for the sale of Clementi Mall together with the plant and equipment by CM Domain to the Trustee at the purchase price of S$570,500,000 CM Domain Pte. Ltd., a wholly owned subsidiary of SG Domain Pte. Ltd. which is in turn owned by each of Times Properties, NTUC Fairprice Co-Operative Ltd and NTUC Income Insurance Co-Operative Ltd which respectively hold 60.0%, 20.0% and 20.0% of the total number of ordinary shares issued by SG Domain Pte. Ltd. Lease of Clementi Mall to CM Domain for a leasehold term of 99 years commencing on 31 August 2010 Capital markets services licence for REIT management Occupancy rate based on all current leases in respect of the Properties including letters of offer accepted by tenants which are to be followed up with tenancy agreements to be signed by the parties and for which a deposit has been paid Companies Act, Chapter 50 of Singapore Particulars & Conditions of Tender for proposed commercial space within the Mixed Development The Units to be issued to CM Domains nominees as part consideration for the acquisition of Clementi Mall and the Units to be issued to O290s nominees as part consideration for the acquisition of Paragon For the purpose of calculating the fees payable to the Property Manager means all construction costs and expenditure valued by the quantity surveyor engaged by the Trustee for the project, excluding development charges, differential premiums, statutory payments, consultants professional fees and GST A person who (i) holds directly or indirectly 15.0% or more of the nominal amount of all voting shares of the company or (ii) in fact exercises control over the company A person who (i) holds directly or indirectly 15.0% or more of the nominal amount of all voting units in the real estate investment trust or (ii) in fact exercises control over the real estate investment trust
Clementi Mall Sale Agreement
CM Domain
CM Lease Term
CMS Licence Committed Occupancy
: :
Companies Act Conditions of Tender
: :
Consideration Units
construction costs
controlling shareholder
controlling unitholder
231
Cornerstone Investors
The cornerstone investors being Great Eastern Life Assurance Company Limited, Hong Leong Asset Management Bhd, Morgan Stanley Investment Management Company, Newton Investment Management and Norges Bank The subscription agreements entered into between the Manager and the Cornerstone Investors to subscribe for the Cornerstone Units The 251,000,000 Units to be issued to the Cornerstone Investors Mass Rapid Transit Corporation Central Provident Fund Central Expressway Rental income generated from current tenancy agreements The deed of income support dated 9 July 2013 entered into between CM Domain and the Trustee, as trustee of SPH REIT, pursuant to which CM Domain will provide the Income Support
Cornerstone Subscription Agreements
Cornerstone Units
Corporation CPF CTE Current Passing Rent Deed of Income Support
: : : : :
Deposited Property
All the assets of SPH REIT, including the Properties and all the Authorised Investments of SPH REIT for the time being held or deemed to be held in accordance with the Trust Deed The CDPs depository services terms and conditions in relation to the deposit of the Units in CDP Distribution per Unit DTZ Debenham Tie Leung (SEA) Pte Ltd In relation to Clementi Mall, the electrical and mechanical plant, system and equipment including appurtenant cables, pipes and ducts owned or to be owned by HDB, the Ministry of Transport, the LTA, their respective successors and assigns, the owners and occupiers for the time being of the State Lot and persons authorised by them or given permission by them ATM Electronic Applications and applications for Offering Units through the Internet Banking website of the relevant Participating Banks and the mobile banking interface of DBS Bank Ltd. Freehold title The Trust Deed, the ROFR, the Clementi Mall Call Option Agreement, the Clementi Sale Agreement, the Deed of Income Support, the New Sculpture Contract, the Paragon Call Option Agreement, the Paragon Sale Agreement, the Vendor Lease, the Property Management Agreement and the IP Licence Agreement
Depository Services Terms and Conditions DPU DTZ Electrical and Mechanical Plant and System
: : :
Electronic Applications
Estate in fee simple Exempted Agreements
: :
232
Extraordinary Resolution
A resolution proposed and passed as such by a majority consisting of 75.0% or more of the total number of votes cast for and against such resolution at a meeting of Unitholders duly convened and held in accordance with the provisions of the Trust Deed Secured term loan facility of S$975.0 million with staggered loan maturities of three, five and seven year terms The fee arrangements of the Property Manager, the Manager and the Trustee as set out in Overview Certain Fees and Charges The first distribution of SPH REIT after the Listing Date for the period from the Listing Date to 30 November 2013 Rent which includes (i) base rent (after rent rebates, refunds, credits or discounts and rebates for rent-free periods, where applicable, but excluding turnover rent), (ii) service charges payable by tenants to cover the operation and property maintenance expenses of the respective Properties and (iii) advertising and promotion charges payable by tenants for advertising and promotional activities for the respective Properties 1 March 2013 to 31 August 2013
Facility
Fee Arrangements
First Distribution
Fixed Rent
Forecast Period 2H FY2013 Further Grant in Fee Simple FY
Grant in Fee Simple No. 2967 dated 31 March 2008
Financial year ended or, as the case may be, ending 31 August Financial year ended 31 August 2010 Financial year ended 31 August 2011 Financial year ended 31 August 2012 Food and beverage Gross floor area Global financial crisis in 2008 and 2009 Credit Suisse (Singapore) Limited
FY2010 FY2011 FY2012 F&B GFA GFC Global Coordinator or Sole Global Coordinator and Issue Manager Grantor Grants in Fee Simple Gross Rental Income
: : : : : : :
: : :
President of the Republic of Singapore Grants in Fee Simple Nos. 34 and 49 Comprises Fixed Rent and Turnover Rent
233
Gross Revenue
Comprises Gross Rental Income, car park income and other income earned from the Properties, including advertising and promotion income attributable to the operation of the Properties Goods and Services Tax Guaranteed Net Property Income of S$31.0 million per annum
GST Guaranteed Income Amount Guaranteed Obligations
: :
Times Properties guarantee to the Trustee of CM Domains and O290s respective due and punctual payment of all amounts payable by CM Domain and O290 under the Clementi Mall Sale Agreement and the Paragon Sale Agreement and the due and punctual performance and observance by CM Domain and O290 of all their respective obligations, commitments, undertakings, warranties and indemnities under or pursuant to the Clementi Mall Sale Agreement and the Paragon Sale Agreement Healthcare services Housing and Development Board The Grants in Fee Simple and the Further Grant in Fee Simple President of the Republic of Singapore as lessor The income support arrangement which the Manager has put in place in relation to Clementi Mall Income Tax Act, Chapter 134 of Singapore Urbis Pty Ltd
HCS HDB Head Grants Head Lessor Income Support
: : : : :
Income Tax Act Independent Market Research Consultant or Urbis Independent Tax Adviser Independent Valuers Initial Portfolio
: :
: : :
Ernst & Young Solutions LLP CBRE and DTZ The initial portfolio of properties held by SPH REIT as at the Listing Date Offers, agreements or options that might or would require Units to be issued, including but not limited to the creation and issue of (as well as adjustments to) securities, warrants, debentures or other instruments convertible into Units Has the meaning ascribed to it in the Property Funds Appendix Has the meaning ascribed to it in the Property Funds Appendix Has the meaning ascribed to it in the Listing Manual
Instruments
interested party
interested party transaction interested person
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interested person transaction Investible Savings
Has the meaning ascribed to it in the Listing Manual
The balance in a CPF Ordinary Account plus the net amounts (if any) withdrawn for education and investment Intellectual property licence agreement in respect of the Mark entered into by O290 and the Trustee Initial public offering Inland Revenue Authority of Singapore Credit Suisse (Singapore) Limited, DBS Bank Ltd. and Oversea-Chinese Banking Corporation Limited
IP Licence Agreement
IPO IRAS Joint Bookrunners or Joint Bookrunners and Underwriters km Land
: : :
: :
kilometre Land on which, inter alia , Clementi Mall is located pursuant to the State Lease Land Acquisition Act, Chapter 152 of Singapore Land Titles Act, Chapter 157 of Singapore 1 July 2013, being the latest practicable date prior to the lodgement of this Prospectus with the MAS DBS Bank Ltd. and Oversea-Chinese Banking Corporation Limited CM Domain, as lessee of Clementi Mall pursuant to the Clementi Mall Lease Structural elements including columns and beams thereon owned by the Lessee The date of admission of SPH REIT to the Official List of the SGX-ST The Listing Manual of the SGX-ST The period commencing from the Listing Date until the date falling six months after the Listing Date (both dates inclusive) The Units which are held by the Sponsor and any other entity which is wholly-owned by the Sponsor which are subject to the lock-up arrangement Land Transport Authority SPH REIT Management Pte. Ltd., in its capacity as manager of SPH REIT Trade mark Paragon A day on which the SGX-ST is open for trading in securities
Land Acquisition Act Land Titles Act Latest Practicable Date
: : :
Lenders
Lessee
Lessees Structural Elements Listing Date
Listing Manual Lock-up Period
: :
Lock-up Units
LTA Manager
: :
Mark Market Day
: :
235
Material Breach of Warranty
In relation to the Clementi Sale Agreement: Any breach of any of the warranties contained in Schedule 1 to the Clementi Mall Sale Agreement which causes, or will cause, results or will result in, the amount of the aggregate loss of Net Property Income of Clementi Mall over the 12-month period following the completion date to exceed S$7,000,000 In relation to the Paragon Sale Agreement: Any breach of any of the warranties contained in Schedule 1 to the Paragon Sale Agreement which causes, or will cause, results or will result in, the amount of the aggregate loss of Net Property Income of Paragon over the 12-month period following the completion date to exceed S$30,000,000
Maximum Offering Price
S$0.90 per Unit, being the maximum subscription price of the Offering Price Range Refers to medical suites and medical clinics S$0.85 per Unit, being the minimum subscription price of the Offering Price Range Mixed development at Clementi Town Centre comprising residential flats, podium block, bus interchange and basement Mass rapid transit Net asset value Gross Revenue less property expenses A sculpture by Jean-Michel, known as Noeud Rouge Agreements relating to the acquisition of a new sculpture for Paragon Net lettable area Orchard 290 Ltd, a wholly-owned subsidiary of Times Properties, which is in turn a wholly-owned subsidiary of the Sponsor The offering of 308,884,000 Units by the Manager for subscription at the Offering Price under the Placement Tranche and the Public Offer The subscription price of each Unit under the Offering, currently expected to be between S$0.85 and S$0.90 per Unit S$0.85 to S$0.90 per Unit The 308,884,000 Units to be issued pursuant to the Offering
Medical Suites Minimum Offering Price
: :
Mixed Development
MRT NAV Net Property Income New Sculpture New Sculpture Contract
: : : : :
NLA O290
: :
Offering
Offering Price
Offering Price Range Offering Units
: :
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Ordinary Resolution
A resolution proposed and passed as such by a majority being greater than 50.0% of the total number of votes cast for and against such resolution at a meeting of Unitholders duly convened and held in accordance with the provisions of the Trust Deed An option granted by the Unit Lender to the Joint Bookrunners to purchase from the Unit Lender up to an aggregate of 55,988,000 Units at the Offering Price, solely to cover the over-allotment of Units (if any) A 99-year leasehold interest in Paragon commencing on the Listing Date Call option agreement dated 9 July 2013 entered into between O290 and the Trustee, as trustee of SPH REIT Six-storey and one basement retail podium in Paragon with 483,690 sq ft of retail NLA in Paragon 14-storey tower and another three-storey tower with a total 223,000 sq ft of medical suite/office NLA in Paragon Sale and purchase agreement for the sale of (i) a 99-year leasehold interest in Paragon commencing from the date of completion together with the plant and equipment and the licensing to the Trustee of the right to use the trademark referred to in the IP Licence Agreement at the purchase price of S$2,500,000,000, and (ii) certain sculptures at Paragon at a purchase consideration which is the aggregate of S$1,018,500 and an amount equivalent to all payments (other than the purchase price and GST for the new sculpture referred to below to be installed at Paragon) made prior to completion by O290 pursuant to the New Sculpture Contract DBS Bank Ltd. (including POSB), Oversea-Chinese Banking Corporation Limited (OCBC) and United Overseas Bank Limited and its subsidiary, Far Eastern Bank Limited (UOB Group) 5.0% per annum of the Net Property Income of SPH REIT in the relevant financial year Pan Island Expressway The international placement of 224,902,000 Units to investors, including institutional and other investors in Singapore The forecast results for the Forecast Period 2H FY2013 and projected results for the Projection Year FY2014 1 September 2013 to 31 August 2014
Over-Allotment Option
Paragon
Paragon Call Option Agreement Paragon Mall
Paragon Medical
Paragon Sale Agreement
Participating Banks
Performance Fee
PIE Placement Tranche
: :
Price Determination Date Profit Forecast and Profit Projection Projection Year FY2014 or FY2014
: :
237
Properties
The properties which are held by SPH REIT, and Property means any one of them Appendix 6 of the CIS Code issued by the MAS in relation to REITs The property management agreement dated 9 July 2013 entered into between the Manager, the Trustee and the Property Manager SPH Retail Property Management Services Pte. Ltd., as the property manager of SPH REIT In relation to the ROFR, means any proposed offer by a Relevant Entity to dispose of any interest in any Relevant Asset which is owned by the Relevant Entity The offering to the public in Singapore of 83,982,000 Units A person who is neither an individual nor a resident of Singapore for income tax purposes and who does not have a permanent establishment in Singapore or who carries on any operation in Singapore through a permanent establishment in Singapore, where the funds used by that person to acquire the Units are not obtained from that operation A Unitholder who is an individual, a company incorporated and tax resident in Singapore, a body of persons, other than a company or a partnership, incorporated or registered in Singapore (for example, a town council, a statutory board, a registered charity, a registered co-operative society, a registered trade union, a management corporation, a club and a trade and industry association) or a Singapore branch of a foreign company which has presented a letter of approval from the IRAS granting a waiver from tax deduction at source in respect of distributions from SPH REIT Railway area in the lands described in the First Schedule of Gazette No. S52 dated 8 March 1988 Rapid Transit Systems (Railway Protection, Restricted Activities) Regulations Any stock exchange of repute in any part of the world
Property Funds Appendix
Property Management Agreement
Property Manager
Proposed Disposal
Public Offer Qualifying Non-resident Non-individual Unitholder
: :
Qualifying Unitholder
Railway Lands
Railway Protection Regulations Recognised Stock Exchange Regulation S REIT related corporation Related Party
: : : :
Regulation S under the Securities Act Real estate investment trust Has the meaning ascribed to it in the Companies Act Refers to an interested person as defined in the Listing Manual and/or, as the case may be, an interested party as defined in the Property Funds Appendix
238
Related Party Transaction
Interested person transactions as defined in the Listing Manual and interested party transactions as defined in the Property Funds Appendix A completed income-producing real estate located in Asia Pacific which is used primarily for retail purposes SPHL or any of its existing or future subsidiaries or SPHL Private Funds FY2010, FY2011, FY2012 and the six-month periods ended 29 February 2012 and 28 February 2013 KPMG LLP Right of first refusal The properties which are subject to the ROFR (including but not limited to The Seletar Mall) Singapore dollars and cents, the lawful currency of the Republic of Singapore The commercial gross floor area and the additional institutional space as stated in the Conditions of Tender Severe Acute Respiratory Syndrome Paragon Securities account or sub-account maintained by a Depositor (as defined in Section 130A of the Companies Act) with CDP U.S. Securities Act of 1933, as amended Securities and Futures Act, Chapter 289 of Singapore
Relevant Asset
Relevant Entity
Relevant Period
Reporting Auditors ROFR ROFR Properties
: : :
S$ or Singapore dollars and cents said area
SARS Secured Property Securities Account
: : :
Securities Act Securities and Futures Act or SFA Sellers Stamp Duty
: :
Stamp duty which a vendor is obligated to pay on the disposal of certain immovable property by the vendor and under certain conditions Service charges and advertising and promotion charges payable by tenants to defray operating costs of the Properties The date and time on which the Units are issued as settlement under the Offering Singapore Exchange Securities Trading Limited Singapore-sourced rental and other property related income from the business of property letting, Singapore-sourced interest income, discount or premium from placement of surplus cash as deposits with banks or investment in debt securities and top-up payments from Income Support derived by SPH REIT
service charge
Settlement Date
SGX-ST Specified Income
: :
239
Specified Taxable Income
Specified Income, net of allowable expenses and applicable tax allowances SPH REIT, a real estate investment trust established in Singapore and constituted by the Trust Deed Singapore Press Holdings Limited Future private funds to be managed by SPHL The Sponsor and its subsidiaries and related corporations The one Unit held by the Sponsor through TPR on the Listing Date immediately before the issue of the Offering Units Special purpose vehicle Square feet Square metres Singapore Retailers Association Supplementary Retirement Scheme Credit Suisse (Singapore) Limited Stamp Duties Act, Chapter 312 of Singapore State Lease No. 26379 dated 10 May 2007 (as supplemented by the Supplemental Lease dated 22 September 2008) Lots 70002K, 70003N, 70004X, 70005L, 70006C and 70007M of Mukim 5 Singapore Tourism Board Such facility, building or development (the first of which shall be a bus interchange) as may be built or developed on the State Lot Columns, foundations, beams, walls and other structures that support, uphold and maintain the State Lot and the structures on the State Lot Any Unitholder with an interest in one or more Units constituting not less than 5.0% of all Units in issue The Singapore Code on Take-overs and Mergers issued by the Securities Industry Council of Singapore Distributions made out of Specified Taxable Income
SPH REIT
SPHL or Sponsor SPHL Private Funds Sponsor Group Sponsor Initial Unit
: : : :
SPV sq ft sq m SRA SRS Stabilising Manager Stamp Duties Act State Lease
: : : : : : : :
State Lot
STB Stratum
: :
Structural Elements
Substantial Unitholder
Take-over Code
Taxable Income Distributions Threshold Amount
In relation to the Deed of Income Support, the sum of S$31,000,000 per annum (pro-rated where the relevant financial period is less than a full financial year)
240
Times Properties
Times Properties Private Limited, a wholly-owned subsidiary of the Sponsor Temporary occupation licences Temporary Occupation Permit In relation to the Income Support, the difference between the Guaranteed Income Amount and actual Net Property Income for each financial quarter/period together with any applicable taxes payable The relevant Town Council referred to in the Agreement to Lease TPR Holdings Pte. Ltd., a wholly-owned subsidiary of Times Properties, which is in turn a wholly owned subsidiary of the Sponsor The trust deed dated 9 July 2013 entered into between the Manager and DBS Trustee Limited constituting SPH REIT, and as may be amended, varied or supplemented from time to time DBS Trustee Limited, in its capacity as trustee of SPH REIT Rent calculated by reference to a pre-determined percentage of a tenants gross turnover Unaudited pro forma financial information of SPH REIT
TOLs TOP top-up payments
: : :
Town Council
TPR
Trust Deed
Trustee Turnover Rent
: :
Unaudited Pro Forma Financial Information Underwriting Agreement :
The underwriting agreement dated entered into between the Sponsor, the Manager, the Unit Lender and the Joint Bookrunners The underwriting, selling and management commission payable to the Joint Bookrunners for their services in connection with the Offering An undivided interest in SPH REIT as provided for in the Trust Deed The registered holder for the time being of a Unit including persons so registered as joint holders, except that where the registered holder is CDP, the term Unitholder shall, in relation to Units registered in the name of CDP, mean, where the context requires, the depositor whose Securities Account with CDP is credited with Units The general mandate for the Manager to issue Units within certain limits until (i) the conclusion of the first annual general meeting of SPH REIT or (ii) the date by which first annual general meeting of SPH REIT is required by applicable regulations to be held, whichever is earlier TPR
Underwriting, Selling and Management Commission
Unit(s)
Unitholder(s)
Unit Issue Mandate
Unit Lender
241
Unit Lending Agreement
The unit lending agreement entered into between the Stabilising Manager (or its affiliates or other persons acting on behalf of the Stabilising Manager) and the Unit Lender dated in connection with the Over-Allotment Option Boardroom Corporate & Advisory Services Pte. Ltd. United States of America Registrable 99-year lease in respect of Paragon O290 and CM Domain
Unit Registrar United States or U.S. Vendor Lease Vendors
: : : :
Words importing the singular shall, where applicable, include the plural and vice versa . Words importing the masculine gender shall, where applicable, include the feminine and neuter genders. References to persons shall include corporations. Any reference in this Prospectus to any enactment is a reference to that enactment for the time being amended or re-enacted. Any reference to a time of day in this Prospectus is made by reference to Singapore time unless otherwise stated. Any discrepancies in the tables, graphs and charts between the listed amounts and totals thereof are due to rounding. Information contained in the Managers website and the Sponsors website does not constitute part of this Prospectus.
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APPENDIX A
REPORTING AUDITORS REPORT ON THE PROFIT FORECAST AND PROFIT PROJECTION

The Board of Directors SPH REIT Management Pte. Ltd. (as manager of SPH REIT) 1000 Toa Payoh North, News Centre Singapore 318994 DBS Trustee Limited (as trustee of SPH REIT) 12 Marina Boulevard Level 44 DBS Asia Central @ Marina Bay Financial Centre Tower 3 Singapore 018982 9 July 2013 Dear Sirs Letter from the Reporting Auditors on the Profit Forecast for the Period from 1 March 2013 to 31 August 2013 and the Profit Projection for the Year Ending 31 August 2014 This letter has been prepared for inclusion in the preliminary prospectus (the Prospectus) to be issued in connection with the offering of 615,872,000 Units in SPH REIT assuming that the over-allotment option is exercised, at the indicative offering price range of S$0.85 to S$0.90 per Unit (the Offering). The directors of SPH REIT Management Pte. Ltd. (the Directors) are responsible for the preparation and presentation of the forecast statement of total return for the period from 1 March 2013 to 31 August 2013 (the Profit Forecast) and the projected statement of total return for the year ending 31 August 2014 (the Profit Projection) as set out on page 94 of this Prospectus, which have been prepared on the basis of the assumptions set out on pages 95 to 100 of this Prospectus. We have examined the Profit Forecast of SPH REIT for the period from 1 March 2013 to 31 August 2013 and the Profit Projection for the year ending 31 August 2014 as set out on page 94 of this Prospectus in accordance with Singapore Standard on Assurance Engagements (SSAE) 3400 The Examination of Prospective Financial Information . The Directors are solely responsible for the Profit Forecast and Profit Projection including the assumptions set out on pages 95 to 100 of this Prospectus on which they are based. Profit Forecast Based on our examination of the evidence supporting the relevant assumptions, nothing has come to our attention which causes us to believe that these assumptions do not provide a reasonable basis for the Profit Forecast. Further, in our opinion the Profit Forecast, so far as the accounting policies and calculations are concerned, is properly prepared on the basis of the assumptions, is consistent with the accounting policies set out on pages C-14 to C-21 of this Prospectus, and is presented in accordance with the applicable presentation principles of Recommended Accounting
A-1
Practice 7 Reporting Framework for Unit Trusts (but not all the required disclosures) issued by the Institute of Singapore Chartered Accountants (ISCA), which is the framework to be adopted by SPH REIT in the preparation of its financial statements. Profit Projection The Profit Projection is intended to show a possible outcome based on the stated assumptions. As SPH REIT is newly established without any history of activities and because the length of the period covered by the Profit Projection extends beyond the period covered by the Profit Forecast, the assumptions used in the Profit Projection (which include hypothetical assumptions about future events which may not necessarily occur) are more subjective than would be appropriate for a profit forecast. The Profit Projection does not therefore constitute a profit forecast. Based on our examination of the evidence supporting the relevant assumptions, nothing has come to our attention which causes us to believe that these assumptions do not provide a reasonable basis for the Profit Projection. Further, in our opinion the Profit Projection, so far as the accounting policies and calculations are concerned, is properly prepared on the basis of the assumptions, is consistent with the accounting policies set out on pages C-14 to C-21 of this Prospectus, and is presented in accordance with the applicable presentation principles of Recommended Accounting Practice 7 Reporting Framework for Unit Trusts (but not all the required disclosures), which is the framework to be adopted by SPH REIT in the preparation of its financial statements. Events and circumstances frequently do not occur as expected. Even if the events anticipated under the hypothetical assumptions occur, actual results are still likely to be different from the Profit Projection since other anticipated events frequently do not occur as expected and the variation may be material. The actual results may therefore differ materially from those projected. For the reasons set out above, we do not express any opinion as to the possibility of achievement of the Profit Forecast and Profit Projection. Attention is drawn, in particular, to the risk factors set out on pages 48 to 70 of this Prospectus which describe the principal risks associated with the Offering, to which the Profit Forecast and Profit Projection relate and the sensitivity analysis of the Profit Forecast and Profit Projection set out on pages 100 to 103 of this Prospectus.
KPMG LLP Public Accountants and Chartered Accountants
Singapore Partner-in-charge: Lim Jek
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APPENDIX B
REPORTING AUDITORS REPORT ON THE UNAUDITED PRO FORMA FINANCIAL INFORMATION

The Board of Directors SPH REIT Management Pte. Ltd. (as Manager of SPH REIT) 1000 Toa Payoh North, News Centre Singapore 318994 DBS Trustee Limited (as Trustee of SPH REIT) 12 Marina Boulevard Level 44 DBS Asia Central @ Marina Bay Financial Centre Tower 3 Singapore 018982 9 July 2013 Dear Sirs Letter from the Reporting Auditors on the Unaudited Pro Forma Financial Information of SPH REIT for the years ended 31 August 2010, 2011 and 2012 and each of the six-month periods ended 29 February 2012 and 28 February 2013 This letter has been issued for inclusion in the preliminary prospectus (the Prospectus) to be issued in connection with the offering of 615,872,000 Units in SPH REIT (the REIT), assuming that the over-allotment option is exercised, at the indicative offering price range of S$0.85 and S$0.90 per Unit (the Offering). This letter will be revised and re-issued upon registration of the final prospectus. We have completed our assurance engagement to report on the compilation of unaudited pro forma financial information of SPH REIT (the REIT) by SPH REIT Management Pte. Ltd. (the Manager). The unaudited pro forma financial information of the REIT consists of the pro forma balance sheets as at 31 August 2012 and 28 February 2013, the pro forma statements of total returns for the years ended 31 August 2010, 2011 and 2012 and each of the six-month periods ended 29 February 2012 and 28 February 2013, the pro forma cash flow statements for the year ended 31 August 2012 and each of the six-month periods ended 29 February 2012 and 28 February 2013, and related notes (the Unaudited Pro Forma Financial Information) as set out on pages C-1 to C-33 of the Prospectus to be issued in connection with the Offering. The Unaudited Pro Forma Financial Information of the REIT has been prepared for illustrative purposes only and are based on certain assumptions, after making certain adjustments. The applicable criteria (the Criteria) on which the Manager has compiled the Unaudited Pro Forma Financial Information are described in Section C. The Unaudited Pro Forma Financial Information has been compiled by the Manager to illustrate the impact of: (a) the acquisition of Paragon and Clementi Mall (collectively, the Properties) and certain assets and liabilities on the financial position of the REIT as at 31 August 2012 and 28 February 2013, as if the acquisition had taken place on 31 August 2012 and 28 February 2013 respectively, pursuant to the terms set out in the Prospectus;
B-1
(b)
the acquisition of the Properties and certain assets and liabilities on the total return of the REIT for the years ended 31 August 2010, 2011 and 2012 and the six-month periods ended 29 February 2012 and 28 February 2013, as if the acquisition of Paragon had occurred on 1 September 2009 and Clementi Mall on 14 March 2011, which is the date it received its second temporary occupation permit, and certain assets and liabilities had occurred on the respective dates, pursuant to the terms set out in this Prospectus; and the acquisition of the Properties and certain assets and liabilities on the cash flows of the REIT for the year ended 31 August 2012 and the six-month periods ended 29 February 2012 and 28 February 2013, as if the acquisition of the Properties had occurred on 1 September 2011, pursuant to the terms set out in this Prospectus.
(c)
As part of this process, information about the REITs financial position, total returns and cash flows has been extracted by the Manager from the financial statements of Orchard 290 Limited and CM Domain Pte. Ltd., the companies that owned the Properties prior to their acquisition by the REIT for the years ended 31 August 2010, 2011 and 2012, and for the six-month period ended 28 February 2013, on which audit reports has been published; and the management financial information of Orchard 290 Ltd and CM Domain Pte. Ltd. for the six-month period ended 29 February 2012, on which no audit or review report has been published. The Managers responsibility for the Unaudited Pro Forma Financial Information The Manager is responsible for compiling the Unaudited Pro Forma Financial Information on the basis of the Criteria. Reporting Auditors responsibility Our responsibility is to express an opinion about whether the Unaudited Pro Forma Financial Information has been compiled, in all material respects, by the Manager on the basis of the Criteria. We conducted our engagement in accordance with Singapore Standard on Assurance Engagements (SSAE) 3420, Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus , issued by the Institute of Singapore Chartered Accountants (the ISCA). This standard requires that the Reporting Auditors comply with ethical requirements and plan and perform procedures to obtain reasonable assurance about whether the Manager has compiled, in all material respects, the Unaudited Pro Forma Financial Information on the basis of the Criteria. For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical financial information used in compiling the Unaudited Pro Forma Financial Information, nor have we, in the course of this engagement, performed an audit or review of the financial information used in compiling the Unaudited Pro Forma Financial Information. The purpose of the Unaudited Pro Forma Financial Information included in a prospectus is solely to illustrate the impact of a significant event or transaction on unadjusted financial information of the entity as if the event had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the event or transaction at each of the respective dates would have been as presented. A reasonable assurance engagement to report on whether the Unaudited Pro Forma Financial Information has been compiled, in all material respects, on the basis of the Criteria involves performing procedures to assess whether the Criteria used by the Manager in the compilation of B-2
the Unaudited Pro Forma Financial Information provide a reasonable basis for presenting the significant effects directly attributable to the event or transaction, and to obtain sufficient appropriate evidence about whether: the related pro forma adjustments give appropriate effect to those Criteria; and the pro forma financial information reflects the proper application of those adjustments to the unadjusted financial information.
The procedures selected depend on the Reporting Auditors judgment, having regard to his understanding of the nature of the event or transaction in respect of which the Unaudited Pro Forma Financial Information has been compiled, and other relevant engagement circumstances. The engagement also involves evaluating the overall presentation of the Unaudited Pro Forma Financial Information. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Opinion In our opinion: (a) the Unaudited Pro Forma Financial Information has been compiled: (i) from the audited financial statements of and the unaudited management financial information of Orchard 290 Ltd and CM Domain Pte. Ltd. (which were prepared in accordance with Singapore Financial Reporting Standards) and is presented in accordance with the relevant presentation principles of Recommended Accounting Practice 7 Reporting Framework for Unit Trusts issued by the ISCA; in a manner consistent with the accounting policies to be adopted by the REIT; and
(ii)
(iii) on the basis of the Criteria stated in Section C of the Unaudited Pro Forma Financial Information; and (b) each material adjustment made to the information used in the preparation of the Unaudited Pro Forma Financial Information is appropriate for the purpose of preparing such unaudited financial information.
KPMG LLP Public Accountants and Chartered Accountants Singapore Lim, Jek Partner-in-charge
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APPENDIX C

A INTRODUCTION The unaudited pro forma financial information has been prepared for inclusion in the preliminary prospectus (the Prospectus) to be issued in connection with the sponsor initial unit, public offer, placement tranche, consideration units and cornerstone units of 2,500,995,000 Units in SPH REIT (the REIT). The REIT is a Singapore based real estate investment trust established principally to invest, directly or indirectly, in a portfolio of income-producing real estate which is used primarily for retail purposes in Asia-Pacific, as well as real estate-related assets. At the date that the REIT is admitted to the Official List of the Singapore Exchange Securities Trading Limited (SGX-ST) (the Listing Date), the REIT proposes to acquire Paragon and Clementi Mall (collectively, the Properties). SPH REIT Management Pte. Ltd. is the manager of the REIT (the Manager). The Managers key objective for the REIT is to provide Unitholders of the REIT (the Unitholders) with regular and stable distributions, and sustainable long-term growth in distribution per Unit (DPU) and net asset value (NAV) per Unit, while maintaining an appropriate capital structure. Details on the Managers management fees, property managers fees and trustee fees are set out in Section H. B PRO FORMA FINANCIAL INFORMATION The Manager is unable to include the latest three financial years of Clementi Mall in the pro forma financial information of the REIT to be included in this Prospectus as: Clementi Mall, which comprises approximately 18.5% of the Properties (based on net property income of the Properties for the financial year ended 31 August 2012), was available for full occupation when it received its second Temporary Occupation Permit (TOP) on 14 March 2011. Accordingly, historical financial information for Clementi Mall prior to the second TOP would not be representative of the REITs performance. The Manager intends to include Clementi Malls historical financial information from March 2011 in the pro forma financial information of the REIT in this Prospectus, which represents 2 years from March 2011 to February 2013. Paragon represents approximately 81.5% of the Properties (based on net property income of the Properties for the financial year ended 31 August 2012). Given the substantial contribution of Paragon to the Properties, the period of availability of historical financials for Paragon would be more representative of the proforma historical financial information of the REIT.
C-1
For the reasons stated above, the SGX-ST has granted the REIT a waiver, subject to inclusion of the following in this Prospectus: pro forma historical statements of total return of the Properties for a period of three years from 1 September 2009 to 31 August 2012 and for each of the six-month periods ended 29 February 2012 and 28 February 2013, save that such financial information will only cover, in respect of Clementi Mall, financial information from the time when Clementi Mall received the second TOP on 14 March 2011; unaudited pro forma balance sheets as at 31 August 2012 and as at 28 February 2013; unaudited statements of cash flows for the financial year ended 31 August 2012 and for each of the six-month periods ended 29 February 2012 and 28 February 2013; a profit forecast for the financial period from 1 March 2013 to 31 August 2013 and a profit projection for the financial year from 1 September 2013 to 31 August 2014; and full disclosure on the reasons why the full three-year pro forma financial information of the REIT only incorporates historical financial information of Clementi Mall from March 2011.
BASIS OF PREPARATION The unaudited pro forma financial information set out in this report, expressed in Singapore dollar (S$) and rounded to the nearest thousand, unless otherwise stated. The unaudited pro forma financial information set out in this report has been prepared for illustrative purposes only and based on certain assumptions after making certain adjustments, and shows the unaudited pro forma statements of total return of the REIT for the financial years ended 31 August 2010 (FY2010), 31 August 2011 (FY2011), 31 August 2012 (FY2012) and each of the six-month periods ended 29 February 2012 and 28 February 2013, the unaudited pro forma balance sheets of the REIT as at 31 August 2012 and 28 February 2013 and the unaudited pro forma statements of cash flows of the REIT for FY2012 and each of the six-month periods ended 29 February 2012 and 28 February 2013. The unaudited pro forma balance sheets as at 31 August 2012 and 28 February 2013 reflect the financial position of the REIT, as if it had acquired the Properties on 31 August 2012 and 28 February 2013 respectively, pursuant to the terms set out in this Prospectus. The unaudited pro forma statements of total return for FY2010, FY2011, FY2012 and each of the six-month periods ended 29 February 2012 and 28 February 2013 reflect the financial performance of the REIT, as if it had acquired Paragon on 1 September 2009 and Clementi Mall on 14 March 2011, which is the date it received its second TOP, pursuant to the terms set out in this Prospectus. The unaudited pro forma statements of cash flows for FY2012 and each of the six-month periods ended 29 February 2012 and 28 February 2013 reflect the cash flows of the REIT as if it had acquired the Properties on 1 September 2011, pursuant to the terms set out in this Prospectus. The unaudited pro forma balance sheets, unaudited pro forma statements of total return and unaudited pro forma statements of cash flows have been prepared on the basis of the accounting policies set out in Section G and is to be read in conjunction with Section H.
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The objective of the unaudited pro forma financial information is to show what the financial performance, financial position and cash flows might have been, had the REIT as described above existed at an earlier date. However, the unaudited pro forma financial information is not necessarily indicative of the financial performance, financial position and cash flows of the operations that would have been attained had the REIT actually existed earlier. The unaudited pro forma financial information has been prepared for illustrative purposes only and, because of its nature, may not give a true picture of the REITs actual financial performance, financial position or cash flows. The unaudited pro forma financial information has been compiled based on: (a) the audited financial statements of Orchard 290 Ltd (the vendor of Paragon) for the period from 1 September 2009 to 31 August 2012 and CM Domain Pte. Ltd. (the vendor of Clementi Mall) for the period from 1 September 2010 to 31 August 2012; the audited interim financial statements of Orchard 290 Ltd and CM Domain Pte. Ltd. for the six-month period ended 28 February 2013; and the unaudited management financial information of Orchard 290 Ltd and CM Domain Pte. Ltd. for the six-month period ended 29 February 2012.
(b)
(c)
The audited financial statements of Orchard 290 Ltd and CM Domain Pte. Ltd. for the financial period from 1 September 2009 to 31 August 2012 and 1 September 2010 to 31 August 2012, respectively, were audited by another auditor and prepared in accordance with Singapore Financial Reporting Standards and were audited in accordance with Singapore Standards of Auditing. The auditors reports on these financial statements were not subject to any qualifications, modifications or disclaimers. The audited interim financial statements of Orchard 290 Ltd and CM Domain Pte. Ltd. for the six-month period ended 28 February 2013 were prepared in accordance with Singapore Financial Reporting Standards and were audited in accordance with Singapore Standards of Auditing. The auditors reports on these financial statements were not subject to any qualifications, modifications or disclaimers. The unaudited pro forma financial information has been compiled from the financial statements disclosed above and is prepared on the basis of the accounting policies set out in Section G and is to be read in conjunction with Section H. In addition, it has been assumed that the issue price of the Units under the offering is S$0.90 per Unit. 1 Unaudited pro forma balance sheets The unaudited pro forma balance sheets as at 31 August 2012 and 28 February 2013 have been prepared to reflect the financial position of the REIT as if it had acquired the Properties on 31 August 2012 and 28 February 2013, respectively. In arriving at the unaudited pro forma balance sheets as at 31 August 2012 and 28 February 2013, the following key adjustments were made: Adjustments to state the Properties to an amount of S$3,053,000,000 based on the average of two independent valuations carried by DTZ Debenham Tie Leung (SEA) Pte Ltd and CBRE Pte. Ltd.; Adjustments to recognise an intangible asset of S$17,500,000, relating to the income support provided by CM Domain Pte. Ltd. for Clementi Mall for a period of 5 years from the Listing Date; C-3
Adjustments to reverse the assets and liabilities of Orchard 290 Ltd and CM Domain Pte. Ltd., which are not in line with the REITs structure, and replace these with assets and liabilities (namely certain plant and equipment, cash and security deposits) attributable to the Properties to be transferred to the REIT; Adjustments to reverse the existing borrowings of Orchard 290 Ltd and CM Domain Pte. Ltd. that are not in line with the REITs structure and replace them with the REITs borrowings of S$849,815,000 and ancillary cost incurred of S$8,923,000 in connection with obtaining the borrowings; Adjustments to reverse the existing equity structure of Orchard 290 Ltd and CM Domain Pte. Ltd. and replace with the REITs capital structure, which includes the issue of 2,500,995,000 Units at an issue price of S$0.90 per Unit and assuming the over-allotment is fully exercised; Adjustments to include the issue costs relating to the Offering, which are estimated to be S$19,179,000 excluding (goods and service tax (GST)); and Adjustments to reverse the tax assets and liabilities that are not in line with the REITs tax transparency status.
In addition, the following key assumptions were made: The term loan facility for an amount of S$975,000,000 was in place at the time of acquisition of properties; and The fair value of derivatives entered into by the REIT is assumed to be zero.
Unaudited pro forma statements of total return The unaudited pro forma statements of total return have been prepared on the basis that the REIT acquired Paragon on 1 September 2009 and The Clementi Mall on 14 March 2011, which is the date it received its second TOP, pursuant to the terms set out in this Prospectus. The pro forma adjustments made to the audited financial statements of Orchard 290 Ltd for FY2010, FY2011, FY2012 and each of the six-month periods ended 29 February 2012 and 28 February 2013 and of CM Domain Pte. Ltd. for FY2011, FY2012 and each of the six-month periods ended 29 February 2012 and 28 February 2013, are summarised below: Adjustments to reverse income and expenses of Orchard 290 Ltd and CM Domain Pte. Ltd. which are not in line with the REITs structure; Adjustments to include the recognition of income support and the amortisation of intangible asset; Adjustments to include the property managers management fee, Managers management fees, and trust expenses (comprising recurring operating expenses such as the trustee fee, annual listing fee, registry fee, audit and tax advisory fees, valuation fees, cost associated with preparation and distribution of reports to Unitholders, investor communication costs and other miscellaneous expenses related to the REIT) and borrowing costs; and Adjustments to reverse tax expenses as the REIT will not be taxed on the portion of the specified taxable income that is distributed to Unitholders.
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In addition, the following key assumptions were made: 100% of the specified taxable income is distributed; The term loan facility for an amount of S$975,000,000 was in place at the time of acquisition of Paragon and Clementi Mall; The interest expense is based on the effective interest rate of 2.35% per annum (inclusive of all margins and amortisation of the debt arrangement fee, with annualised upfront fee) and average principal debt balance of S$849,815,000 for FY2010, FY2011, FY2012 and each of the six-month periods ended 29 February 2012 and 28 February 2013, respectively; and The fair value of derivatives entered into by the REIT is assumed to be unchanged.
Unaudited pro forma statements of cash flows The unaudited pro forma statements of cash flows for FY2012 and each of the six-month periods ended 29 February 2012 and 28 February 2013 have been prepared assuming the REIT had purchased the Properties on 1 September 2011, based on the cash flows directly attributable to the Properties and incorporating the following: Adjustments to reverse cash flows of Orchard 290 Ltd and CM Domain Pte. Ltd. which are not in line with the REITs structure; Adjustments to include the REITs cash flows relating to payments for the property managers management fee, Managers management fees and other trust expenses; Adjustments to reverse the cash flows relating to existing borrowings and replace these with the REITs borrowing and capital structure; and Adjustments to recognise the cash inflow relating to the income support.
In addition, the following key assumptions were made: The date that the REITs borrowings were fully drawn down and Units were issued correspond to the timing of the purchase of the Properties on 1 September 2011; The term loan facility for an amount of S$975,000,000 was in place at the time of acquisition of the Properties; There is no change in valuation of the Properties, other than the incremental in valuations associated with capital expenditure capitalised; Managers management fees are payable entirely in the form of Units and are paid on a quarterly basis, in arrears in the following quarter; and 100% of specified taxable income is distributed for each of the period presented. Distributions to Unitholders are paid on quarterly basis, in arrears of the following quarter.
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UNAUDITED PRO FORMA BALANCE SHEETS The unaudited pro forma balance sheets as at 31 August 2012 and 28 February 2013 have been prepared for inclusion in this Prospectus and are presented below. Details of the pro forma adjustments made are set out on pages C-3 to C-4 of this Prospectus and are consistent with the assumptions described in the Basis of Preparation set out in Section C. Aggregated Balance Sheet Note S$000 As at 31 August 2012
Non-current assets Plant and equipment . . . Investment properties . . . Intangible asset . . . . . . . 983 1,744,925 1,745,908 Current assets Other receivables. . . . . . Cash and cash equivalents . . . . . . . . . . 4,048 141,650 145,698 Total assets . . . . . . . . . Non-current liabilities Loans and borrowings . Financial derivatives. . . Trade and other payables . . . . . . . . . . . Deferred tax liabilities. . . . . . 5 1,891,606 1,134,965 7,082 32,521 4,033 1,178,601 Current liabilities Loan and borrowings . . . Trade and other payables . . . . . . . . . . . . 5 6 200,000 77,349 277,349 Total liabilities . . . . . . . Net assets attributable to Unitholders . . . . . . . Net asset value per Unit (S$) . . . . . . . . . . .
Notes to Pro Forma Adjustments: (a) (b) Adjustment to reverse the borrowings prior to the initial public offering (the IPO) and reflect the drawdown of bank borrowing by the REIT. Adjustments to reflect the net proceeds from the IPO in connection of issuance of 2,500,995,000 Units in the REIT on 31 August 2012 at an assumed issue price of S$0.90 per Unit and assuming the over-allotment option is fully exercised. Adjustment to reflect the acquisition of the Properties and other assets and liabilities. If the unaudited pro forma balance sheet had been prepared based on the minimum offering price of S$0.85 per Unit, the net assets attributable to Unitholders would have been S$2,107,767,000 as at 31 August 2012.
Pro Forma Adjustments Note (a) Note (b) S$000 S$000 Note (c) S$000
Unaudited Pro Forma Balance Sheet
S$000
3 4
840,892 840,892 840,892 (294,073) (7,082) (301,155) (200,000) (200,000) (501,155) 1,342,047
1,343 533,766 535,109 535,109 535,109
(218) 1,308,075 17,500 1,325,357 (4,048) (1,473,918) (1,477,966) (152,609) (4,033) (4,033) (67,480) (67,480) (71,513) (81,096)
765 3,053,000 17,500 3,071,265 1,343 42,390 43,733 3,114,998 840,892 32,521 873,413 9,869 9,869 883,282 2,231,716 0.89
1,455,950 435,656
(c) (d)
C-6
Aggregated Balance Sheet Note S$000 As at 28 February 2013

Non-current assets Plant and equipment . . . Investment properties . . . Intangible asset . . . . . . . 880 1,736,314 1,737,194 Current assets Other receivables. . . . . . Cash and cash equivalents . . . . . . . . . . 3,969 80,953 84,922 Total assets . . . . . . . . . Non-current liabilities Loans and borrowings . Financial derivatives. . . Trade and other payables . . . . . . . . . . . Deferred tax liabilities. . . . . . 5 1,822,116 1,119,307 6,343 32,754 4,839 1,163,243 Current liabilities Loan and borrowings . . . Trade and other payables . . . . . . . . . . . . 5 6 200,000 60,357 260,357 Total liabilities . . . . . . . Net assets attributable to Unitholders . . . . . . . Net asset value per Unit (S$) . . . . . . . . . . .
Notes to Pro Forma Adjustments: (a) (b)
Pro Forma Adjustments Note (a) Note (b) S$000 S$000 Note (c) S$000
Unaudited Pro Forma Balance Sheet
S$000
3 4
840,892 840,892 840,892 (278,415) (6,343) (284,758) (200,000) (200,000) (484,758) 1,325,650
1,343 533,766 535,109 535,109 535,109
(115) 1,316,686 17,500 1,334,071 (3,969) (1,412,042) (1,416,011) (81,940) (4,839) (4,839) (49,542) (49,542) (54,381) (27,559)
765 3,053,000 17,500 3,071,265 1,343 43,569 44,912 3,116,177 840,892 32,754 873,646 10,815 10,815 884,461 2,231,716 0.89
1,423,600 398,516
Adjustment to reverse the borrowings prior to the IPO and reflect the drawdown of bank borrowing by the REIT. Adjustments to reflect the net proceeds from the IPO in connection of issuance of 2,500,995,000 Units in the REIT on 28 February 2013 at an assumed issue price of S$0.90 per Unit and assuming the over-allotment option is fully exercised. Adjustment to reflect the acquisition of the Properties and other assets and liabilities. If the unaudited pro forma balance sheet had been prepared based on the minimum offering price of S$0.85 per Unit, the net assets attributable to Unitholders would have been S$2,107,767,000 as at 28 February 2013.
(c) (d)
C-7
UNAUDITED PRO FORMA STATEMENTS OF TOTAL RETURN The unaudited pro forma statements of total return for FY2010, FY2011, FY2012 and each of the six-month periods ended 29 February 2012 and 28 February 2013 have been prepared for inclusion in this Prospectus and is presented below. Details of the pro forma adjustments made are set out on pages C-4 to C-5 of this Prospectus and are consistent with the assumptions described in the Basis of Preparation set out in Section C. Unaudited Pro Forma Statement of Total Return
Aggregated Income Statements Note $000 FY2010

Gross revenue . . . . . Property operating expenses. . . . . . . . . Net property income . . . . . . . . . . Managers management fees. . . Trustees fee . . . . . . Other trust expenses. . . . . . . . . Finance income . . . . Finance costs . . . . . Total return before income tax . . . . . . . Tax expense . . . . . . Total return for the year . . . . . . . . . . . . Earnings per Unit (cents) Basic . . . . . . . . . . . Diluted . . . . . . . . . . 13 13 12 11 10 8 9 132,582 (41,957)
Pro Forma Adjustments Note (a) $000

Note (b) $000

16,101
Note (c) $000

(7,100)
$000
132,582 (32,956)
90,625 (580) 135 (32,775)
12,804
16,101 456 (39)
(7,100) (12,772) (462) (1,676)
99,626 (12,772) (462) (1,800) 96 (19,971)
57,405 (11,034)
12,804
16,518 11,034
(22,010)
64,717
46,371
12,804
27,552
(22,010)
64,717
2.58 2.58
Notes to Pro Forma Adjustments: (a) (b) (c) (d) (e) Adjustments to (i) reverse finance costs (including amortisation of transaction costs) and (ii) reflect the finance costs (including amortisation of transaction costs) on the new borrowing drawn down by the REIT. Adjustments to reverse property management fee and other expenses based on the arrangements existing prior to the acquisition of the Properties, which are not in line with the REITs structure. Adjustments to include recognition of the Managers management fees, trustees fees, the property managers management fees and other trust expenses based on the REITs structure. Assumes the issuance of 2,500,995,000 Units at an issue price of S$0.90 per Unit, and that the over-allotment option is fully exercised. If the unaudited pro forma statements of total return had been prepared based on the minimum offering price of S$0.85 per Unit, the total return for the year would be S$61,775,000.
C-8

Gross revenue. . . Property operating expenses . . . . . . Net property income . . . . . . . . Income support . . Amortisation of intangible asset . . Managers management fees . . . . . . . . . . Trustees fee . . . . Other trust expenses . . . . . . Finance income . . Finance costs . . . Total return before income tax . . . . . . . . . . . Tax expense . . . . Total return for the year . . . . . . . Earnings per Unit (cents) Basic . . . . . . . . . Diluted . . . . . . . . 13 13 12 11 8 165,886
Pro Forma Adjustments Note (a) Note (b) Note (c) Note (d) $000
(2,299)
Unaudited Pro Forma Statement of Total Return
$000
$000
(847)
$000
$000
162,740
(56,546)
1,941
20,879
(8,721)
(42,447)
109,340
(358)
20,032
(8,721) 1,667 (1,667)
120,293 1,667 (1,667)
10
(585) 177 (39,477)
27
19,506
469 (113)
(13,805) (462) (1,711)
(13,805) (462) (1,800) 64 (19,971)
69,455 (13,987)
(331)
19,506
20,388 13,987
(24,699)
84,319
55,468
(331)
19,506
34,375
(24,699)
84,319
3.35 3.35
Notes to Pro Forma Adjustments: (a) (b) (c) (d) Adjustments to reverse income and expenses of Clementi Mall prior to the acquisition of the property by the REIT. Adjustments to (i) reverse finance costs (including amortisation of transaction costs) and (ii) reflect the finance costs (including amortisation of transaction costs) on the new borrowing drawn down by the REIT. Adjustments to reverse property management fee and other expenses based on the arrangements existing prior to the acquisition of the Properties, which are not in line with the REITs structure. Adjustments to include recognition of income support, amortisation of intangible asset, Managers management fees, trustees fees, the property managers management fees and other trust expenses based on the REITs structure. Assumes the issuance of 2,500,995,000 Units at an issue price of S$0.90 per Unit and that the over-allotment option is fully exercised. If the unaudited pro forma statements of total return been prepared based on the minimum offering price of S$0.85 per Unit, the total return for the year would had be S$81,377,000.
(e) (f)
C-9

Gross revenue . . . . . Property operating expenses. . . . . . . . . Net property income . . . . . . . . . . Income support . . . . Amortisation of intangible asset . . . . Managers management fees. . . Trustees fee . . . . . . Other trust expenses. . . . . . . . . Finance income . . . . Finance costs . . . . . Total return before income tax . . . . . . . Tax expense . . . . . . Total return for the year . . . . . . . . . . . . Earnings per Unit (cents) Basic . . . . . . . . . . . Diluted . . . . . . . . . . 13 13 12 11 10 8 9 188,951 (67,639)
Pro Forma Adjustments Note (a) $000

Note (b) $000

(1,190) 27,508
Note (c) $000

(10,015)
$000
187,761 (50,146)
121,312 (989) 177 (41,040)
21,069
26,318 739 (110)
(10,015) 5,593 (5,593) (14,671) (462) (1,550)
137,615 5,593 (5,593) (14,671) (462) (1,800) 67 (19,971)
79,460 (17,589)
21,069
26,947 17,589
(26,698)
100,778
61,871
21,069
44,536
(26,698)
100,778
3.97 3.97
Notes to Pro Forma Adjustments: (a) (b) (c) Adjustments to (i) reverse finance costs (including amortisation of transaction costs) and (ii) reflect the finance costs (including amortisation of transaction costs) on the new borrowing drawn down by the REIT. Adjustments to reverse property management fee and other expenses based on the arrangements existing prior to the acquisition of the Properties, which are not in line with the REITs structure. Adjustments to include recognition of income support, amortisation of intangible asset, Managers management fees, trustees fees, property managers management fees and other trust expenses based on the REITs structure. Assumes the issuance of 2,500,995,000 Units at an issue price of S$0.90 per Unit, and that the over-allotment option is fully exercised. If the unaudited pro forma statements of total return had been prepared based on the minimum offering price of S$0.85 per Unit, the total return for the year would had be S$97,836,000.
(d) (e)
C-10
Aggregated Income Statements Note S$000 Six-month period ended 29 February 2012
Gross revenue . . . . . Property operating expenses. . . . . . . . . Net property income . . . . . . . . . . Income support . . . . Amortisation of intangible asset . . . . Managers management fees. . . Trustees fee . . . . . . Other trust expenses. . . . . . . . . Finance income . . . . Finance costs . . . . . Total return before tax . . . . . . . . . . . . . Tax expense . . . . . . Total return for the period . . . . . . . . . . Earnings per Unit (cents) Basic . . . . . . . . . . . Diluted . . . . . . . . . . 13 13 12 11 10 8 9 93,734 (34,204)
Pro Forma Adjustments Note (a) S$000 Note (b) S$000 Note (c) S$000
S$000
(477) 13,805
(4,838)
93,257 (25,237)
59,530 (324) 70 (20,358)
10,373
13,328 234 (40)
(4,838) 2,935 (2,935) (7,296) (231) (810)
68,020 2,935 (2,935) (7,296) (231) (900) 30 (9,985)
38,918 (8,529)
10,373
13,522 8,529
(13,175)
49,638
30,389
10,373
22,051
(13,175)
49,638
1.96 1.96
Notes to Pro Forma Adjustments: (a) (b) (c) Adjustments to (i) reverse finance costs (including amortisation of transaction costs) and (ii) reflect the finance costs (including amortisation of transaction costs) on the new borrowing drawn down by the REIT. Adjustments to reverse property management fee and other expenses based on the arrangements existing prior to the acquisition of the Properties, which are not in line with the REITs structure. Adjustments to include recognition of income support, amortisation of intangible asset, Managers management fees, trustees fees, property managers management fees and other trust expenses based on the REITs structure. Assumes the issuance of 2,500,995,000 Units at an issue price of S$0.90 per Unit, and that the over-allotment option is fully exercised. If the unaudited pro forma statements of total return had been prepared based on the minimum offering price of S$0.85 per Unit, the total return for the period would be S$48,167,000.
(d) (e)
C-11
Aggregated Income Statements Note S$000 Six-month period ended 28 February 2013
Gross revenue . . . . . Property operating expenses. . . . . . . . . Net property income . . . . . . . . . . Income support . . . . Amortisation of intangible asset . . . . Managers management fees. . . Trustees fee . . . . . . Other trust expenses. . . . . . . . . Finance income . . . . Finance costs . . . . . Total returns before tax . . . . . . . . . . . . . Tax expense . . . . . . Total returns for the period . . . . . . . . Earnings per Unit (cents) Basic . . . . . . . . . . . Diluted . . . . . . . . . . 13 13 12 11 10 8 9 97,784 (35,426)
Pro Forma Adjustments Note (a) S$000 Note (b) S$000 Note (c) S$000
S$000
(389) 14,564
(5,032)
97,395 (25,894)
62,358 (444) 76 (20,217)
10,232
14,175 363
(5,032) 2,469 (2,469) (7,470) (231) (819) (40)
71,501 2,469 (2,469) (7,470) (231) (900) 36 (9,985)
41,773 (9,200)
10,232
14,538 9,200
(13,592)
52,951
32,573
10,232
23,738
(13,592)
52,951
2.08 2.08
Notes to Pro Forma Adjustments: (a) (b) (c) Adjustments to (i) reverse finance costs (including amortisation of transaction costs) and (ii) reflect the finance costs (including amortisation of transaction costs) on the new borrowing drawn down by the REIT. Adjustments to reverse property management fee and other expenses based on the arrangements existing prior to the acquisition of the Properties, which are not in line with the REITs structure. Adjustments to include recognition of income support, amortisation of intangible asset, Managers management fees, trustees fees, property managers management and other trust expenses based on the REITs structure. Assumes the issuance of 2,500,995,000 Units at an issue price of S$0.90 per Unit, and that the over-allotment option is fully exercised. If the unaudited pro forma statements of total return had been prepared based on the minimum offering price of S$0.85 per Unit, the total return for the period would be S$51,480,000.
(d) (e)
C-12
UNAUDITED PRO FORMA STATEMENTS OF CASH FLOWS The unaudited pro forma statements of cash flows for FY2012 and each of the six-month periods ended 29 February 2012 and 28 February 2013 have been prepared for inclusion in this Prospectus and is presented below. Details of the pro forma adjustments made are set out on page C-5 of this Prospectus and are consistent with the assumptions described in the Basis of Preparation set out in Section C. Six-month Six-month period ended period ended 29 February 28 February FY2012 2012 2013 S$000 Cash flow from operating activities Total return for the year/period . . . . . . Adjustments for: Managers fee paid/payable in units . . Depreciation of plant and equipment . . Interest income. . . . . . . . . . . . . . . . . . . Finance costs . . . . . . . . . . . . . . . . . . . . Amortisation of intangible asset . . . . . . .. . . . . . . . . . . 100,778 14,671 77 (67) 19,971 5,593 141,023 Changes in working capital: Trade and other receivables . . . . . . . . . . Trade and other payables . . . . . . . . . . . . Net cash from operating activities . . . . Cash flow from investing activities Acquisition of the Properties and other assets and liabilities (1) . . . . . . . . . . . . . . . Capital expenditure on investment properties . . . . . . . . . . . . . . . . . . . . . . . . . Interest received . . . . . . . . . . . . . . . . . . . Net cash used in investing activities . . Cash flows from financing activities Proceeds from issue of Units (1) . . . . . . Issue expenses paid . . . . . . . . . . . . . . Proceeds from bank borrowings . . . . . Distributions to Unitholders . . . . . . . . . Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,193) 5,404 143,234 S$000 49,638 7,296 38 (30) 9,985 2,935 69,862 (1,635) 2,629 70,856 S$000 52,951 7,470 38 (36) 9,985 2,469 72,877 389 (3,455) 69,811
(1,281,876) (10,986) 67 (1,292,795) 503,896 (19,179) 840,892 (92,248) (13,512) 1,219,849 70,288 70,288
(1,281,876) (2,844) 30 (1,284,690) 503,896 (19,179) 840,892 (30,423) (4,504) 1,290,682 76,848 76,848
(1,429) 36 (1,393) (62,683) (9,008) (71,691) (3,273) 70,288 67,015
Net cash from/(used in) financing activities . . . . . . . . . . . . . . . . . . . . . . . . . Net increase/(decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . Cash and cash equivalents at beginning of year/period . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents at end of year/period . . . . . . . . . . . . . . . . . . . . . . .
(1)
The REIT issued 1,941,110,999 Units of S$0.90 per Unit to the vendors as partial consideration of the acquisition of the Properties and other assets and liabilities.
Notes to Pro forma Adjustments: (a) (b) (c) Assumes the issuance of 2,500,995,000 Units at an issue price of S$0.90 per Unit, and that the over-allotment option is fully exercised. The manager has elected to receive 100% of the management fee in the form of Units. Acquisition of Properties, issuance of Units and drawdown of borrowings had occurred on 1 September 2011.
C-13
NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION 1 Basis of preparation (a) Statement of compliance The unaudited pro forma financial information is prepared in accordance with the basis set out in Section C and applied to financial information prepared in accordance with Statement of Recommended Accounting Practice 7 Reporting Framework for Unit Trusts (RAP 7) issued by the Institute of Singapore Chartered Accountants and the applicable requirements of the Code of Collective Investment Schemes (CIS Code) issued by the Monetary Authority of Singapore (MAS) and the provision of the Trust Deed. (b) Basis of measurement The financial information on the pro forma financial information is prepared on the historical cost basis except as disclosed in the accounting policies below. (c) Functional and presentation currency The financial information is presented in Singapore dollar (S$) which is the REITs functional currency. All unaudited pro forma financial information presented in S$ has been rounded to the nearest thousand, unless otherwise stated. (d) Use of estimates and judgements The preparation of the financial information requires the Manager to make judgements, estimates and assumptions that affect the application of accounting policies and reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and any future periods affected. Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year is included in Note 3 Valuation of investment properties. 2 Significant accounting policies The accounting policies set out below have been applied consistently throughout the period presented in these financial information, and have been applied consistently by the REIT. (a) Plant and equipment Plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset.
C-14
Subsequent expenditure relating to plant and equipment carrying amount of the asset when it is probable that future excess of the originally assessed standard of performance will flow to the REIT. All other subsequent expenditure expense in the period in which it is incurred.
is recognised in the economic benefits, in of the existing asset, is recognised as an
Depreciation is recognised on a straight-line basis over their estimated useful lives of each component of an item of plant and equipment as follows: Plant and equipment 10 years
The assets residual values, useful lives and depreciation methods are reviewed, and adjusted if necessary, at each reporting date. (b) Investment properties Investment properties are properties held either to earn rental income or for capital appreciation or both. They are not for sale in the ordinary course of business, used in the production or supply of goods or services, or for administrative purposes. Investment properties are initially recognised at cost, including transaction costs, and subsequently at fair value with any change therein recognised in the statement of total return. Cost includes expenditure that is directly attributable to the acquisition of the investment properties. Subsequent expenditure relating to investment properties is recognised in the carrying amount of the asset when it is probable that future economic benefits, in excess of the originally assessed standard of performance of the existing asset, will flow to the REIT. All other subsequent expenditure is recognised as an expense in the period in which it is incurred. Rental income from investment properties is accounted for in the manner described in Note 2(h). When an investment property is disposed of, the resulting gain or loss recognised in the statement of total return is the difference between net disposal proceeds and the carrying amount of the property. (c) Intangible asset Intangible asset acquired by the REIT is measured initially at cost. Following initial recognition, the intangible asset is measured at cost less any accumulated amortisation and accumulated impairment losses. The intangible asset is amortised in the statement of total return on a systematic basis over its estimated useful life. Intangible asset is tested for impairment as described in Note 2(e). (d) Financial instruments (i) Non-derivative financial assets The REIT initially recognises loans and receivables and deposits on the date that they are originated. All other financial assets are recognised initially on the trade date, which is the date that the REIT becomes a party to the contractual provisions of the instrument.
C-15
The REIT derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the REIT is recognised as a separate asset or liability. Financial assets and liabilities are offset and the net amount presented in the balance sheet when, and only when, the REIT has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. The REIT classifies non-derivative financial assets into the loans and receivables category. Loans and receivables Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses. Loans and receivables comprise cash and cash equivalents and trade and other receivables. Cash and cash equivalents Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or less. (ii) Non-derivative financial liabilities The REIT initially recognises debt securities issued and subordinated liabilities on the date that they are originated. All other financial liabilities are recognised initially on the trade date, which is the date that the REIT becomes a party to the contractual provisions of the instrument. The REIT derecognises a financial liability when its contractual obligations are discharged, cancelled or expired. Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the REIT has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. The REIT classifies non-derivative financial liabilities into the other financial liabilities category. Such financial liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the effective interest method. Other financial liabilities comprise loans and borrowings and trade and other payables. C-16
(iii) Derivative financial instruments and hedging activities Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics and risks of the host contract and the embedded derivative are not closely related, a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative, and the combined instrument is not measured at fair value through profit or loss. Derivatives are recognised initially at fair value; attributable transaction costs are recognised in the statement of total return when incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below. Cash flow hedges Changes in the fair value of the derivative hedging instrument designated as a cash flow hedge are recognised directly in other comprehensive income and presented in the hedging reserve in Unitholders funds to the extent that the hedge is effective. To the extent that the hedge is ineffective, changes in fair value are recognised in the statement of total return. If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, hedge accounting is discontinued prospectively. If the forecast transaction is no longer expected to occur, then the balance in Unitholders fund is reclassified to the statement of total return. When the hedged item is a non-financial asset, the amount recognised in unitholders fund is transferred to the carrying amount of the asset when it is recognised. In other cases, the amount recognised in Unitholders fund is transferred to the statement of total return in the same period that the hedged item affects the statement of total return. Derivatives that do not qualify for hedge accounting Changes in the fair value of any derivative instrument that do not qualify for hedge accounting are recognised immediately in the statement of total return. (iv) Unitholders funds Unitholders funds represent the Unitholders residual interest in the REITs net assets upon termination and are classified as equity. Incremental costs directly attributable to the issue of Units are recognised as a deduction from Unitholders funds. (e) Impairment (i) Impairment of financial assets A financial asset not carried at fair value through profit or loss is assessed at the end of each reporting period to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event has a negative effect on the estimated future cash flows of that asset that can be estimated reliably. C-17
Objective evidence that financial assets (including equity securities) are impaired can include default or delinquency by a debtor, restructuring of an amount due to the REIT on terms that the REIT would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers in the REIT, economic conditions that correlate with defaults or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment. Loans and receivables The REIT considers evidence of impairment for loans and receivables at both a specific asset and collective level. All individually significant loans and receivables are assessed for specific impairment. All individually significant receivables found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Loans and receivables that are not individually significant are collectively assessed for impairment by grouping together loans and receivables with similar risk characteristics. In assessing collective impairment, the REIT uses historical trends of the probability of default, the timing of recoveries and the amount of loss incurred, adjusted for managements judgement as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the assets original effective interest rate. Losses are recognised in the statement of total return and reflected in an allowance account against loans and receivables. Interest on the impaired asset continues to be recognised. When a subsequent event (e.g. repayment by a debtor) causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through the statement of total return. (ii) Non-financial assets The carrying amounts of the REITs non-financial assets, other than investment properties, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the assets recoverable amounts are estimated. An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit (CGU) exceeds its estimated recoverable amount. The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generate cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGU. C-18
Impairment losses are recognised in the statement of total return unless it reverses a previous revaluation credited to Unitholders funds, in which case it is charged to Unitholders funds. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro-rata basis. Impairment losses recognised in prior periods are assessed at each reporting date for any indication that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the assets carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. (f) Provision A provision is recognised if, as a result of a past event, the REIT has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. (g) Leases When the REIT is a lessee of an operating lease Where the REIT has the use of assets under operating leases, payments made under the leases are recognised in the statement of total return on a straight-line basis over the term of the lease. Lease incentives received are recognised in the statement of total return as an integral part of the total lease payments made. Contingent rentals are charged to the statement of total return in the accounting period in which they are incurred. When the REIT is a lessor of an operating lease Assets subject to operating leases are included in investment properties (see Note 2(b)). (h) Revenue recognition Rental income Rental income receivable under operating leases is recognised in the statement of total return on a straight-line basis over the term of the lease, except where an alternative basis is more representative of the pattern of benefits to be derived from the leased asset. Lease incentives granted are recognised as an integral part of the total rental income to be received. Contingent rentals are recognised as income in the accounting period in which they are earned. No contingent rentals are recognised if there are uncertainties due to the possible return of amounts received. Car park income Car park income is recognised as the underlying services are rendered.
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(i)
Expenses Managers management management fees fees, trustee fees and property managers
These fees are recognised on an accrual basis using the applicable formula stipulated in Section H. (j) Finance income and costs Interest income is recognised as it accrues, using the effective interest method. Borrowing costs are recognised in the statement of total return using the effective interest method in the period in which they are incurred, except to the extent that they are capitalised as being directly attributable to the acquisition, construction or production of an asset which necessarily takes a substantial period of time to be prepared for its intended use or sale. (k) Income tax expenses Tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in the statement of total return except to the extent that it relates to items directly related to Unitholders funds, in which case it is recognised in Unitholders funds. Current tax is the expected tax payable or receivable on the taxable income or loss for the period, using tax rates enacted or substantively enacted at each reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The temporary differences on initial recognition of assets or liabilities that affect neither accounting nor taxable profit are not provided for. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at each reporting date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the unused tax losses, tax credits and deductible temporary differences can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. The Inland Revenue Authority of Singapore (IRAS) has granted tax transparency treatment to the REIT. Subject to meeting the terms and conditions of the tax ruling issued by IRAS which includes a distribution of at least 90% of the taxable income of the REIT, the Trustee is not subject to tax on the specified taxable income of the REIT. Instead, the Trustee and the Manager will deduct income tax at the prevailing corporate tax rate (currently 17%) from the distributions made to Unitholders that are made out of the taxable income of the REIT, except: (i) where the beneficial owners are Qualifying Unitholders, the Trustee and the Manager will make the distributions to such Unitholders without deducting any income tax; or
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(ii)
where the beneficial owners are non-resident non-individual Unitholders, the Trustee and the Manager will deduct Singapore income tax at the reduced rate of 10% for distributions made up to 31 March 2015, unless concession is extended.
A Qualifying Unitholder is a Unitholder who is: an individual; a company incorporated and tax resident in Singapore; a body of persons, other than a company or a partnership, incorporated or registered in Singapore (for example, a town council, a statutory board, a registered charity, a registered co-operative society, a registered trade union, a management corporation, a club and a trade and industry association); or a Singapore branch of a foreign company which has presented a letter of approval from the IRAS granting a waiver from tax deduction at source in respect of distributions from SPH REIT.
A Qualifying Non-resident Non-individual Unitholder is a person who is neither an individual nor a resident of Singapore for income tax purposes and: who does not have a permanent establishment in Singapore; or who carries on any operation in Singapore through a permanent establishment in Singapore, where the funds used by that person to acquire the Units are not obtained from that operation.
The above tax transparency treatment does not apply to gains from sale of real estate properties, if considered to be trading gains derived from a trade or business carried on by the REIT. Tax on such gains or profits will be assessed, in accordance with section 10(1)(a) of the Income Tax Act, Chapter 134 and collected from the Trustee. Where the gains are capital gains, it will not be assessed to tax and the Trustee and the Manager may distribute the capital gains without tax being deducted at source. (l) Earnings per Unit (EPU) Basic EPU is calculated by dividing the total return attributable to Unitholders by the weighted average number of ordinary Units outstanding during the period. Diluted EPS is determined by adjusting the total return attributable to Unitholders and the weighted average number of ordinary Units outstanding for the effects of all dilutive potential Units. (m) Segment reporting An operating segment is a component of the REIT that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the REITs other components. All operating segments results are reviewed and used by the management for strategic decision-making and resource allocation.
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Investment properties 31 August 2012 S$000 Investment properties 3,053,000 28 February 2013 S$000 3,053,000
Investment properties comprise retail malls and medical suite/office that are leased to external customers. The lease terms range from 2 to 6 years.
Percentage of net assets Attributable to Unitholders % 112.0
Description of Leasehold Property
Location
Term of lease (years)
Remaining term of lease (years)
Type
Valuation S$000
Paragon
290 Orchard Road, Singapore 238859
99, commencing on Listing Date
99
2,500,000 Retail and medical suite/office Retail 553,000
Clementi Mall
99, 3155 Commonwealth commencing on 31 Avenue West, August 2010 Singapore 129588
97 1/ 96.5 2
24.8
Investment properties, at valuation Net liabilities Net assets attributable to Unitholders
3,053,000 (821,284) 2,231,716
136.8 (36.8) 100.0
1 2
As at 31 August 2012 As at 28 February 2013
The carrying amount of the investment properties at 31 August 2012 and 28 February 2013 is based on the average of two independent valuations carried out by DTZ Debenham Tie Leung (SEA) Pte Ltd and CBRE Pte. Ltd. The fair values are based on open market values, being the estimated amount for which a property could be exchanged on the date of the valuation between a willing buyer and a willing seller in an arms length transaction wherein the parties had each acted knowledgeably, prudently and without compulsion. The valuers have considered the discounted cash flow method and capitalisation approach in arriving at the open market value as at the balance sheet date. The valuation methods involve certain estimates. The key assumptions used to determine the fair value of investment properties include projected rental rates, marketcorroborated capitalisation yield, terminal yield and discount rate. In relying on the valuation reports, the Manager has exercised its judgment and is satisfied that the valuation methods and estimates are reflective of current market conditions and that the valuation reports are prepared in accordance with recognised appraisal and valuation standards. At 31 August 2012 and 28 February 2013, Paragon with carrying value of S$2,500,000,000 was mortgaged to banks to secure credit facilities for the REIT.
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Intangible asset Intangible asset represents the unamortised income support receivable by REIT under the Deed of Income Support entered into with the vendor of The Clementi Mall. The sum of the carrying amounts of the intangible asset and The Clementi Mall (see Note 3) is equivalent to the gross consideration paid by the REIT.
Loans and borrowings 31 August 2012 S$000 Non-current liabilities . . . . . . . . . . . . . . . . . . . . . Secured bank loans . . . . . . . . . . . . . . . . . . . . . . . . Less: Unamortised transaction costs . . . . . . . . . . . 849,815 (8,923) 840,892 Maturity of gross interest-bearing borrowings: after 1 year but within 5 years . . . . . . . . . . . . . . more than 5 years. . . . . . . . . . . . . . . . . . . . . . . . 560,595 280,297 840,892 560,595 280,297 840,892 849,815 (8,923) 840,892 28 February 2013 S$000
The REIT has put in place a secured term loan facility of S$975,000,000 from various banks. The term loan facility has staggered loan maturities of three, five and seven year terms as described below: approximately one-third of the facility repayable in three years; approximately one-third of the facility repayable in five years; and approximately one-third of the facility repayable in seven years.
The secured bank loan, will be secured, inter alia by way of a first mortgage over the 99-year leasehold interest in Paragon (the Secured Property), first legal charge over the tenancy account and sales proceeds account for the Secured Property, and an assignment of the insurances (save for any third party liability insurances) taken in relation to the Secured Property. 6 Trade and other payables 31 August 2012 S$000 Security deposits Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,869 32,521 42,390 10,815 32,754 43,569 28 February 2013 S$000
C-23
Net asset value per Unit 31 August 2012 S$000 Net asset value per Unit is based on: Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,231,716 2,231,716 28 February 2013 S$000
000 Total issued Units. . . . . . . . . . . . . . . . . . . . . . . . . . 8 Gross revenue Six-month period ended 29 February 2012 S$000 89,481 2,867 909 93,257 2,500,995
000 2,500,995
FY2010 S$000 Gross rental income . . . . . . Carpark income . . . . . . Other income . 125,497 4,576 2,509 132,582
FY2011 S$000 156,714 5,255 771 162,740
FY2012 S$000 180,127 5,919 1,715 187,761
Six-month period ended 28 February 2013 S$000 92,715 3,786 894 97,395
Gross rental income includes contingent rents, which represent income based on certain sales achieved by tenants, recognised in the statements of total return during FY2010, FY2011, FY2012 and each of the six-month ended 29 February 2012 and 28 February 2013 amounted to S$2,157,000, S$3,353,000, S$5,099,000, S$2,605,000 and S$2,766,000, respectively. 9 Property operating expenses Six-month period ended 29 February 2012 S$000 8,244 Six-month period ended 28 February 2013 S$000 8,270
FY2010 S$000 Property taxes . . . . . . . Property management fees and reimbursements. Marketing expenses . . . . 10,545
FY2011 S$000 14,865
FY2012 S$000 16,268
7,100 4,245
8,721 4,403
10,015 5,085
4,840 3,138
5,033 2,590
C-24
FY2010 S$000 Maintenance expenses . . . . Utilities. . . . . . Depreciation . Others . . . . . . 4,197 6,211 76 582 32,956 10 Managers management fees
FY2011 S$000 4,827 8,466 76 1,089 42,447
FY2012 S$000 6,223 11,646 76 833 50,146
Six-month period ended 29 February 2012 S$000 3,011 5,585 38 381 25,237
Six-month period ended 28 February 2013 S$000 3,863 5,693 38 407 25,894
FY2010 S$000 Base fee . . . . Performance fee . . . . . . . . . 7,790 4,982 12,772
FY2011 S$000 7,790 6,015 13,805
FY2012 S$000 7,790 6,881 14,671
Six-month period ended 29 February 2012 S$000 3,895 3,401 7,296
Six-month period ended 28 February 2013 S$000 3,895 3,575 7,470
The Manager has opted to receive 100% of the management fees in the form of Units. 11 Other trust expenses Six-month period ended 29 February 2012 S$000 100 120 680 900 Six-month period ended 28 February 2013 S$000 100 120 680 900
FY2010 S$000 Audit fee . . . . . . Valuation fee. . . Others. . . . . . . . 200 240 1,360 1,800
FY2011 S$000 200 240 1,360 1,800
FY2012 S$000 200 240 1,360 1,800
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12
Income tax expense Six-month period ended 29 February 2012 S$000 Six-month period ended 28 February 2013 S$000
FY2010 S$000 Current tax Current year/period. . . . Reconciliation of effective tax rate . . . . . . Total returns before tax . . . . Income tax using Singapore tax rate of 17% . . . Expenses not deductible for tax purposes . . Tax transparency . . 64,717
FY2011 S$000
FY2012 S$000
84,319
100,778
49,638
52,951
11,002
14,334
17,132
8,438
9,002
2,595 (13,597)
3,054 (17,388)
3,869 (21,001)
1,969 (10,407)
1,919 (10,921)
13
Earnings per Unit Basis and diluted earnings per Unit are based on: Six-month period ended 29 February 2012 S$000 49,638 Six-month period ended 28 February 2013 S$000 52,951
FY2010 S$000 Total return for the year/period. 64,717
FY2011 S$000 84,319
FY2012 S$000 100,778
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FY2010 Number of Units (000) Weighted average number of Units Issued Units at 1 September . . . . . Managers fee paid in Units . . . . . . . . . Weighted average number of Units at 31 August/ 29 February/ 28 February . . . . . . 14 2,500,995 4,452
FY2011 Number of Units (000)
FY2012 Number of Units (000)
Six-month Six-month period period ended ended 29 February 28 February 2012 2013 Number of Units (000) Number of Units (000)
2,511,638 8,068
2,526,690 8,655
2,526,690 4,726
2,542,751 4,714
2,505,447
2,519,706
2,535,345
2,531,416
2,547,465
Financial risk management The REITs activities expose it to credit risk, liquidity risk, market risk (including interest rate risk and currency risk) in the normal course of its business. The REITs overall risk management strategy seeks to minimise adverse effects from the unpredictability of financial markets on the REITs financial performance. The REIT may use fixed rate loans or financial instruments such as interest rate swaps to hedge certain financial risk exposures. The Board of Directors (BOD) of the Manager is responsible for setting the objectives and underlying principles of financial risk management for the REIT. This is supported by comprehensive internal processes and procedures which are formalised in the Managers organisational and reporting structure, operating manuals and delegation of authority guidelines. Credit risk Credit risk is the potential financial loss resulting from the failure of a customer or a counterparty to settle its financial and contractual obligations to the REIT as and when they fall due. The REIT has a credit policy in place and exposure to credit risk is monitored on an ongoing basis. Cash and fixed deposits are placed with financial institutions which are regulated. At the reporting date, there was no significant concentration of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet.
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Liquidity risk Liquidity risk is the risk that the REIT will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The REITs approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the REITs reputation. The REIT monitors its liquidity risk and maintains a level of cash and cash equivalents deemed adequate by management to finance the REITs operations and to mitigate the effects of fluctuations in cash flows. The following are the contractual maturities of financial liabilities, including interest payments and excluding the impact of netting agreements: Contractual cash flows Carrying amounts S$000 31 August 2012 Loans and borrowings . . . . . . . . . Trade and other payables . . . . . . . . . . . Within 1 year S$000 Within 2 to 5 years S$000
Total S$000
> 5 years S$000
840,892 42,390 883,282
929,332 42,390 971,722
12,556 9,869 22,425
622,345 32,521 654,866
294,431 294,431
28 February 2013 Loans and borrowings . . . . . . . . . Trade and other payables . . . . . . . . . . .
840,892 43,569 884,461
929,332 43,569 972,901
12,556 10,815 23,371
622,345 32,754 655,099
294,431 294,431
Interest rate risk The REIT manages its net exposure to interest rate risk by maintaining sufficient lines of credit to achieve acceptable lending costs and by monitoring the exposure to such risks on an ongoing basis and entering into hedging instruments, where appropriate. The REITs interest rate risk arises primarily from its interest-bearing financial liabilities which are variable rate instruments. An increase/decrease of 50 basis points in the effective interest rates at the reporting date would have decreased/increased total returns before tax by S$4.3 million for FY2010, FY2011 and FY2012, and decreased/increased total returns before tax by S$2.2 million for the six-month periods ended 29 February 2012 and 28 February 2013. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. Foreign currency risk The REIT is not exposed to foreign currency risk as all its transactions are in Singapore dollar. C-28
Capital management The Managers objective when managing capital is to optimise the REITs capital structure within the borrowing limits set out in the Code on Collective Investment Schemes (CIS) by the Monetary Authority of Singapore to fund future acquisitions and asset enhancement works at the REITs properties. To maintain or achieve an optimal capital structure, the Manager may issue new Units or source additional borrowing from both financial institutions and capital markets. Accounting classifications and fair values Fair values versus carrying amounts The fair values of financial assets and liabilities, together with the carrying amounts shown in the unaudited pro forma balance sheets as at 31 August 2012 and 28 February 2013 are as follows: Other financial liabilities S$000 840,892 42,390 883,282 840,892 43,569 884,461
Note 31 August 2012 Other receivables . . . . . . . . . . Cash and cash equivalents . .
Loans and receivables S$000 1,343 42,390 43,733
Fair value S$000 1,343 42,390 43,733 840,892 42,390 883,282 1,343 43,569 44,912 840,892 43,569 884,461
Loans and borrowings . . . . . . Trade and other payables . . .
5 6
28 February 2013 Other receivables . . . . . . . . . . Cash and cash equivalents . .
1,343 43,569 44,912
Loans and borrowings . . . . . . Trade and other payables . . .
5 6
Estimation of fair values The following summarises the significant methods and assumptions used in estimating the fair value of financial instruments of the REIT. Financial assets and liabilities The carrying amounts of financial assets and liabilities with a maturity of less than one year (including other receivables, cash and cash equivalents, and trade and other payables) and variable rate loans and borrowings are assumed to approximately their fair values because of the short period to maturity or repricing. All other financial assets and liabilities are discounted in arriving at their fair values.
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15
Segment reporting Business segment FY2010 In respect of segment results for FY2010, the REITs only segment relates to Paragon. Clementi Mall S$000 16,190 (4,940) 11,250 1,667 (1,667) 11,250
Paragon S$000 FY2011 Gross revenue . . . . . . . . . . . . . . . . Property operating expenses . . . . . Net property income . . . . . . . . . . . Income support . . . . . . . . . . . . . . . . Amortisation of intangible asset . . . Unallocated amounts . . . . . Managers management fees Trustees fee . . . . . . . . . . . . . Other trust expenses . . . . . . Finance income . . . . . . . . . . . Finance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146,550 (37,507) 109,043 109,043
Total S$000 162,740 (42,447) 120,293 1,667 (1,667) 120,293 (13,805) (462) (1,800) 64 (19,971) 84,319 84,319
Total return before income tax . . Income tax expense . . . . . . . . . . . . Total return for the year . . . . . . . . Clementi Mall S$000 36,653 (11,246) 25,407 5,593 (5,593) 25,407
Paragon S$000 FY2012 Gross revenue . . . . . . . . . . . . . . . . . Property operating expenses . . . . . . Net property income . . . . . . . . . . . Income support . . . . . . . . . . . . . . . . Amortisation of intangible asset . . . . 151,108 (38,900) 112,208 112,208 Unallocated amounts Managers management fees . Trustees fee . . . . . . . . . . . . . Other trust expenses . . . . . . . Finance income . . . . . . . . . . . Finance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total S$000 187,761 (50,146) 137,615 5,593 (5,593) 137,615 (14,671) (462) (1,800) 67 (19,971) 100,778 100,778
Total return before income tax . . . Income tax expense . . . . . . . . . . . . . Total return for the year . . . . . . . .
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Business segment Paragon S$000 Six-month period ended 29 February 2012 Gross revenue . . . . . . . . . . . . . . . . . Property operating expenses . . . . . . Net property income . . . . . . . . . . . Income support . . . . . . . . . . . . . . . . Amortisation of intangible asset . . . . 75,019 (19,567) 55,452 55,452 Unallocated amounts Managers management fees . Trustees fee . . . . . . . . . . . . . Other trust expenses . . . . . . . Finance income . . . . . . . . . . . Finance costs . . . . . . . . . . . . . 18,238 (5,670) 12,568 2,935 (2,935) 12,568 93,257 (25,237) 68,020 2,935 (2,935) 68,020 Clementi Mall S$000 Total S$000
. . . . .
. . . . .
. . . . .
. . . . .
. . . . .
(7,296) (231) (900) 30 (9,985) 49,638 49,638 Clementi Mall S$000
Total returns before income tax . . Income tax expense . . . . . . . . . . . . . Total returns for the period . . . . . .
Paragon S$000 Six-month period ended 28 February 2013 Gross revenue . . . . . . . . . . . . . . . . . Property operating expenses . . . . . . Net property income . . . . . . . . . . . Income support . . . . . . . . . . . . . . . . Amortisation of intangible asset . . . .
Total S$000
78,677 (20,207) 58,470 58,470
18,718 (5,687) 13,031 2,469 (2,469) 13,031
97,395 (25,894) 71,501 2,469 (2,469) 71,501 (7,470) (231) (900) 36 (9,985) 52,951 52,951
Unallocated amounts Managers management fees . Trustees fee . . . . . . . . . . . . . Other trust expenses . . . . . . . Finance income . . . . . . . . . . . Finance costs . . . . . . . . . . . . .
. . . . .
. . . . .
. . . . .
. . . . .
. . . . .
Total return before income tax . . . Income tax expense . . . . . . . . . . . . . Total return for the period . . . . . . .
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Business segment Paragon S$000 As at 31 August 2012 Segment assets . . . . . . . . . . . . . . . . Unallocated amounts . . . . . . . . . . . . 2,534,968 Clementi Mall S$000 578,687 Total S$000 3,113,655 1,343 3,114,998 Segment liabilities . . . . . . . . . . . . . . Unallocated amounts . . . . . . . . . . . . 34,203 8,187 42,390 840,892 883,282 As at 28 February 2013 Segment assets . . . . . . . . . . . . . . . . Unallocated amounts . . . . . . . . . . . . 2,536,272 578,562 3,114,834 1,343 3,116,177 Segment liabilities . . . . . . . . . . . . . . Unallocated amounts . . . . . . . . . . . . 35,507 8,062 43,569 840,892 884,461 16 Commitment (i) Capital commitment: 31 August 2012 Contracted but not provided for . . . . . . . . . . . S$000 1,554 28 February 2013 S$000 1,517
(ii)
Non-cancellable rental receivable: 31 August 2012 within 1 year . . . . . . . . . . . . . . . . . . . . . . . . after 1 year but within 5 years . . . . . . . . . . S$000 175,656 222,467 398,123 28 February 2013 S$000 176,408 172,131 348,539
17
Significant related party transactions For the purposes of these financial information, parties are considered to be related to the REIT if the REIT has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the REIT and the party are subject to common control or common significant influence. Related parties may be individuals or other entities. In the normal course of the operations of the REIT, Managers fees and Trustees fees were paid or are payable to the Manager and Trustee, respectively. C-32
During the financial period, other than the transactions disclosed elsewhere in the financial statements, there were the following related party transactions: Six-month Six-month period ended period ended 29 February 28 February 2012 2013 S$000 S$000
FY2010 S$000 Managers management fees paid to related corporations . . . . . . Property managers management fees and reimbursables paid/payable to related corporations . . . . . . H
FY2011 S$000
FY2012 S$000
12,772
13,805
14,671
7,296
7,470
7,100
8,721
10,015
4,840
5,033
MANAGERS MANAGEMENT FEES, TRUSTEES FEES, AND PROPERTY MANAGERS MANAGEMENT FEES Unless defined in this report, capitalised terms below shall have the meanings set out in the Glossary to this Prospectus.
Managers Management Fees The Manager is entitled under the Trust Deed to management fees comprising the base fee and performance fee as follows: (a) (b) A base fee of 0.25% per annum of the value of the REITs Deposited Property; and A performance fee of 5.00% per annum of the REITs net property income.
Trustees Fees The Trustee is entitled under the Trust Deed to a fee charged on a scale basis of up to 0.02% per annum of the value of the Deposited Property of the REIT, subject to a minimum of S$15,000 per month. The REIT will also pay the Trustee a one-time inception fee as may be agreed between the Trustee and the Manager, subject to a maximum of S$60,000. Under the Trust Deed, the maximum fee which the Trustee may charge shall not exceed 0.1% per annum of the Deposited Property. Any increase in the Trustees fee beyond the current scaled basis of up to 0.02% per annum of the value of the Deposited Property will be subject to agreement between the Manager and the Trustee.
Property Managers Management Fees Under the property management agreement in respect of the Properties, the Property Manager will provide property management services, lease management services and general management services in relation to the Properties. The Property Manager is entitled to a property management fees of 2.00% of Gross Revenue and 2.00% of net property income (before deduction of property management fee) and 0.50% of net property income (before deduction of property management fee) in lieu of leasing commission.
C-33
APPENDIX D
INDEPENDENT TAXATION REPORT

The Board of Directors SPH REIT Management Pte. Ltd. (as Manager of SPH REIT) 1000 Toa Payoh North, News Centre, Singapore 318994 DBS Trustee Limited (as trustee of SPH REIT) 12 Marina Boulevard Level 44 DBS Asia Central @ Marina Bay Financial Centre Tower 3 Singapore 018982 Singapore taxation report Dear Sirs: This letter has been prepared at the request of SPH REIT Management Pte. Ltd. (the Manager ) for inclusion in this Prospectus to be issued in relation to the initial public offering of the units in SPH REIT (the Units ) on Singapore Exchange Securities Trading Limited. The purpose of this letter is to provide prospective purchasers of the Units with an overview of the Singapore income tax consequences of the purchase, ownership and disposition of the Units. This letter principally addresses investors who hold the Units as investment assets. Investors who hold or acquire the Units for dealing purposes should consult their own tax advisers concerning the tax consequences of their particular situations. This letter is not a tax advice and does not attempt to describe comprehensively all the tax considerations that may be relevant to a decision to purchase, own or dispose of the Units. Prospective investors in the Units should consult their own tax advisers to take into account the tax law applicable to their particular situations. In particular, prospective investors who are not Singapore tax residents are advised to consult their own tax advisers to take into account the tax laws of their respective countries of residence and the existence of any tax treaty which their countries of residence may have with Singapore. This letter is based on the Singapore income tax laws and the relevant interpretations thereof current as at the date of this letter, all of which are subject to change, possibly with retroactive effect. Words and expressions in this letter have the same meaning as defined in this Prospectus. In addition, unless the context requires otherwise, words in the singular include the plural and the other way around and words of one gender include any gender. Singapore taxation of trust in general Under current Singapore income tax law, the taxable income of a trust comprises: (a) income accruing in or derived from Singapore; and 9 July 2013
D-1
(b)
unless such income is otherwise exempt from tax, income derived from outside Singapore which is received in Singapore or deemed to have been received in Singapore by the operation of law.
The taxable income of a trust is ascertained in accordance with the provisions of the Income Tax Act, Chapter 134 of Singapore (the Income Tax Act ), after deduction of all allowable expenses and any other allowances permitted under that Act. The taxable income of a trust, or part thereof, is taxed at the prevailing corporate tax rate (currently 17.0%) and the tax is assessed on the trustee in the following circumstances: (a) where the income is derived from any trade or business carried on by the trustee, in its capacity as the trustee of the trust; where the beneficiaries of the trust are not resident in Singapore; or where the beneficiaries are not entitled to the income of the trust.
(b) (c)
Any distribution made out of taxable income which has been assessed to tax on the trustee is treated as capital in nature and the beneficiaries will not be subject to further tax on such distribution. The tax paid by the trustee on such income is not imputed as a credit to the beneficiaries for Singapore income tax purposes. Under section 43(2) of the Income Tax Act, where it is proved to the satisfaction of the Comptroller of Income Tax (the Comptroller ) that any beneficiary of a trust is entitled to a share of the trust income, a corresponding share of the statutory income of the trustee may be charged at a lower rate or not charged with any tax, as the Comptroller shall determine. Instead, the beneficiaries of the trust will be assessed to tax on their respective shares of the statutory income of the trust. This treatment, where the trustee may be charged at a lower rate or not charged with any tax, is known as tax transparency treatment and is applicable only in certain circumstances. Approval for tax transparency treatment is granted by the Inland Revenue Authority of Singapore (the IRAS ) on an application basis. Tax transparency treatment SPH REIT has been accorded the tax transparency treatment by the IRAS on the following income ( Specified Income ): (a) Singapore-sourced rental and other property related income from its business of property letting; Singapore-sourced interest income, discount or premium from placement of surplus cash as deposits with banks or investment in debt securities; and income support payments (i.e., rental top-up payments) in respect of The Clementi Mall.
(b)
(c)
Under the tax transparency treatment, the Specified Income, net of allowable expenses and applicable tax allowances, ( Specified Taxable Income ) will not be assessed to tax in the hands of the Trustee to the extent of the amount distributed to Unitholders. Instead, Unitholders will be subject to tax on the distributions made out of the Specified Taxable Income ( Taxable Income Distributions ), either directly or by way of tax deduction at source, depending on their own tax status.
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For the purpose of applying for the tax transparency treatment, the Trustee and the Manager have given a joint undertaking to the IRAS to comply with certain conditions. One of those conditions requires SPH REIT to distribute at least 90.0% of its Specified Taxable Income to Unitholders in the same year in which the income is derived. Taxation of SPH REIT Income from operations The taxable income of SPH REIT will be ascertained in accordance with the provisions of the Income Tax Act, after deduction of all allowable expenses and any other allowances permitted under that Act. Subject to meeting the conditions specified in the joint undertaking that was given for the tax transparency treatment, the Trustee will not be assessed to tax on the Specified Taxable Income of SPH REIT to the extent of the amount distributed, provided that at least 90.0% of Specified Taxable Income is distributed within the same year in which the income is derived. Instead, the Trustee and the Manager will deduct income tax at the prevailing corporate tax rate (currently 17.0%) from such Taxable Income Distributions. Tax will not be deducted if the Unitholder beneficially entitled to the distributions is a Qualifying Unitholder. A Qualifying Unitholder refers to: (a) (b) an individual; a company incorporated and tax resident in Singapore (see Declaration by Unitholders Tax residence of a company ); a body of persons, other than a company or a partnership, incorporated or registered in Singapore or established by any written law (for example, a registered charity, a town council, a statutory board, a registered co-operative society, a registered trade union, a management corporation, a club and a trade and industry association) (See Declaration by Unitholders); or a Singapore branch of a foreign company which has presented a letter of approval from the IRAS granting a waiver from tax deduction at source in respect of distributions from SPH REIT (see Declaration by Unitholders Singapore branches of foreign companies ).
(c)
(d)
For Units that are held in joint names, tax will be deducted from Taxable Income Distributions, except where the Units are jointly held by individuals. Where the beneficial owner of the Units is a Qualifying Non-resident Non-individual Unitholder, tax at the reduced rate of 10.0% will be deducted from Taxable Income Distributions made on or before 31 March 2015. A Qualifying Non-resident Non-individual Unitholder is a person who is neither an individual nor a resident of Singapore for income tax purposes and: (a) (b) who does not have a permanent establishment in Singapore; or who carries on any operation in Singapore through a permanent establishment in Singapore, where the funds used by that person to acquire the Units are not obtained from that operation.
D-3
To receive distributions without tax deduction at source, Unitholders who are Qualifying Unitholders (other than those who are individuals) must disclose their status in a prescribed form provided by the Manager. Similarly, to receive distributions with tax deduction at the reduced rate of 10.0% for distributions made on or before 31 March 2015, Qualifying Non-resident Nonindividual Unitholders must disclose their status in a prescribed form provided by the Manager (see Declaration by Unitholders). Where the Units are held in the name of nominees, the Trustee and the Manager will deduct income tax at the prevailing corporate tax rate (currently 17.0%) from Taxable Income Distributions, except: (a) where the beneficial owners of the Units are Qualifying Unitholders, income tax may not be deducted at source from the distributions provided that a declaration is made by the nominee of the beneficial owners status (which includes the provision of certain particulars of the beneficial owners of the Units) in a prescribed form provided by the Manager (see Declaration by Unitholders); where the beneficial owners of the Units are Qualifying Non-resident Non-individual Unitholders, income tax may be deducted at source at the reduced rate of 10.0% from distributions made on or before 31 March 2015 provided that a declaration is made by the nominee of the beneficial owners status (which includes the provision of certain particulars of the beneficial owners of the Units) in a prescribed form provided by the Manager (see Declaration by Unitholders); and where the Units are held by the nominees as agent banks or the Supplementary Retirement Scheme (the SRS ) operators acting for individuals who purchased the Units within the CPF Investment Scheme or the SRS respectively, income tax will not be deducted at source from the distributions made in respect of these Units.
(b)
(c)
The tax transparency treatment does not apply to any amount of Specified Taxable Income that is not distributed to Unitholders and any income that is not Specified Income, for example, gains from the disposal of immovable properties which are considered trading gains. The Trustee will be assessed to tax on such income. Any distribution made out of such income (i.e., income in respect of which tax has been assessed on the Trustee) will not be subject to deduction of tax at source by the Trustee and the Manager. Rollover income adjustments Taxable Income Distributions made to Unitholders will be based on the amount of Specified Taxable Income determined by the Manager. In the event that the amount finally agreed with the IRAS is different from the amount of Specified Taxable Income determined by the Manager for distribution purposes, the difference will be added to or deducted from, as the case may be, the amount of Specified Taxable Income determined by the Manager for the next distribution immediately after the difference has been agreed with the IRAS. This arrangement, known as rollover income adjustments, is accepted by the IRAS based on the understanding that: (a) (b) (c) at least 90.0% of the difference has to be distributed to Unitholders; the shortfall in distribution is not material; no major issue that would cause undue delay in reaching the agreement with the IRAS is envisaged; and the IRAS reserves the right to review such arrangement as and when needed.
(d)
D-4
The practical effect of the rollover income adjustments to Unitholders is that the amount of distributions received by Unitholders for a distribution period may be reduced or increased by the amount of such adjustments. Gains on disposal of immovable properties Singapore does not impose tax on capital gains. Gains derived by SPH REIT from the disposal of its immovable properties will not be liable to Singapore income tax unless such gains are considered income derived from a trade or business carried on by the Trustee on behalf of SPH REIT. The gains may also be subject to tax if the immovable properties are acquired with the intent or purpose of making a profit from their subsequent sale and not for long-term investment purposes. SPH REIT is entitled to use the facts and circumstances test derived from case law in determining whether or not gains from the sale of any of its immovable properties are trading gains. Should such gains be determined to be trading gains and hence subject to Singapore income tax, the tax will be assessed on the Trustee. Tax transparency treatment does not apply to such gains. The Trustee and the Manager have undertaken, as part of the joint undertaking given for tax transparency treatment, not to distribute any gain arising from the disposal of any immovable properties until the nature of the gain, and hence its taxability, has been agreed with the IRAS. In the event that the Trustee and the Manager exercise their discretion to make a distribution out of such gains (i.e., after the nature of the gains has been agreed with the IRAS), tax will not be deducted from such distribution. Taxation of Unitholders General The tax treatment of distributions from SPH REIT in the hands of its Unitholders will depend on the nature or type of distributions and the type of Unitholders. The income distributed to Unitholders does not retain the original character of the income out of which the distribution is made. If a Unitholder holds the Units for trading purpose, the distributions will be assessed to tax under section 10(1)(a) of the Income Tax Act. If a Unitholder holds the Units for purposes other than trading, such as for investment purpose, the distributions will be assessed to tax under section 10(1)(e) of the Income Tax Act. Taxable Income Distributions Taxable Income Distributions are taxed as income of the year which corresponds to the year of income of SPH REIT out of which the distribution is made, regardless of when the distribution is paid to Unitholders. For example, if a Unitholder receives Taxable Income Distributions, say on 28 February 2015, in respect of Specified Taxable Income of SPH REIT for the distribution period ending 30 November 2014, that distribution, being a distribution out of SPH REITs Specified Taxable Income derived during the financial year ending 31 August 2015, will be considered income derived by Unitholder for the year of assessment 2016.
D-5
Distributions made out of income subject to tax on the Trustee Distributions made out of income which has been assessed to tax on the Trustee (for example, Specified Taxable Income that was not distributed or gains from the disposal of immovable properties which are taxed as trading gains) are treated as capital in nature and will not be subject to further tax in the hands of Unitholders. The tax paid by the Trustee on such income is not imputed as a credit to Unitholders for Singapore income tax purposes. Distributions made out of capital gains Distributions made out of gains or profits arising from disposal of immovable properties that have been determined to be capital gains are not taxable in the hands of Unitholders. Individuals who hold Units as investment assets Individuals who hold Units as investment assets and not as trading assets, excluding individuals who hold Units through a partnership in Singapore, are exempt from income tax on Taxable Income Distributions, regardless of their nationality or tax residence status. Individuals who hold Units as trading assets or through a partnership in Singapore Individuals who hold Units as trading assets or through a partnership in Singapore are subject to income tax on Taxable Income Distributions. The gross amount of such distributions (i.e., before tax deducted at source (if any)) is taxable in the hands of the individuals at their own applicable income tax rates. Non-individuals (other than Qualifying Non-resident Non-individuals) Non-individual Unitholders are subject to Singapore income tax on Taxable Income Distributions, regardless of whether the Trustee and the Manager had deducted tax from the distributions. The gross amount of such distributions (i.e., before tax deducted at source (if any)), is taxable at the prevailing corporate tax rate (currently 17.0%). Qualifying Non-resident Non-individuals Qualifying Non-resident Non-individual Unitholders are subject to Singapore income tax on Taxable Income Distributions. The tax is imposed on the gross amount of such distributions (i.e., before tax deducted at source) and the tax is deducted at source at the prevailing corporate tax rate (currently 17.0%) except for distributions made on or before 31 March 2015 where the tax rate is reduced to 10.0%. Tax deducted at source Where tax had been deducted at source at the prevailing corporate tax rate (currently 17.0%), the tax deducted is not a final tax. Unitholders can use such tax deducted at source to set-off against their Singapore income tax liabilities. However, the tax at 10.0% on distributions to Qualifying Non-resident Non-individual Unitholders on or before 31 March 2015 is a final tax. Gains on disposal of Units Singapore currently does not impose tax on capital gains. Therefore, gains on disposal of the Units that are capital in nature will not be subject to tax. However, such gains may be considered income in nature and subject to Singapore income tax if they arise from or are otherwise connected with the activities of a trade or business carried on in Singapore. Such gains may also
D-6
be considered income in nature, even if they do not arise from an activity in the ordinary course of trade or business or an ordinary incident of some other business activity, if the intention of Unitholder was not to hold the Units as long-term investments. If a Unitholder has held the Units as investment assets, any gains arising from subsequent sales of the Units should generally be considered capital gains not subject to Singapore income tax. However, if the Units have been held as trading assets, the gains arising from subsequent sales will be subject to tax. As the precise tax status of one Unitholder will vary from another, Unitholders are advised to consult their own professional advisers on the Singapore tax consequences that may apply to their own circumstances. Unitholders who have adopted or are required to adopt Singapore Financial Reporting Standard 39 Financial Instruments: Recognition and Measurement ( FRS 39 ) for financial reporting purposes may for Singapore income tax purposes be required to recognise gains or losses (not being gains or losses in the nature of capital) on the Units, irrespective of disposal. Unitholders should consult their own accounting and tax advisers regarding the Singapore income tax consequences of their purchase, ownership and disposition of the Units arising from the adoption of FRS 39. Declaration by Unitholders To receive gross Taxable Income Distributions (i.e., without tax deduction at source) or Taxable Income Distributions net of tax deduction at the reduced rate of 10.0%, as the case may be: (a) in respect of Units held directly by beneficial owners who are Qualifying Unitholders (other than those who are individuals) or Qualifying Non-resident Non-individual Unitholders, these Unitholders will have to make a declaration of their status and provide such other particulars as may be required in a prescribed form provided by the Manager; and in respect of Units held by nominees for the benefit of Qualifying Unitholders or Qualifying Non-resident Non-individual Unitholders, these nominees will have to declare the status of the ultimate beneficial owners of the Units and provide such other particulars of the ultimate beneficial owners as may be required in a prescribed form provided by the Manager.
(b)
A draft sample of each of the prescribed forms is attached as an Annex to this Taxation Report. The prescribed form must be completed and returned to the Trustee within the time limit set by the Trustee and the Manager. The Trustee and the Manager will make Taxable Income Distributions without deduction of tax (for distributions made to Qualifying Unitholders) or after deduction of tax at the reduced rate of 10.0% (for distributions made on or before 31 March 2015 to Qualifying Non-resident Non-individual Unitholders), as the case may be, only if they are satisfied from the statements and declarations made in the prescribed forms as to the status of Unitholders and that they are the beneficial recipients of the distributions to be made. Unitholders who are individuals do not have to submit any prescribed form. Tax residence of a company A company is considered a tax resident of Singapore if the control and management of its business is exercised in Singapore.
D-7
Singapore branches of foreign companies ( Singapore branches ) Tax will be deducted at the prevailing corporate tax rate (currently 17.0%) from Taxable Income Distributions made to Singapore branches, unless these Singapore branches submit, together with the duly completed prescribed form, a copy of the letter of approval from the IRAS to waive the deduction of tax from distributions made by Trustee out of income of SPH REIT. Singapore branches can apply to the IRAS for waiver of deduction of tax subject to the same terms and conditions imposed under the administrative concession currently available for section 12(6) and (7) payments to Singapore branches which are not banks. The details of this administrative concession can be found in the e-Tax Guide (Revised Edition) issued by the IRAS on 1 August 2008.
Yours faithfully
Lim Gek Khim Partner for and on behalf of Ernst & Young Solutions LLP Singapore
D-8
To: Unit Registrar
Annex to Appendix D
FORM A DECLARATION FOR SINGAPORE TAX PURPOSES Name of registered holder (preprinted) Address (preprinted) Securties Account No. (preprinted) Holding: Units (preprinted)
Name of Counter: SPH REIT

Please read the following important notes carefully before completion of this Form: 1 The Trustee and the Manager of SPH REIT ("SPHR") will not deduct tax from distributions made out of SPHR's taxable income that is not taxed at the Trustee level of SPHR to: (a) Unitholders who are individuals and who hold the units either in their sole names or jointly with other individuals; (b) Unitholders which are companies incorporated and tax resident in Singapore; (c) Unitholders which are Singapore branches of foreign companies that have obtained specific approval from the Inland Revenue Authority of Singapore to receive the distribution from the Trustee of SPHR without deduction of tax; or (d) Unitholders which are non-corporate entities (excluding partnerships) constituted or registered in Singapore, such as: (i) institutions, authorities, persons or funds specified in the First Schedule to the Income Tax Act (Cap. 134); (ii) co-operative societies registered under the Co-operative Societies Act (Cap. 62); (iii) trade unions registered under the Trade Unions Act (Cap. 333); (iv) charities registered under the Charities Act (Cap. 37) or established by an Act of Parliament; and (v) town councils. 2 For distributions made to classes of unitholders that do not fall within the categories stated under Note 1 above, the Trustee and the Manager of SPHR will deduct tax at the rate of 10% if the unitholders are foreign non-individual investors. A foreign non-individual investor is one who is not a resident of Singapore* for income tax purposes and: (a) who does not have a permanent establishment^ in Singapore; or (b) who carries on any operation in Singapore through a permanent establishment in Singapore, where the funds used to acquire the units in SPHR are not obtained from that operation. 3 4 Unitholders are required to complete the applicable Section A, B or C if they fall within the categories (b) to (d) stated under Note 1 or Section D if they qualify as a foreign non-individual investor as described under Note 2. The Trustee and the Manager of SPHR will rely on the declarations made in this Form to determine (i) if tax is to be deducted for the categories of unitholders listed in (b) to (d) under Note 1; and (ii) if tax is to be deducted at the rate of 10% for distributions to foreign nonindividual investors. Please therefore ensure that the appropriate section of this Form is completed in full and legibly and is returned to [Unit Registrar] within the stipulated time limit. Failure to comply with any of these requirements will render this Form invalid and therefore, the Trustee and the Manager will be obliged to deduct tax at the prevailing corporate tax rate from the distributions in respect of which this declaration is made. Unitholders who fall within class (a) under Note 1 are not required to submit this declaration form. Unitholders who do not fall within the classes of Unitholders listed in Note 1 and Note 2 above can choose not to return this Form as tax will be deducted from the distributions made to them at the prevailing corporate tax rate in any case. Unitholders who hold their Units jointly (where at least one of the joint holders is not an individual) or through nominees do not have to return this Form. Please make sure that the information given and the declaration made in this Form is true and correct. The making of a false or incorrect declaration constitutes an offence under the Income Tax Act and the Declarant shall be liable to the appropriate penalties imposed under the said Act. This Form must be returned to [Unit Registrar], [Address] by [Date].
5 6 7 8
* A company is not a resident of Singapore if the management and control of its business is exercised outside Singapore. ^ Under the Singapore Income Tax Act, permanent establishment means a fixed place where a business is wholly or partly carried on including a place of management, a branch, an office, a factory, a warehouse, a workshop, a farm or plantation, a mine, oil well, quarry or other place of extraction of natural resources, a building or work site or a construction, installation or assembly project. A unitholder shall be deemed to have a permanent establishment in Singapore if it: (i) carries on supervisory activities in connection with a building or work site or a construction, installation or assembly project; or (ii) has another person acting on the unitholder's behalf in Singapore who: (a) has and habitually exercises an authority to conclude contracts; (b) maintains stock of goods or merchandise for the purpose of delivery on its behalf; or (c) habitually secures orders wholly and almost wholly for the unitholder or for such other enterprises as are controlled by the unitholder.
D-9
DECLARATION FOR SINGAPORE TAX PURPOSES

Section A : To be completed by Unitholder which is a Singapore incorporated company I, ____________________________________, NRIC/Passport No. _________________________, the Director of _________________________________________________ ("the Company") hereby declare that the Company is the beneficial owner of the holdings stated above and that: Tick ( / ) either the "Yes" or "No" box (a) the Company is incorporated in Singapore and its registration number is ; (b) the management and control of the Company's business for the preceding year and from the beginning of this year to the date of this Declaration was exercised in Singapore and there is no intention, at the time of this Declaration, to change the place of management and control of the Company to a location outside Singapore; and (c) the Company has previously filed tax returns with the Inland Revenue Authority of Singapore. If your reply to (c) is "Yes", please proceed with (d) # (d) the Company is declared as a tax resident of Singapore based on the latest tax return filed with the Inland Revenue Authority of Singapore. Signature of Declarant : ________________________ Contact No: ________________________
#
Yes
No
Date: ________________
A company is tax resident in Singapore if the management and control of its business is exercised in Singapore.
Section B : To be completed by Unitholder which is a Singapore branch of a foreign company I, _________________________________, NRIC/Passport No. _________________, the manager of _______________________________________________ (the "Singapore Branch") hereby declare that the Singapore Branch is the beneficial owner of the holdings stated above and that the Inland Revenue Authority of Singapore has granted approval to the Singapore Branch to receive distribution from SPHR without deduction of tax. A copy of the letter of approval dated _____________ is attached.
Signature of Declarant : ___________________________ Contact No: ______________________ Section C : To be completed by Unitholder which falls under Note 1(d)
Date : _______________
I, ___________________________, NRIC/Passport No. __________________, the principal officer of __________________________________________________ ("the Entity") hereby declare that the Entity is the beneficial owner of the holdings stated above and that the Entity is (tick whichever is applicable): - an institution, authority, person or fund specified in the First Schedule to the Income Tax Act (Cap. 134). - a co-operative society registered under the Co-operative Societies Act (Cap. 62). - a trade union registered under the Trade Unions Act (Cap. 333). - a charity registered under the Charities Act (Cap. 37) or a charity established by an Act of Parliament. - a town council. - any other non-corporate entity (other than a partnership) constituted or registered in Singapore. Signature of Declarant : _____________________________ Contact No : ___________________________ Section D : To be completed by Unitholder which falls under Note 2 I, ____________________________, NRIC/Passport No. _____________________, the Director/Principal Officer of ____________________________ (the "Entity") hereby declare that the Entity is the beneficial owner of the holdings stated above and that: Tick ( / ) either the "Yes" or "No" box (a) the Entity is not a resident of Singapore* for income tax purposes for the preceding year and from the beginning of this year to the date of this Declaration and there is no intention, at the time of this Declaration, to change the tax residence of the Entity to Singapore; and (b) the Entity does not have a permanent establishment^ in Singapore. If your reply to (b) is "No", please proceed with (c) (c) the funds used to acquire the holdings in SPHR are not obtained by the Entity from any operation carried on in Singapore through a permanent establishment in Singapore. Signature of Declarant : _____________________________ Contact No : ___________________________ Date : ______________ Yes No Date : ______________
*/^ Please see front page.
D-10
To: Unit Registrar
FORM B DECLARATION BY DEPOSITORY AGENTS FOR SINGAPORE TAX PURPOSES Name of registered holder (preprinted) Address (preprinted) Securities Account No. (preprinted) Holding: Units (preprinted)
Name of Counter: SPH REIT Please read the following important notes carefully before completion of this Form:
1 The Trustee and the Manager of SPH REIT ("SPHR") will deduct tax at the prevailing corporate tax rate from distributions made out of SPHR's taxable income, that is not taxed at the Trustee level of SPHR, in respect of units held by you in your capacity as a Depository Agent except where the beneficial owners of these units are: (i) individuals and the units are not held through a partnership in Singapore; (ii) qualifying unitholders; or (iii) foreign non-individual investors. 2 Tax will not be deducted for distributions made in respect of units held by you for the benefit of unitholders who fall within categories (i) and (ii) of Note 1. Tax will be deducted at the reduced rate of 10% for distributions made in respect of units held by you for the benefit of foreign non-individuals. A qualifying unitholder refers to: (i) a company incorporated and tax resident in Singapore; (ii) non-corporate entities (excluding partnerships) constituted or registered in Singapore; such as (a) institutions, authorities, persons or funds specified in the First Schedule to the Income Tax Act (Cap. 134); (b) co-operative societies registered under the Co-operative Societies Act (Cap. 62); (c) trade unions registered under the Trade Unions Act (Cap. 333); (d) charities registered under the Charities Act (Cap. 37) or established by an Act of Parliament; and (e) town councils; or (iii) a Singapore branch of a foreign company which has obtained from the Inland Revenue Authority of Singapore, a waiver from tax deducted at source in respect of distributions from the Trustee of SPHR. A foreign non-individual is one who is not a resident in Singapore* for income tax purposes and: (i) who does not have a permanent establishment^ in Singapore; or (ii) who carries on any operation in Singapore through a permanent establishment in Singapore, where the funds used to acquire the units in SPHR are not obtained from that operation. The Trustee and the Manager of SPHR will rely on the declarations made in this Form to determine the applicable rate at which tax is to be deducted in respect of the units held by you in your capacity as a Depository Agent. Please therefore ensure that this Form and the Annexes are completed in full and legibly and are returned to [Unit Registrar] within the stipulated time limit. Failure to comply with any of these requirements will render this Form invalid and the Trustee and the Manager will deduct tax at the prevailing corporate tax rate from the distributions in respect of which this declaration is made. Please make sure that the information given and the declaration made in this Form is true and correct. The making of false or incorrect declaration constitutes an offence under the Income Tax Act and the Declarant shall be liable to the appropriate penalties imposed under the said Act. The hard copy of this completed and duly signed Form B together with the Annexes, must be returned to [Unit Registrar], [Address]. The softcopy of the aforesaid Annexes must be uploaded and submitted at URL: [xxx] by [Date]. Please note that it is compulsory to submit the Annexes online.
Declaration I, _________________________, NRIC/Passport No. ________________, the principal officer of ________________________________________________ ("the Depository Agent") hereby declare that the SPHR units registered in the name of the Depository Agent and deposited in the sub-accounts maintained with The Central Depository (Pte) Ltd, as listed in the Annexes 1 to 3 to this declaration, belonged beneficially to persons who are individuals, qualifying unitholders (as defined in Note 3 above) and foreign non-individuals (as defined in Note 4 above), respectively. The details of each of these beneficial owners are also listed in the respective Annexes. We hereby also undertake to provide the actual amount of gross distribution made to each qualifying unitholder in the format provided in Annex 2.1 and to upload and submit Annex 2.1 to [Unit Registrar] by [Date] (with 21 days from the date of distribution). Signature of Declarant : _____________________________ Contact No : ___________________________ * A company is not a resident of Singapore if the management and control of its business for the preceding year and from the beginning of this year to the date of this declaration was exercised outside Singapore and there is no intention, at the time of this declaration, to change the tax residence of the company to Singapore. ^ Under the Singapore Income Tax Act, permanent establishment means a fixed place where a business is wholly or partly carried on including a place of management, a branch, an office, a factory, a warehouse, a workshop, a farm or plantation, a mine, oil well, quarry or other place of extraction of natural resources, a building or work site or a construction, installation or assembly project. A unitholder shall be deemed to have a permanent establishment in Singapore if it: (i) carries on supervisory activities in connection with a building or work site or a construction, installation or assembly project; or (ii) has another person acting on the unitholder's behalf in Singapore who: (a) has and habitually exercises an authority to conclude contracts; (b) maintains stock of goods or merchandise for the purpose of delivery on its behalf; or (c) habitually secures orders wholly and almost wholly for the unitholder or for such other enterprises as are controlled by the unitholder. Date : ______________
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SPH REIT Distribution Period: Annex to Declaration Form B - Individuals

S/No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 * This refers to Singapore NRIC No., foreign ID No. or Passport No. CDP Sub-Account No. Name of beneficiary holder(s) Identification No.*
Annex 1
Number of units
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SPH REIT Distribution Period: Annex to Declaration Form B - Qualifying Unitholders

S/No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 * This refers to ROC / Tax Reference No. CDP Sub-Account No. Name of beneficiary holder(s) Registration No.*
Annex 2
Number of units
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SPH REIT Distribution Period: Annex to Declaration Form B - Qualifying Unitholders

S/No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 * This refers to ROC / Tax Reference No. CDP Sub-Account No. Name of beneficiary holder(s) Registration No.* Number of units
Annex 2.1
Gross distribution paid
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SPH REIT Distribution Period: Annex to Declaration Form B - Foreign Non-Individuals

S/No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 CDP Sub-Account No. Name of beneficiary holder(s) Address
Annex 3
Number of units
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APPENDIX E
INDEPENDENT PROPERTY VALUATION SUMMARY REPORTS
CBRE Pte. Ltd.
6 Battery Road #32-01 Singapore 049909 T (65) 6224 8181 F (65) 6225 1987 www.cbre.com.sg Co. Reg. No.: 197701161R Agency Licence No.: L3002163I
27 May 2013 SPH REIT Management Pte Ltd (as Manager of SPH REIT) c/o 1000 Toa Payoh North, News Centre Singapore 318994 DBS Trustee Limited (in its capacity as Trustee of SPH REIT) (the "Trustee") 12 Marina Boulevard Level 44 DBS Asia Central @ Marina Bay Financial Central Tower 3 Singapore 018982 Dear Sirs, 1) Paragon, 290 Orchard Road, Singapore 238859 2) The Clementi Mall, 3155 Commonwealth Avenue West, Singapore 129588 all within Singapore. (Together "Properties" and Individually "Property") Instructions We refer to instructions issued by SPH REIT Management Ltd. (as Manager of SPH REIT) (the "Manager"), requesting formal valuation advice in respect of the abovementioned commercial properties. We have specifically been instructed to provide our opinion of Market Value of the remaining leasehold interest in the Properties as at 28 February 2013, subject to the existing tenancies and occupational arrangements, and income support for The Clementi Mall as disclosed. We have prepared comprehensive formal valuation reports (individually a "Report" and collectively the "Reports") in accordance with the requirements of our instructions. In accordance with the International Valuation Standards and as advocated by the Royal Institution of Chartered Surveyors (RICS), the definition of Market Value is as follows: "Market Value is the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arms length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion". We have been advised that the Vendor of The Clementi Mall will be providing a net property income guarantee of $31 million per year (ie guarantee equivalent to the difference between the guarantee income amount and actual net property income), subject to an aggregate top-up of $20 million for 5 years from listing date ("Income Support"). The Income Support is payable
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27 May 2013
at the end of each financial quarter period. We have in our valuation assessment taken this Income Support into consideration. For the specific purposes of this Prospectus, we provide a Summary of the Reports outlining key factors that have been considered in arriving at our opinions of value. The value conclusions reflect all information known by the valuers of CBRE Pte. Ltd. ("CBRE") who worked on the valuations in respect to the Properties, market conditions and available data. Reliance on This Letter For the purposes of this Prospectus, we have prepared this letter which summarises our Reports and outlines key factors which have been considered in arriving at our opinions of value. This letter alone does not contain the necessary data and support information included in our Reports. For further information to that contained herein, reference should be made to the Reports, copies of which are held by the Manager and the Trustee. CBRE has provided the Manager and the Trustee with comprehensive valuation reports for each of the Properties. The valuations and market information are not guarantees or predictions and must be read in consideration of the following: x Each report is approximately 50 to 70 pages in length and the conclusions as to the estimated value are based upon the factual information set forth in that Report. Whilst CBRE has endeavoured to assure the accuracy of the factual information, it has not independently verified all information provided by the Manager (primarily the leases and financial information with respect to the Properties as well as reports by independent consultants engaged by the Manager, or the government of Singapore (primarily statistical information relating to market conditions). CBRE believes that every investor, before making an investment in the SPH REIT, should review at least one of the Reports to understand the complexity of the methodology and the many variables involved. The methodologies used by CBRE in valuing the Properties the Capitalisation of Income and Discounted Cash Flow Analysis are based upon estimates of future results and are not predictions. These valuation methodologies are summarised in the Valuation Rationale section of this letter. Each methodology begins with a set of assumptions as to income and expenses of the Property and future economic conditions in the local market. The income and expense figures are mathematically extended with adjustments for estimated changes in economic conditions. The resultant value is considered the best practice estimate, but is not to be construed as a prediction or guarantee and is fully dependent upon the accuracy of the assumptions as to income, expenses and market conditions. The basic assumptions utilised for the properties is summarised in the Valuation Rationale section of this letter. The Reports were undertaken based upon information available as at February/March 2013. CBRE accepts no responsibility for subsequent changes in information as to income, expenses or market conditions.
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Property Descriptions The following pages provide a brief summary of each of the properties. 1) Paragon, 290 Orchard Road, Singapore 238859 Paragon is a major retail mall located within the Orchard Road shopping belt of Singapore. Paragon incorporates a part 9-storey part 6-storey with 2 basement levels podium comprising 7 levels of retail space including Basement Level 1, car parking for 416 vehicles on Basement Levels 1 and 2, and 3 levels (7th to 9th storey of podium which is the redeveloped section of the development) of medical space including a gym centre. Built above the podium, at the flank facing Bideford Road is a 14-storey high medical/office tower known as the Paragon Medical Centre which was completed in 2002. Over the years, Paragon has embarked on various expansion and upgrading plans to maintain its position as a premier luxury shopping mall on Orchard Road. These include the redevelopment of Promenade Shopping Centre merging with the original Paragon in 2002; and over the last 10 years enhancement works that have been carried out include the facelift to refresh the interior and exterior of the mall with the latest exercise being the facade articulation carried out in 2008 to 2009. The building is in good condition and is well-maintained, having regard to its age and use. The tenure of Paragon is freehold. However, we have been instructed to value the Property as leasehold with a tenure of 99 years from the date of listing of SPH REIT. The retail component has a net lettable area of about 509,358 square feet whilst the office/medical suites component has a net lettable area of about 200,159 square feet. The retail and office/medical suites components within Paragon is currently 100% occupied. The tenants include major tenants such as Paragon Market Place, Metro, Marks & Spencer, Pacific Healthcare, Fitness First and other specialty retail tenancies (including ATM tenancies) and office/medical suites tenancies.
2) The Clementi Mall, 3155 Commonwealth Avenue West, Singapore 129588 The Clementi Mall is a major retail property incorporating 6 levels of retail space, from 1st to 5th storey including Basement Level 1, and car parking for approximately 169 vehicles on Basement Levels 1 and 2. The Temporary Occupation Permits was issued on 31 December 2010 and 14 March 2011. The Certificate of Statutory Completion was issued on 9 April 2012. The mall started trading in phases in January and March 2011, with its official opening in May 2011. The Clementi Mall is part of a mixed use development built by the Housing and Development Board (HDB). Besides the retail podium, the development houses 2 residential blocks of 388 HDB units, the West Coast Town Council (Clementi Office) and a bus interchange on Level 1. The new bus interchange has direct access to the mall and the existing Clementi MRT Station is linked directly to the mall at Level 3. The building is in good condition and is well-maintained, having regard to its age and use.
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The tenure of the Property is leasehold for 99 years commencing from 31 August 2010. The remaining unexpired lease term is approximately 96.5 years. Clementi Mall is 100% occupied and the tenants include major tenants such as NTUC FairPrice Finest, BHG Department Store, NTUC FoodFare, Popular Book Store, Clementi Public Library (a civic and community institution space) and other specialty tenancies (including ATM/AXS tenancies). Briefly, the property details of the two properties are detailed as follows:
Remaining Land Lease Term (Years) 99.0 96.5 Land Area (sq m) 17,362.2 16,579.2 * Gross Floor Net Lettable Area Area (sq ft) (sq ft) 1,017,707 289,877 706,690 192,089
Property
1) Paragon, 290 Orchard Road, Singapore 238859 2) The Clementi Mall, 3155 Commonwealth Avenue West, Singapore 129588
* The site houses The Clementi Mall, the Clementi Bus Interchange and two blocks of HDB flats
Valuation Rationale In arriving at our opinion of value, we have considered relevant general and economic factors and in particular have investigated recent sales and leasing transactions of comparable properties that have occurred in the commercial property market. We have primarily utilised the Capitalisation Approach and Discounted Cash Flow analysis in undertaking our assessment for each of the Properties. Capitalisation Approach We have utilised a capitalisation approach in which the sustainable net income on a fully leased basis has been estimated having regard to the current passing rental income. From this figure, we have deducted property management fee as all other outgoings including property tax. The resultant net income has thereafter been capitalised for the remaining tenure of the respective Properties to produce a core capital value. The yields adopted reflect the nature, location and tenancy profile of the Properties together with current market investment criteria, as evidenced by the sales evidence considered. Thereafter, appropriate capital adjustments have been included relating to rental reversion adjustments and capital expenditure requirements. Discounted Cash Flow Analysis We have also carried out a discounted cash flow analysis over a 10-year investment horizon in which we have assumed that the Property is sold at the commencement of the eleventh year of the cashflow. This form of analysis allows an investor or owner to make an assessment of the long term return that is likely to be derived from a property with a combination of both rental and capital growth over an assumed investment horizon. In undertaking this analysis, a wide range of assumptions are made including a target or pre-selected internal rate of return, rental
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27 May 2013
growth, sale price of the property at the end of the investment horizon, costs associated with the initial purchase of the property and also its disposal at the end of the investment period. The Singapore Government has introduced legislation in 2005 whereby REIT vehicles purchasing Singapore based property will not have to pay stamp duty on purchases during the next 5 years. In early 2010, this was first extended to 31 Mar 2010 and then during Budget 2010, it was extended for another 5 years expiring 31 Mar 2015. As the Properties are investment grade properties suitable for acquisition by a REIT vehicle, we have for the purpose of this valuation not included stamp duty within our valuation analysis. We have investigated the current market requirements for an investment return over a 10-year period from commercial properties. We hold regular discussions with investors active in the market, both as purchasers and owners of commercial properties. From this evidence, we conclude that market expectations are currently in the order of 7.0% to 8.0%. We note that the Singapore 10-year bond rate is trading in the order of 1.30% and 1.66% during the last year, indicating a risk premium of between circa 5.84% and 6.20%. In comparison with other investment products, the slightly higher premium for this portfolio reflects the inherent investment risks associated with the properties and real estate at large, and also the current status of the local bond rate which has consistently traded below 1.80% since August 2011. Our selected terminal capitalisation rates, used to estimate the terminal sale price, takes into consideration perceived market conditions in the future, estimated tenancy and cash flow profile and the overall physical condition of the building in 10 years' time. The adopted terminal capitalisation rate additionally has regard to the duration of the remaining tenure of the Properties at the end of the cash flow period. Summary of Values Based on the above, the following table outlines the salient valuation assumptions adopted in undertaking our assessment:
Property 1) Paragon, 290 Orchard Road, Singapore 238859 Capitalisation Rate 4.75% * Discount Rate 7.50% Assessed Market Value (S$) 2,500,000,000 S$ psf of net Lettable Area 3,538
2) The Clementi Mall, 3155 Commonwealth Avenue West, Singapore 129588 Total Portfolio
5.00%
7.50%
570,000,000 **
2,967
3,070,000,000
* Blended cap rate of Retail component at 4.85% and Office/Medical Suite component at 4.25%. ** Value takes into account net property income guarantee of $31 million for 5 years from listing date to be provided by the Vendor. Value of The Clementi Mall without Income Support is S$550 million.
Assessment of Value We are of the opinion that the Market Value of the leasehold interest in the Properties, subject to the existing tenancies and occupational arrangements, and the income support for The Clementi Mall is: Total Portfolio : S$3,070,000,000 (Singapore Dollars: Three billion and Seventy million only)
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Disclaimer Mr Li Hiaw Ho, Ms Sim Hwee Yan and CBRE have prepared this Valuation Summary Letter which appears in this prospectus and specifically disclaim liability to any person in the event of any omission from or false or misleading statement included in the prospectus, other than in respect of the information provided within the aforementioned Reports and this Valuation Summary letter. Mr Li Hiaw Ho, Ms Sim Hwee Yan and CBRE do not make any warranty or representation as to the accuracy of the information in any other part of the prospectus other than as expressly made or given by CBRE in this Valuation Summary letter. CBRE has relied upon property data supplied by the Manager which we assume to be true and accurate. CBRE takes no responsibility for inaccurate client supplied data and subsequent conclusions related to such data. The reported analyses, opinions and conclusions are limited only by the reported assumptions and limiting conditions and are our personal, unbiased professional analyses, opinions and conclusions. Messrs Li Hiaw Ho and Sim Hwee Yan have no present or prospective interest in the Properties and have no personal interest or bias with respect to the party/s involved. The valuers compensation is not contingent upon the reporting of a predetermined value or direction in value that favours the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event (such as a lending proposal or sale negotiation). We hereby certify that the valuers undertaking these valuations are authorised to practise as valuers and have at least 15 years continuous experience in valuation.
Yours sincerely CBRE PTE. LTD.
Li Hiaw Ho DipUrbVal (Auck) SNZPI FSISV Appraiser's Licence, No. AD041-2445 Executive Director Valuation & Advisory Services
Sim Hwee Yan BSc (Est. Mgt) Hons FSISV Appraisers Licence No. AD041-2004155J Executive Director Valuation & Advisory Services
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CBRE Pte. Ltd.
Valuation Certificate
Property: Paragon 290 Orchard Road Singapore 238859 SPH REIT Management Pte Ltd (in its capacity as Manager of SPH REIT) and DBS Trustee Limited (in its capacity as Trustee of SPH REIT) SPH REIT Acquisition and Corporate Finance Leasehold for a term of 99 years commencing from the date of listing of SPH REIT. Market Value subject to existing tenancies and occupational arrangements. Orchard 290 Ltd 17,362.2 Commercial with a plot ratio of 4.9+ Paragon is a major retail mall located within the Orchard Road shopping belt of Singapore. Paragon incorporates a part 9-storey part 6-storey with 2 basement levels podium comprising 7 levels of retail space including Basement Level 1, car parking for 416 vehicles on Basement Levels 1 and 2, and 3 levels (7th to 9th storey of podium which is the redeveloped section of the development) of medical space including a gym centre. Built above the podium, at the flank facing Bideford Road is a 14-storey high medical/office tower known as the Paragon Medical Centre which was completed in 1999. Over the years, Paragon has embarked on various expansion and upgrading plans to maintain its position as a premier luxury shopping mall on Orchard Road. These include the redevelopment of Promenade Shopping Centre merging with the original Paragon in 2002; and over the last 10 years enhancement works that have been carried out include the facelift to refresh the interior and exterior of the mall with the latest exercise being the facade articulation carried out in 2008 to 2009. The building is in good condition and is well-maintained, having regard to its age and use. Tenancy Profile: NLA (sqft): GFA (sqft): Valuation Approaches: Date of Valuation: Assessed Value: Assumptions, Disclaimers, Limitations & Qualifications Paragon Market Place, Metro, Marks & Spencer, Pacific Healthcare, Fitness First and other specialty tenancies (including ATM tenancies). 706,690 1,017,707 Capitalisation Approach & Discounted Cash Flow Analysis 28 February 2013 S$2,500,000,000 (Two Billion Five Hundred Million Dollars) This valuation is exclusive of GST.
Client: Trust: Purpose: Interest Valued: Basis of Valuation: Registered Owner: Land Area (sq m): Town Planning: Brief Description:
This valuation report is provided subject to the assumptions, qualifications, limitations and disclaimers detailed throughout the valuation report which are made in conjunction with those included within the Assumptions, Qualifications, Limitations & Disclaimers section located within the report. Reliance on the valuation report and extension of our liability is conditional upon the reader's acknowledgement and understanding of these statements. This valuation is for the use only of the party to whom it is addressed and for no other purpose. No responsibility is accepted to any third party who may use or rely on the whole or any part of the content of this valuation. The valuer has no pecuniary interest that would conflict with the proper valuation of the property. CBRE Pte. Ltd.
Prepared By:
Per:
Li Hiaw Ho DipUrbVal (Auck) SNZPI FSISV Appraiser's Licence, No. AD041-2445 Executive Director - Valuation & Advisory Services
Per:
Sim Hwee Yan BSc (Est. Mgt) Hons FSISV Appraiser's Licence, No. AD041-2004155J Executive Director - Valuation & Advisory Services
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CBRE Pte. Ltd.
Valuation Certificate
Property: The Clementi Mall 3155 Commonwealth Avenue West Singapore 129588 SPH REIT Management Pte Ltd (in its capacity as Manager of SPH REIT) and DBS Trustee Limited (in its capacity as Trustee of SPH REIT) SPH REIT Acquisition and Corporate Finance Leasehold for a term of 99 years commencing from 31 August 2010. Balance term 96.5 years. Market Value subject to existing tenancies and occupational arrangements. CM Domain Pte. Ltd. 16,579.2 (for the site which houses The Clementi Mall, the Clementi Bus Interchange and two blocks of HDB flats) Commercial & Residential with a plot ratio of 5.0 The Clementi Mall is a major retail property incorporating 6 levels of retail space, from 1st to 5th storey including Basement Level 1, and car parking for approximately 169 vehicles on Basement Levels 1 and 2. The Temporary Occupation Permits was issued on 31 December 2010 and 14 March 2011. The Certificate of Statutory Completion was issued on 9 April 2012. The mall started trading in phases in January and March 2011, with its official opening in May 2011. The Clementi Mall is part of a mixed use development built by the Housing and Development Board (HDB). Besides the retail podium, the development houses 2 residential blocks of 388 HDB units, the West Coast Town Council (Clementi Office) and a bus interchange on Level 1. The new bus interchange has direct access to the mall and the existing Clementi MRT Station is linked directly to the mall at Level 3. The building is in good condition and is well-maintained, having regard to its age and use. NTUC FairPrice Finest, BHG Department Store, NTUC FoodFare, Popular Book Store, Clementi Public Library (a civic and community institution space) and other specialty tenancies (including ATM/AXS tenancies). 192,089 289,877 (including civic & community institution GFA of 21,266) We have been advised that the Vendor of the property will be providing a net property income guarantee of $31 million per year (ie guarantee equivalent to the difference between the guarantee income amount and actual net property income), subject to an aggregate top-up of $20 million for 5 years from listing date ("Income Support"). The Income Support is payable at the end of each financial quarter period. We have in our valuation assessment taken this income support into consideration. Capitalisation Approach & Discounted Cash Flow Analysis 28 February 2013 S$550,000,000 (Five Hundred Fifty Million Dollars) S$570,000,000 (Five Hundred Seventy Million Dollars) This valuation is exclusive of GST. This valuation is exclusive of GST.
Client: Trust: Purpose: Interest Valued: Basis of Valuation: Registered Owner: Land Area (sq m): Town Planning: Brief Description:
Tenancy Profile: NLA (sqft): GFA (sqft): Income Support:
Valuation Approaches: Date of Valuation: Assessed Value: Without Income Support: With Income Support: Assumptions, Disclaimers, Limitations & Qualifications
This valuation report is provided subject to the assumptions, qualifications, limitations and disclaimers detailed throughout the valuation report which are made in conjunction with those included within the Assumptions, Qualifications, Limitations & Disclaimers section located within the report. Reliance on the valuation report and extension of our liability is conditional upon the reader's acknowledgement and understanding of these statements. This valuation is for the use only of the party to whom it is addressed and for no other purpose. No responsibility is accepted to any third party who may use or rely on the whole or any part of the content of this valuation. The valuer has no pecuniary interest that would conflict with the proper valuation of the property. CBRE Pte. Ltd.
Prepared By:
Per:
Li Hiaw Ho DipUrbVal (Auck) SNZPI FSISV Appraiser's Licence, No. AD041-2445 Executive Director - Valuation & Advisory Services
Per:
Sim Hwee Yan BSc (Est. Mgt) Hons FSISV Appraiser's Licence, No. AD041-2004155J Executive Director - Valuation & Advisory Services
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Our Ref: PKE:HN/AWL:ao:3.306:1304226/7 27 May 2013 SPH REIT Management Pte. Ltd. (as manager for SPH REIT) 1000 Toa Payoh North News Centre Singapore 318994 Dear Sirs VALUATION OF: (1) 290 ORCHARD ROAD, PARAGON, SINGAPORE 238859 (2) 3155 COMMONWEALTH AVENUE WEST, THE CLEMENTI MALL, SINGAPORE 129588 INSTRUCTIONS We refer to the instructions of SPH REIT Management Pte. Ltd. in its capacity as manager for SPH REIT ("the Manager") to assess the market value of the captioned properties, for the purpose of a proposed establishment of a real estate investment trust (REIT) and its Initial Public Offering (IPO), as at 28 February 2013. We confirmed that we have inspected the properties, made relevant local searches and enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the market values as at 28 February 2013. We have, in accordance with the instructions, prepared formal comprehensive valuation reports. The valuation is in accordance with the Singapore Institute of Surveyors and Valuers Professional Practice Guidelines. The term Market Value as used herein is intended to mean the highest value at which the sale interest in property might reasonably be expected to have been completed at the date of valuation, assuming, a) b) a willing seller; that, prior to the date of valuation, there had been a reasonable period (having regard to the nature of the property and the state of the market) for the proper marketing of the interest, for the agreement of price and terms for the completion of the sale; that no account is taken of any additional bid by a prospective purchaser with a special interest; and that both parties to the transaction had acted knowledgeably, prudently and without compulsion.
c)
d)
DTZ Debenham Tie Leung (SEA) Pte Ltd 100 Beach Road #35-00 Shaw Tower Singapore 189702 Tel: +65 6293 3228 Fax: +65 6298 9328
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RELIANCE ON THIS LETTER For the purposes of the Prospectus, we have prepared this letter which summarises our Reports and outlines key factors which have been considered in arriving at our opinion of market values. This letter alone does not contain the necessary data and support information included in our Reports. For further information to that contained herein, reference should be made to the Reports, copies of which are held by the Manager. DTZ has provided the Manager with comprehensive formal valuation reports of the Properties. The valuation and market information are not guarantees or predictions and must be read in conjunction with the following: (i) Each Report is several pages in length and the conclusion as to the estimated value is based upon the factual information within the reports. Whilst DTZ has endeavored to assure the accuracy of the factual information, it has not independently verified all information provided by the Manager (primary copies of tenancy details and other information with respect to the Properties) or the government of Singapore (primarily statistical information relating to market conditions). DTZ believes that every investor and every recipient of the Prospectus, before making an investment in the SPH REIT, should review the Reports to understand the complexity of the methodology and the many variables involved. The methodologies used by DTZ in valuing the Properties - Capitalisation Approach and Discounted Cash Flow Analysis - are based upon estimates of future results and are not predictions. These valuation methodologies are summarised in the Valuation Rationale section of this letter. Each methodology begins with a set of assumptions as to income and expenses of the Property and future economic conditions in the local market. The income and expense figures are mathematically extended with adjustments for estimated changes in economic conditions. The resultant value is considered the best practice estimate, but is not to be construed as a prediction or guarantee and is fully dependent upon the accuracy of the assumptions as to income, expenses and market conditions. The Report was undertaken mainly based upon information available as at April 2013, DTZ accepts no responsible for subsequent changes information as to income, expenses or market conditions.
(ii)
(iii)
SUMMARY OF PROPERTY INFORMATION No. 1. Property 290 Orchard Road Paragon Singapore 238859 3155 Commonwealth Avenue West The Clementi Mall Singapore 129588 Balance Lease Term (years) (1) 99 Site Area (sq.m.) 17,362.2 Gross Floor (2) Area (sq.ft.) 1,017,707 Net Lettable Area (sq.ft.) 706,987
2.
96.5
16,579.2
(3)
289,877
192,159
(1) (2) (3)
99 years leasehold interest commencing from listing date of SPH REIT. According to information provided by the Manager and subject to survey. For the whole development.
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VALUATION RATIONALE We have considered the nature of the Properties and the prevailing market conditions and used the Capitalisation Approach and Discounted Cash Flow Analysis (DCF) in arriving at our opinion of market value. Capitalisation Approach In the Capitalisation Approach, the estimated annual net income of the property after deducting all necessary outgoings is capitalised at an appropriate rate for the balance term of the lease tenure to arrive at the market value. The adopted rate reflects the nature, location, tenure, tenancy profile of the property together with the prevailing property market conditions. Discounted Cash Flow Analysis We have also carried out a Discounted Cash Flow Analysis (DCF) over a 10-year investment horizon in which, the property is hypothetically assumed to be sold at the end of the investment period. Briefly, this method entails comparison of all future receipts from an investment with all future outgoings and the application of an appropriate discounted rate to this flow of net income to determine the net present value (NPV) of this income stream. In undertaking this analysis, a wide range of assumptions are made relating to rental growth, outgoings, escalation throughout the cash flow period, vacancy as well as costs associated with the initial purchase of the property and also of its disposal at the end of the investment period. The future estimates adopted for rents and costs are projections only formed on the basis of information currently available to us and are not representations of what the value of the property will be as at a future date. These assumptions have been based on the current market conditions and current expectations as to property values, income and yield.
SUMMARY OF VALUES No. 1. Property 290 Orchard Road Paragon Singapore 238859 3155 Commonwealth Avenue West The Clementi Mall Singapore 129588 Market Value (S$) as at 28 February 2013 S$2,500,000,000/(Singapore Dollars Two Billion And Five Hundred Million) S$556,000,000/(Singapore Dollars Five Hundred And Fifty-Six Million) S$571,000,000/(Singapore Dollars Five Hundred And Seventy-One Million)
(1) (2)
2.
(1)
(2)
Valuation without income support. This valuation takes into account "Income Support" provided by the Vendor who will guarantee a net property income (NPI) of S$31,000,000/- per annum (payable quarterly) for 5 years to SPH REIT. For the purpose of this valuation, we have attributed a notional date of 28 February 2013 as the date of commencement of the Income Support.
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DISCLAIMER Neither the whole nor any part of this report nor for any reference thereto may be included in any document, circular or statement without our prior written approval of the form and context in which it will appear. Finally and in accordance with our standard practice, we must state that this valuation report is for the use only of the party to whom it is addressed and no responsibility is accepted to any third party for the whole or any part of its contents.
for and on behalf of DTZ DEBENHAM TIE LEUNG (SEA) PTE LTD
Poh Kwee Eng (Ms) Executive Director Head of Valuation, SEA BSc (Est Mgt) FSISV (Appraisers Licence No: AD041-2003168D)
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VALUATION CERTIFICATE
1.
Address Client: Purpose of Valuation:
290 Orchard Road, Paragon, Singapore 238859 SPH REIT Management Pte. Ltd. in its capacity as manager for SPH REIT. To determine the market value of the subject property for the purpose of a proposed establishment of a real estate investment trust (REIT) and its Initial Public Offering (IPO). Orchard 290 Ltd. Freehold. 99 years leasehold interest commencing from listing date of SPH REIT. Commercial at gross plot ratio of 4.9+. Paragon is located at the junction of Orchard Road/Bideford Road, within the major tourist shopping and entertainment district in Singapore and approximately 3 km from the city centre at Raffles Place. The subject property is a part 9/part 20-storey building, comprises a 6-storey shopping podium with 2 basement levels and a part 3/part 14-storey medical/office tower.
Registered Proprietor: Tenure: Interest Valued: Master Plan Zoning: (2008 Edition) Brief Description:
Site Area: Gross Floor Area (GFA): Net Lettable Area (NLA): Valuation Methodologies: Tenancy:
17,362.2 sq.m. (186,885 sq.ft.) 94,548.17 sq.m. (1,017,707 sq.ft.) 65,681.29 sq.m. (706,987 sq.ft.) Capitalisation Approach and Discounted Cash Flow Analysis Net Lettable Area (sq.ft.) 489,143 217,844 Effective Monthly Gross Rental (psf) S$20.92 S$11.09 Occupancy 100% 100%
Retail Medical/Office Valuation Date: Valuation: 28 February 2013
S$2,500,000,000/(Singapore Dollars Two Billion And Five Hundred Million)
Assumptions, Disclaimers, This valuation certificate is provided subject to the assumptions, Limitations & Qualifications: qualifications, limitations and disclaimers throughout this certificate which are made in conjunction with those included within the Assumptions, Qualifications, Limitations & Disclaimers section located at the end of this certificate. Reliance on this certificate and extension of our liability is conditional upon the reader's acknowledgement and understanding of these statements. This valuation is for the use only of the party to whom it is addressed and for no other purpose. No responsibility is accepted to any third party who may use or rely on the whole or any part of the content of this valuation. The valuer has no pecuniary interest that would conflict with the proper valuation of the property.
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VALUATION CERTIFICATE
2. Address Client: Purpose of Valuation: 3155 Commonwealth Avenue West, The Clementi Mall, Singapore 129588 SPH REIT Management Pte. Ltd. in its capacity as manager for SPH REIT. To determine the market value of the subject property for the purpose of a proposed establishment of a real estate investment trust (REIT) and its Initial Public Offering (IPO). Housing And Development Board. CM Domain Pte. Ltd. 99 years leasehold interest commencing from 31 August 2010. Commercial and Residential at gross plot ratio of 5.0. The Clementi Mall is a 5-storey shopping complex with 2 basement levels which is located within Clementi Town Centre and linked to the Clementi MRT station at Level 3. It is approximately 14 km from the city centre at Raffles Place. The subject property forms part of a HDB development that comprises 2 blocks of 40-storey HDB flats and a part 3/part 7storey podium with 2 basement levels accommodating th th commercial facilities, library, carparks (on 6 , 7 storeys and st nd basement 2) and a bus interchange (1 and 2 storeys). Site Area: (for the whole development) Gross Floor Area (GFA): Net Lettable Area (NLA): Valuation Methodologies*: Tenancy: Valuation Date: Valuation: 16,579.2 sq.m. (178,457 sq.ft.) 26,930.46 sq.m. (289,877 sq.ft.) 17,852.17 sq.m. (192,159 sq.ft.) Capitalisation Approach and Discounted Cash Flow Analysis 100% leased at an effective gross rental of approximately S$15.15/- psf per month. 28 February 2013 S$556,000,000/(Singapore Dollars Five Hundred And Fifty-Six Million) S$571,000,000/(Singapore Dollars Five Hundred And Seventy-One Million) Assumptions, Disclaimers, Limitations & Qualifications: This valuation certificate is provided subject to the assumptions, qualifications, limitations and disclaimers throughout this certificate which are made in conjunction with those included within the Assumptions, Qualifications, Limitations & Disclaimers section located at the end of this certificate. Reliance on this certificate and extension of our liability is conditional upon the reader's acknowledgement and understanding of these statements. This valuation is for the use only of the party to whom it is addressed and for no other purpose. No responsibility is accepted to any third party who may use or rely on the whole or any part of the content of this valuation. The valuer has no pecuniary interest that would conflict with the proper valuation of the property.
(2) (1)
Lessor: Lessee: Interest Valued: Master Plan Zoning: (2008 Edition) Brief Description:
(1) (2)
Valuation without income support. This valuation takes into account "Income Support" provided by the Vendor who will guarantee a net property income (NPI) of S$31,000,000/- per annum (payable quarterly) for 5 years to SPH REIT. For the purpose of this valuation, we have attributed a notional date of 28 February 2013 as the date of commencement of the Income Support.
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LIMITING CONDITIONS
This property Valuation and Report has been prepared subject to the following limiting conditions:VALUATION BASIS
Our valuation is made on the basis of Market Value. This is intended to mean the best price at which the sale of an interest in the property would-have been completed unconditionally for cash consideration on the date of valuation, assuming: a) a willing seller; b) that, prior to the date of valuation, there had been a reasonable period (having regard to the nature of the property and the state of the market) for the proper marketing of the interest, for the agreement of the price and terms and for the completion of the sale. c) that no account is taken of any additional bid by a prospective purchaser with a special interest; and d) that both parties to the transaction had acted knowledgeably, prudently and without compulsion. No allowance are made for any expenses or realisation or for taxation which might arise in the event of a disposal. Our valuation assumes that as at the date of valuation, the property is free and clear of all mortgages, encumbrances and other outstanding premiums, charges and liabilities. Values are reported in Singapore Currency.
CONFIDENTIALITY
Our Valuation and Report is confidential to the party to whom it is addressed and to their professional advisors for the specific purpose to which they refer. The valuer disclaims all responsibility and will accept no liability to any other party. Neither the whole, nor any part, nor reference thereto may be published in any document, statement or circular, nor in any communication with third parties, without our prior written consent of the form and context in which it will appear. Where it is started in the report that information has been supplied to the valuer by the sources listed, this information is believed to be reliable, but the valuer will accept no responsibility if this should prove not to be so. All other information stated without being attributed directly to another party is obtained from our searches of records, examination of documents or enquiries with relevant government authorities. Enquiries as to the financial standing of actual or prospective tenants are not normally made unless specifically requested. Where properties are valued with the benefit of lettings, it is therefore assumed that the tenants are capable of meeting their obligations under the lease and that there are no arrears of rent or undisclosed breaches ofcovenant. Information on Town Planning is obtained from the set of Master Plan, Development Guide Plan (DGP) and Written Statement published by the competent authority. Unless otherwise instructed, we do not normally carry out requisitions with t he various public authorities to confirm that the property is not adversely affected by any public schemes such as road improvements. If assurance is required, we recommend that verification be obtained from your lawyers: Our valuations are prepared on the basis that the premises and any improvements thereon comply with all relevant statutory regulations. It is assumed that t hey have been or will be issued with a Certificate of Statutory Completion by the competent authority.
SOURCE OF INFORMATION
TENANTS
TOWN PLANNING AND OTHER STATUTORY REGULATIONS
STRUCTURAL SURVEYS
Unless expressly instructed, we do not carry out a structural survey, nor do we test the services. Whilst any defects or items of disrepair which we note during the course of our inspection will be reflected in our valuations, we are not able to give any assurance in respect of rot, termite, or past infestation or other hidden defects. We do not normally carry out investigations on site in order to determine the suitability of the ground conditions, and the services, for any new development. Unless we are otherwise informed, our valuations are on the basis that these aspects are satisfactory and that where development is proposed, no extraordinary expenses or delays will be incurred during the construction period. Our maximum liability to the client relating to our services rendered (regardless of action whether in contract, negligence or otherwise) shall be limited to fees paid for engaging our services. Under no circumstances will be liable for consequential, incidental, punitive or special losses, damage or expenses (including opportunity costs and loss of profits) despite being advised of their possible existence. The valuer is not required to give testimony or to appear in court by reason of this report unless specify arrangement has been made therefor.
SITE CONDITIONS
MAXIMUM LIABILITY
ATTENDANCE IN COURT
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APPENDIX F
INDEPENDENT RETAIL PROPERTY MARKET RESEARCH REPORT
27 May 2013
SPH REIT Management Pte Ltd (as Manager of SPH REIT) c/o 1000 T oa Payoh North, News Centre Singapore 318994 DBS Trustee Limited (in its capacity as Trustee of SPH REIT) 12 Marina Boulevard Level 44 DBS Asia Central @ Marina Bay Financial Central Tower 3 Singapore 018982
Dear Sirs,
INDEPENDENT MARKET REVIEW

With reference to your instructions received on 25 February 2013, Urbis Pty Ltd was commissioned to undertake an independent market review of Paragon and Clementi Mall and its respective markets. We are pleased to submit our report which comprises an overview of the Singapore retail and healthcare services markets, together with a review of Paragon and Clementi Mall including analysis of the physical property, its trading performance and its customer profile, as well as turnover forecasts. As we understand, this report is for inclusion into the prospectus of the impending Initial Public Offering of SPH REIT in Singapore.
Yours faithfully for and on behalf of Urbis Pty Ltd,
r;;{J~~
Name: Peter Holland Designation: Director
MELBOURNE
Level 12. 120 Colbns Strtoet Melboume VIC 3000 Austra!1 a
CONSE>!T lTTER tURBIS)
t 03 8663 4888 f 03 8663 t.999 e info@urbis.com.au w urbis.com.au Urbis Pty Ltd ABN 50 105 256 228
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DISCLAIMER This report is prepared on the instructions of the party to whom or which it is addressed and is thus not suitable for use other than by that party. As the report involves future forecasts, it can be affected by a number of unforeseen variables. It represents for the party to whom or which it is addressed the best estimates of Urbis Pty Ltd, but no assurance is able to be given by Urbis Pty Ltd that the forecasts will be achieved.
URBIS STAFF RESPONSIBLE FOR THIS REPORT WERE: Director Director Consultant Job Code
xdisclaimerx
Peter Holland Jack Backen David Barbalatt MPEA-0089
REPORT PREPARED FOR:
SPH REIT Management Pte Ltd
Urbis Pty Ltd ABN 50 105 256 228 All Rights Reserved. No material may be reproduced without prior permission. While we have tried to ensure the accuracy of the information in this publication, the Publisher accepts no responsibility or liability for any errors, omissions or resultant consequences including any loss or damage arising from reliance in information in this publication. URBIS Australia Asia Middle East urbis.com.au
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TABLE OF CONTENTS
Executive Summary ..................................................................................................................................... i Introduction .................................................................................................................................................. 1 1 1.1 1.1.1 1.1.2 1.1.3 1.2 1.3 1.4 1.5 1.5.1 1.5.2 1.5.3 1.6 1.6.1 1.6.2 1.7 1.7.1 1.7.2 1.8 2 2.1 2.1.1 2.1.2 2.1.3 2.1.4 2.1.5 2.1.6 2.1.7 2.1.8 2.2 2.2.1 2.2.2 2.2.3 2.2.4 2.2.5 2.2.6 2.2.7 2.3 2.4 2.4.1 2.4.2 2.5 2.5.1 2.5.2 2.5.3 2.5.4 Singapore Retail Market Overview................................................................................................. 4 Economic Outlook............................................................................................................................. 5 GDP Trends ...................................................................................................................................... 5 Inflation ............................................................................................................................................. 6 Private Consumption Expenditure .................................................................................................... 7 Population Trends............................................................................................................................. 8 Tourism Outlook ............................................................................................................................... 8 Forecast Retail Sales Growth ........................................................................................................... 9 Retail Supply................................................................................................................................... 11 Total Supply .................................................................................................................................... 11 Shopping Centre Supply................................................................................................................. 11 Per Capita Supply ........................................................................................................................... 12 Future Supply ................................................................................................................................. 12 Projected Shopping Centre Completions ....................................................................................... 12 New Supply by Region ................................................................................................................... 13 Retail Performance Metrics ............................................................................................................ 14 Retail Rental Outlook ...................................................................................................................... 14 Occupancy Rate Outlook ................................................................................................................ 15 Implications for Paragon & Clementi Mall ...................................................................................... 15 Paragon Mall .................................................................................................................................. 17 Overview of Paragon ...................................................................................................................... 17 Location .......................................................................................................................................... 17 Site Characteristics & Surrounding Land Uses .............................................................................. 21 Accessibility .................................................................................................................................... 22 Tenancy Composition ..................................................................................................................... 23 Lease Expiry Profile ........................................................................................................................ 27 Car Parking ..................................................................................................................................... 28 Design & Layout ............................................................................................................................. 29 Enhancement Potential .................................................................................................................. 31 Trading Performance Metrics ......................................................................................................... 32 Pedestrian Footfall .......................................................................................................................... 32 Historical Sales Performance ......................................................................................................... 33 Historical Rental Performance ........................................................................................................ 33 Factors Influencing Performance to Date ....................................................................................... 34 Forecast Performance For Year Ending August 2013 ................................................................... 34 Centre Management & Marketing................................................................................................... 35 Capital Expenditure ........................................................................................................................ 36 Customer Profile ............................................................................................................................. 36 Retail Competition .......................................................................................................................... 37 Future Retail Projects of Relevance ............................................................................................... 40 Supply Forecasts ............................................................................................................................ 41 Trade Area Analysis & Spending Forecasts ................................................................................... 42 Relevant Market Segments ............................................................................................................ 42 Resident Trade Area Definition ...................................................................................................... 42 Resident Trade Area Demographics .............................................................................................. 43 Resident Trade Area Population Forecasts ................................................................................... 44
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2.5.5 2.5.6 2.5.7 2.5.8 2.5.9 2.6 2.6.1 2.6.2 2.6.3 2.6.4 2.7 2.7.1 2.7.2 2.7.3 3 3.1 3.1.1 3.1.2 3.1.3 3.1.4 3.1.5 3.1.6 3.1.7 3.2 3.2.1 3.2.2 3.2.3 3.2.4 3.2.5 3.3 3.4 3.4.1 3.4.2 3.4.3 3.4.4 3.5 3.5.1 3.5.2 3.5.3 3.5.4 3.5.5 3.6 3.6.1 3.6.2 3.6.3 3.6.4 3.7 3.7.1 3.7.2 3.7.3
Trade Area Retail Spending Forecasts .......................................................................................... 44 Orchard Road Hotel Guest Spending Market ................................................................................. 46 The Worker Spending Market ......................................................................................................... 47 Paragon Sales & Shopper Distribution ........................................................................................... 47 Existing Market Shares ................................................................................................................... 48 SWOT Analysis ............................................................................................................................... 49 Strengths......................................................................................................................................... 49 Weaknesses ................................................................................................................................... 50 Opportunities................................................................................................................................... 50 Threats ............................................................................................................................................ 50 Future Sales & Rental Growth ........................................................................................................ 51 Future Outlook for Paragon ............................................................................................................ 51 Retail Sales Potential FY2018 ........................................................................................................ 52 Future Rental Growth ..................................................................................................................... 52 Clementi Mall ..................................................................................................................................53 Overview of Centre ......................................................................................................................... 53 Location .......................................................................................................................................... 53 Accessibility .................................................................................................................................... 54 Tenancy Composition ..................................................................................................................... 55 Lease Expiry Profile ........................................................................................................................ 57 Car Parking ..................................................................................................................................... 57 Design & Layout ............................................................................................................................. 57 Asset Enhancement Potential......................................................................................................... 60 Trading Performance Metrics ......................................................................................................... 61 Pedestrian Footfall .......................................................................................................................... 61 Historic Sales & Rental Performance ............................................................................................. 61 Factors Influencing Performance to Date ....................................................................................... 62 Centre Management & Marketing ................................................................................................... 62 Capital Expenditure ........................................................................................................................ 63 Customer Profile ............................................................................................................................. 63 Retail Competition .......................................................................................................................... 63 Existing Competition ....................................................................................................................... 63 Future Projects of Relevance ......................................................................................................... 67 Supply Forecasts ............................................................................................................................ 68 Implications for The Clementi Mall ................................................................................................. 69 Trade Area Analysis & Spending Forecasts ................................................................................... 69 Resident Trade Area Definition....................................................................................................... 69 Resident Trade Area Population Forecasts.................................................................................... 71 Resident Trade Area Demographics .............................................................................................. 71 Trade Area Retail Spending Forecasts .......................................................................................... 73 Existing Market Shares ................................................................................................................... 74 SWOT Analysis ............................................................................................................................... 75 Strengths......................................................................................................................................... 75 Weaknesses ................................................................................................................................... 76 Opportunities................................................................................................................................... 76 Threats ............................................................................................................................................ 76 Future Sales & Rental Growth ........................................................................................................ 76 Future Outlook ................................................................................................................................ 76 Retail Sales Potential FY2018 ........................................................................................................ 77 Future Rental Growth ..................................................................................................................... 77
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TABLE OF CONTENTS
4 4.1 4.1.1 4.1.2 4.2 4.2.1 4.2.2 4.2.3 4.3 4.3.1 4.3.2 4.3.3 4.3.4 4.3.5 4.3.6 4.4 4.4.1 4.4.2 4.4.3 4.4.4 4.5 4.5.1 4.5.2 4.5.3
Paragon Medical Market Review .................................................................................................. 78 Overview of HCS in Singapore ....................................................................................................... 78 HCS Model & Funding .................................................................................................................... 78 Supply Dynamics & Competition .................................................................................................... 81 Medical Travel in Singapore ........................................................................................................... 82 Market Size ..................................................................................................................................... 82 Drivers of Demand .......................................................................................................................... 84 Industry Outlook.............................................................................................................................. 84 Overview of Paragon Medical......................................................................................................... 84 Location & Accessibility .................................................................................................................. 85 Size and Quality of Facility ............................................................................................................. 85 Medical Services Offered ............................................................................................................... 85 Market Positioning .......................................................................................................................... 85 Current Office Market Rents & Occupancy .................................................................................... 86 Office Market Outlook ..................................................................................................................... 88 SWOT ............................................................................................................................................. 88 Strengths ........................................................................................................................................ 88 Weaknesses ................................................................................................................................... 89 Opportunities .................................................................................................................................. 89 Threats ............................................................................................................................................ 89 Paragon Tower Market Outlook................................................................................................... 89 Current & Future Competition......................................................................................................... 89 Future Demand Outlook ................................................................................................................. 91 Rental Growth Outlook ................................................................................................................... 91 Paragon Floor Plans ........................................................................................................ 93 Competition ...................................................................................................................... 96 The Clementi Mall ........................................................................................................... 100
Appendix A Appendix B Appendix C
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Executive Summary
MACRO ECONOMIC OVERVIEW
In spite of some volatility attributable to fluctuating global growth over the past decade, Singapores economy has grown relatively strongly, averaging 5.3% per annum from 2001 to 2012. Over the same period, growth in PCE has also been strong, averaging 4.2% per annum. Inflation has remained under control, although has risen over the past few years on the back of rising housing, food and transport costs. Growth in the Singapore economy is expected to further improve over the next few years assuming the continued recovery in global economic conditions, with real GDP growth forecast to average around 4.2% per annum from 2013 to 2018. The Singapore economy is highly integrated with the global economy. This is positive during times of strong global economic growth; however it does expose the domestic economy to adverse global shocks, rendering economic growth in Singapore relatively volatile. Retail sales have risen in line with economic growth in Singapore over the past decade with nominal growth averaging 4.5% per annum from 2001 to 2012. Assuming a continuation in the global economic recovery, we expect that retail sales growth will average 5.0% per annum from 2013 to 2018. In recent years retail rental growth has been influenced by both growth in retail sales and significant increases to the stock of retail floorspace, particularly in the Central Region. Orchard Road rents have rebounded from weak years in 2009 and 2010, attributable to the Global Financial Crisis (GFC) and large additions to retail floorspace supply. Suburban markets did not experience the same downturn as they were not impacted by such large additions to retail floorspace. Nominal rental growth in both markets is forecast to average 3.0% per annum over the next five years. Occupancy rates in Suburban markets have grown strongly over the past few years, particularly in 2012, reaching 95.5%. Given frictional vacancy and scheduled increases to retail floorspace in these markets, we expect average occupancy to maintain a level around 95.5% to 2015. Occupancy rates on Orchard Road are expected to tighten over the next three years stabilising at 95% by 2015.
PARAGON MALL
Paragon is an upscale retail mall located in Orchard Road, Singapore. Orchard Road is Singapores most famous shopping centre district, located in the heart of Singapores Central Core. Paragon has a significant 136 metre prime frontage to Orchard Road. Paragon is situated in the middle of the Orchard Road strip with its closest retail neighbours being Knightsbridge to the east (on the northern side of Orchard Road) and Ngee Ann City and the Mandarin Gallery on the southern side. In addition to being located centrally from a retail perspective, Paragon is also well located from a medical perspective with the Mount Elizabeth Hospital and Mount Elizabeth Medical Centre behind the mall (off Orchard Road), and with the frontage onto Mount Elizabeth Road. Paragon has excellent accessibility by foot given its location 200 metres from the Orchard MRT station and 350 metres from the Somerset MRT station. Paragon is also well served by the bus network. Currently the total NLA for the entire property is 706,690 sq ft including the retail mall (Paragon), the three levels above Podium 2 which accommodate a fitness centre (Level 8) and medical suites (Levels 7 and 9) and then the 14 storey tower, Paragon Tower, situated above Podium 1. Excluding Paragon Tower and Levels 7, 8 and 9 of Podium 2 which are the subject of a separate assessment later in this report, the total lettable area for Paragon (including Podiums 1 and 2) is 483,690 sq ft of which 455,163 sq ft or 94% can be classified as retail space.
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At 483,690 sq ft NLA it is currently the fourth largest mall on Orchard Road and is only exceeded by Ngee Ann City (710,900 sq ft), ION Orchard (636,000 sq ft) and Plaza Singapura (498,200 sq ft). In terms of market positioning Paragon is deliberately positioned to cater for upmarket shoppers with its extensive provision of luxury retail and fashion, including childrens apparel, as well as its wide F&B offer and its gourmet supermarket (Paragon Market Place). A very strong feature of Paragon, particularly post-2009 following the completion of the faade enhancement, has been the external and street frontage emphasis on luxury retail. Inside the centre there are also some other luxury international fashion and lifestyle brands including Burberry, Givenchy, Etro, Ermenegildo Zegna, Jimmy Choo, Georg Jensen, Daum and Llardo. Paragon has as its anchor tenants an 82,000 sq ft Metro department store, an 18,300 sq ft gourmet supermarket (Paragon Market Place) and an 18,800 sq ft Marks & Spencer department store. Befitting its upmarket status the centre does not contain a food court but rather has a more sophisticated F&B offer with a variety of table service establishments as well as quality take-away. Another feature of Paragon is its extensive medical offer located on Level 6 in Podium 1, on Levels 7 and 9 in Podium 2 and then in a quite separate building the Paragon Medical Centre at the rear of the property and above Podium 1. Paragon, including the Paragon Tower, has some 416 basement car spaces. This represents an overall provision of around 0.59 spaces per 1,000 sq ft NLA over the entire complex. This is slightly lower that than the traditional regional centre provision for Singapore which typically is around 0.8 to 1.5 spaces per 1,000 sq ft but is not unusual for a Central Area mall. The overall layout of the Paragon retail mall is relatively simple and legible despite the fact that it involved joining two originally separate malls (Paragon and Promenade) into a single entity. Reflecting the upscale market positioning of Paragon, the overall ambiance, fit-out and feel of the centre internally is of a sophisticated timeless mall which is much more spacious and less cluttered than its main competitors. The centre is generating around 1718 million visitors a year, with a relatively even distribution throughout the week. The following outlines the estimated turnover and rent forecasts for FY2013: Total sales have been estimated at S$ 753 million by Urbis representing a 2% increase above the previous calendar year figure of S$ 738 million. Forecast gross rent at S$ 118.0 million or S$ 20.30 per sq ft per month takes into account base rent, estimated turnover rent plus service charges and the promotional and advertising levy. Again this information has been provided by the Manager.
It is clear from the centres performance metrics and comparing these previous years that Paragon is a high performing retail mall in terms of sales density and average gross rents. The average occupancy cost ratio (OCR) at 15.7% is, from our assessment of other centres elsewhere in Singapore and Orchard Road, not atypical and is considered reasonable for a centre of this type with its heavy emphasis on luxury. Paragons major competition comes from the significant retail offer located elsewhere on Orchard Road. Probably the most relevant of this are Ngee Ann City and ION Orchard which are of similar scale and quality, and located near to Paragon. Paragon also competes to a limited degree with Mandarin Gallery and Scotts Square, both of which are upscale specialist centres. These two centres have significantly smaller scale offers and are therefore of minor competitive relevance. In terms of department store competition in Orchard Road, Robinsons and Tangs are direct competitors to Metro, as is Isetan at the Shaw Centre and Wisma Atria. Takashimaya tends to pitch itself slightly higher than Metro and some of the concessions and brands within Takashimaya are partly competitive.
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EXECUTIVE SUMMARY
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Outside Orchard Road the other main locations for luxury retail in Singapore include the Shoppes at Marina Bay Sands; the luxury Fashion Galleria at Resorts World Sentosa; the retail provided airside at Changi Airport. There are two major retail developments that are expected to impact Paragon in the future: 268 Orchard Road: This project is 100 metres to the immediate east of Paragon, and is currently under construction. Total anticipated retail NLA for 268 Orchard Road is 95,900 sq ft over several levels. The tenant mix proposed for this centre at this stage is unknown and the anticipated completion/opening date is 2014. Orchard Gateway: This is a development that comprises properties at 218 Orchard Road and 277 Orchard Road. The properties will be linked by a bridge-way at Level 2 and an underground connection in Basement 2. The anticipated retail NLA for both properties is 143,900 sq ft, with the majority located at 277 Orchard Road. Approximately half the retail space has been leased, including leasings to Crate & Barrel, Religion, Swatch and Nike. The project is expected to be completed in 2014.
THE CLEMENTI MALL

The Clementi Mall is an enclosed sub-regional shopping centre, servicing the inner western suburbs of Singapore around Clementi. The centre is located in the Clementi district on Commonwealth Avenue West, one of the main secondary arterials that connect Queenstown to the east with Jurong in the west. The centre is connected to the Clementi MRT station and adjacent to the Clementi bus interchange. It is also just a short drive from two major intersections for the Ayer Rajah Expressway, one of the two major arterials connecting western Singapore with the rest of the Island. The Clementi Malls immediate surrounds are a mix of private and HDB residential areas, as well as industrial estates along the waterfront to the south The Clementi Mall has a total NLA of 192,089 sq ft of lettable area. A total of 155,740 sq ft (or 81%) of the centre is classified as retail area. The remaining space is classified as non-retail and includes such uses as banks, education and a library. The centres major tenant is a FairPrice Finest supermarket and its mini anchors include a small BHG department store, a Popular book store and Best Denki (electronics). The centre is well sized to play a local convenience-based role in the retail hierarchy, and its tenant composition reflects this. A major component of the convenience focus is the supermarket, which acts as a solid anchor for the basement in particular, and brings in shoppers for the centres as a whole as well. The centre has a family focussed mid-market positioning, with a diverse tenant mix including apparel tenants such as Bata, Bossini, Cache Cache, Charles & Keith, Cotton On, G2000 Men and Giordano. F&B tenants include a range of local operators (including the food court), as well as a range of international operators (Subway, McDonalds, KFC, Burger King, Ajisen Ramen, Starbucks and Ootoya Japanese Restaurant). Other better well-known brands are GNC Live Well, The Body Shop, Giordano and Watsons. The Clementi Mall has a unique design and layout as a result of providing the bus interchange within the centre. However, the benefits of being so well integrated with public transport go a long way to offsetting issues caused by this layout. In CY 2012, The Clementi Mall had 27.1 million visitors. This is a very high level of visitation for a centre of this size, reflecting the number of people who go through the centre on their way to and from the MRT station or the bus interchange. Total sales for the centre in FY 2013 are estimated at approximately S$ 238 million, representing growth of 4.4% on 2012 calendar year (provided by the Manager).
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Forecast gross rent at S$ 35.8 million or S$ 15.5 per sq ft per month takes into account base rent, estimated turnover rent plus service charges and the promotional and advertising levy. Again this information has been provided by the Manager. The Clementi Mall is currently trading at healthy levels. A FY2013 forecast overall centre average trading level of S$ 121.2 per sq ft per month (excluding non-turnover producing tenants such as the library) is a very impressive outcome. The overall centre OCR is 13.5% which, based on Urbis experience with other centres, is sustainable over the medium/long term. The area immediately surrounding The Clementi Mall provides a modest level of competition. This competition is also complementary, providing additional critical mass to the broader Clementi Town Centre. Within the trade area, the main competitor to The Clementi Mall is West Coast Plaza, which is situated in the secondary south eastern sector. This centre is of a similar size to The Clementi Mall but is not expected to trade as successfully as The Clementi Mall, and its catchment will be mainly confined to the secondary south east sector. Lend Leases Jem project, CapitaLands Westgate project and the Jurong Big Box retail complex development are set to significantly strengthen the retail offer at Jurong Gateway over the next few years. These developments will further limit The Clementi Malls draw from west of the trade area. However, this competition is somewhat curtailed by the strong visitorship to Clementi Mall from the immediate surrounds.
iv
EXECUTIVE SUMMARY
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Introduction
Singapore Press Holdings (the Sponsor) is proposing to include two properties in a new Singaporebased real estate investment trust (REIT), to be launched in July 2013. As part of the prospectus for the initial public offering (IPO), SPH REIT Management Pte. Ltd. (the Manager) in its capacity as manager for the SPH REIT trust has engaged Urbis to prepare an independent market review (IMR) of the two assets to be included in the trust. The two properties are: Paragon, a premier upscale retail mall and medical suite / office property located in the heart of Orchard Road held under a 99-year lease. Paragon consists of a six-storey retail podium and one basement with 483,690 sq ft of retail NLA with a 14-storey tower and another three-storey tower sitting on top of the retail podium with a total 223,000 sq ft of medical suite/office NLA. The Clementi Mall, a mid-market suburban mall located in the centre of Clementi town, an established residential estate in the West of Singapore held under a lease commencing 31 August 2010. The retail mall, which also houses a public library, is part of an integrated mixed-use development that includes Housing Development Board residential blocks and a bus interchange.
OBJECTIVES OF RESEARCH
The objectives of this research are to: Independently review the Singapore retail market. Analyse rent, sales and occupancy cost trends in Singapore and the subject malls. Review and comment on Paragon and The Clementi Mall with regard to: Location and surrounding land uses Accessibility Layout, tenant mix and market positioning Potential areas for improvement
Review the retail competition relevant to each mall. Review the potential for sales and rental growth for both malls. Review the healthcare services market in Singapore and the market outlook for Paragon Medical.
FORMAT OF REPORT
The report has four principal sections as follows: Section 1 overview of the Singapore retail market. Section 2 review of the Paragon retail mall including an assessment of its future potential. Section 3 review of The Clementi Mall including an assessment of its future potential. Section 4 provides an overview of the healthcare services in Singapore and assesses the market outlook for the Paragon Medical.
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INTRODUCTION
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SOURCES OF INFORMATION
This report draws on a variety of information both official and unofficial. The principal sources of information used in this study include: Economic data and forecasts provided by the Economist Intelligence Unit (EIU). Publications from the Singapore Ministry of Trade and Industry including the Economic Survey of Singapore. Statistical information, both published and unpublished, from the Singapore Department of Statistics including: Population Census 2010 Tourism Statistics for 2006-2012 Population Trends 2012 Household Income and Expenditure Survey, 2007/08 Retail Sales and Catering Trade Index Series Wholesale and Retail Sales Economic Review
Publications from the Singapore Tourism Board (STB), the Urban Redevelopment Authority (URA) and the Housing Development Board (HDB). Plans, tenancy schedules, rental and trading performance data for Paragon and The Clementi Mall provided by the Manager. Summary results from some consumer research on Paragon customers conducted in 2009 by Acorn Asia. Singapore retail rental indices provided by Jones Lang LaSalle and CB Richard Ellis. Previous studies and research undertaken by Urbis on the retail market for specific shopping centres within the Singapore market. Workshops, discussions and feedback from the Managers personnel. Health industry statistics provided by the World Health Organisation, Singapore Ministry of Health, Singapore Government White Papers, and the Singapore Tourism Board. Historic rent information provided by various real estate agencies (e.g. Colliers International).
KEY ASSUMPTIONS
In undertaking the analysis in the report the key assumptions adopted were: There are no fundamental shocks to the Singapore economy over the forecast period and the economy broadly behaves as discussed in Section 1. Retail competition is as described in Section 2 in the case of Paragon and in Section 3 for The Clementi Mall. Any additional competitive developments could affect the properties which are the subject of this report. No allowance is or can be made for such unforeseen competitive developments. The plans, tenancy schedules and trading performance for both properties, as provided by SPH Retail Property Management Services Pte. Ltd. are accurate.
INTRODUCTION
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ABBREVIATIONS
CPI EIU FY GDP GFC GLA HDB NLA OCR PCE RPI SPH STB URA Consumer Price Index Economist Intelligence Unit Financial Year Ended August 31 Gross Domestic Product Global Financial Crisis Gross Leasable Area Housing Development Board Net Leasable Area Occupancy Cost Ratio Private Consumption Expenditure Retail Price Inflation Singapore Press Holdings Singapore Tourism Board Urban Redevelopment Authority
LIMITATIONS ON THE REPORT

This report is dated 27 May 2013 and incorporates information and events up to that date only and excludes any information arising, or event occurring, after that date which may affect the validity of Urbis Pty Ltds (Urbis) opinion in this report. Urbis prepared this report on the instructions, and for the benefit only, of Singapore Press Holdings Limited for the purpose of providing an Independent Market Review of Paragon and The Clementi retail malls and Paragon Medical (Purpose) and not for any other purpose or use. Urbis expressly disclaims any liability to the Manager or the Sponsor (each an Instructing Partner) who rely or purports to rely on this report for any purpose other than the Purpose and to any party other than the Instructing Party who relies or purports to rely on this report for any purpose whatsoever (including the Purpose). In preparing this report, Urbis was required to make judgements which may be affected by unforeseen future events including wars, civil unrest, economic disruption, financial market disruption, business cycles, industrial disputes, labour difficulties, political action and changes of government or law, the likelihood and effects of which are not capable of precise assessment. All estimates, forecasts, projections and recommendations contained in or made in relation to or associated with this report are made in good faith and on the basis of information supplied to Urbis at the date of this report. Achievement of the projections set out in this report will depend, among other things, on the actions of others over which Urbis has no control. Urbis has made all reasonable inquiries that it believes is necessary in preparing this report but it cannot be certain that all information material to the preparation of this report has been provided to it as there may be information that is not publicly available at the time of its inquiry. This report has been prepared with due care and diligence by Urbis and the statements and opinions given by Urbis in this report are given in good faith and in the belief on reasonable grounds that such statements and opinions are correct and not misleading bearing in mind the necessary limitations noted in the previous paragraphs. Further, no responsibility is accepted by Urbis or any of its officers or employees for any errors, including errors in data which is either supplied by the Instructing Party, supplied by a third party to Urbis, or which Urbis is required to estimate, or omissions howsoever arising in the preparation of this report, provided that this will not absolve Urbis from liability arising from an opinion expressed recklessly or in bad faith.
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Singapore Retail Market Overview
Singapore is an island state located between Malaysia and Indonesia, and is the most important economic, financial and transport hub for South East Asia. According to the Heritage Foundations 2013 Index of Economic Freedom, Singapore ranks as second in the world in terms of economic freedom, taking into account factors including financial freedom, freedom from corruption, business freedom and property rights. Prudent macroeconomic policy, combined with a stable political and legal environment have been important in maintaining this level of economic freedom. The combination of a free market economy and a high degree of state ownership in Singapore has served the economy well, enabling Singapore to become one of the worlds most wealthy countries. In recent years, efforts have been made to reduce Singapores reliance on its manufacturing and export sectors, resulting in Singapore becoming a more dynamic economy, with strong services and transport sectors. Singapores main industries include: Financial, Insurance & Business Services The combined contribution of the financial and business services sectors to GDP is estimated at 24.8% in 2012. The business supportive environment has attracted over 7,000 multinational firms to establish offices in Singapore, with Singapore recognized as an economic gateway to Asia. Manufacturing In 2012, manufacturing remained one of the largest sectors in Singapore, contributing an estimated 19.4% of GDP. Major industries within this sector include electronics, pharmaceuticals, construction, and ship building. Wholesale & Retail Trade The Wholesale and Retail Trade sector contributed an estimated 16.0% of GDP in 2012 and is a core component of GDP. A significant amount of this spending takes place on Orchard Road, with an increasing proportion coming from tourists. Transportation & Storage In 2012, the Transportation and Storage sector is estimated to have accounted for 7.3% of GDP. Singapores location, at the crossroads of the east/west shipping lanes, has facilitated it becoming a major transport hub in South East Asia, emphasised by Singapores claim to the worlds largest container port. The continued growth of trade from China and India is a key factor in determining current and future sea trade activity. Tourism is an increasingly important sector to the Singapore economy. The completion of major tourist attractions, the attraction of internationally renowned events, and the development of Singapores meetings, incentives, conventions and exhibitions tourism (MICE) industry have led to strong growth in tourism arrivals and spending in recent years. In 2011 Changi Airport with 46.5 million passenger movements, was ranked as the 18th busiest airport in the world.
GDP Contribution by Sector

SINGAPORE, 2012
Financial, Insurance & Business Services (24.8%) Manufacturing (19.4%)
CHART 1.1
Wholesale & Retail Trade (16.0%)
Other (32.5%)
Source : Urbis
Transportation & Storage (7.3%)
SINGAPORE RETAIL MARKET OVERVIEW
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1.1
ECONOMIC OUTLOOK
The Singapore economy is highly integrated with the global economy. This is positive during times of strong global economic growth. However it does expose the domestic economy to adverse global shocks, rendering economic growth in Singapore relatively volatile.
1.1.1
GDP TRENDS
Singapore has recorded strong real GDP growth from 2001, with an average annual rate of 5.3% from 2001 to 2012. Chart 1.2 shows annual real GDP growth from 2001, including forecasts to 2018. This healthy growth rate was achieved in spite of the contractionary effects of the Global Financial Crisis (GFC), which caused growth rates to decrease to 1.7% in 2008 and (1.0%) in 2009. Singapores economy is integrated with regional and global economic players and is therefore sensitive to fluctuations in the global economy, as evidenced by the decrease in growth rates during the GFC in 2008 and 2009. This high level of integration does allow the Singapore economy to rebound quickly and strongly after a downturn. This was shown to be the case post-2009, with GDP growth rebounding to 14.8% in 2010, moderating to trend levels in 2011. Soft global economic conditions in 2012, mainly stemming from Eurozone instability, led to a decline in growth rates in 2012 to approximately 1.3%. Assuming no further destabilization in the Eurozone, the Economist Intelligence Unit (EIU) forecasts a rebound in economic growth rates from 2013 to 2017, with an average annual real GDP growth rate of 4.2%. Urbis expects this growth rate to stabilize at 5.1% in 2018.
Real GDP Growth

SINGAPORE, 2001-2018
16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: Economic Intelligence Unit: March 2013.
CHART 1.2
Forecast
Average annual growth 2001-2012 5.3%
Chart 1.3 shows Singapores GDP per capita in 2012, adjusted for purchasing power parity (PPP), relative to selected countries. The PPP measure adjusts the value of GDP per capita for standards and costs of living across countries. Singapore is one of the worlds most prosperous countries, and is estimated to have a GDP per capita USD 61,047 in 2012, higher than many developed western countries; including the United States, Australia, Germany, and the United Kingdom. Singapores closest neighbour, Malaysia, has GDP per capita of USD 16,186, some 73% below that of Singapore.
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GDP Per Capita (PPP Adjusted)

SINGAPORE & SELECTED COUNTRIES, 2012
Singapore Hong Kong (SAR) United States Australia Germany United Kingdom Japan South Korea Malaysia Thailand China Indonesia Phillipines India Vietnam Cambodia 0 4,944 4,214 3,944 3,550 2,361 10,000 20,000 30,000 40,000 50,000 60,000 70,000 9,979 9,143 16,186 41,468 38,696 36,605 36,040 33,172 50,716 49,601
CHART 1.3
61,047
USD (PPP Adjusted)

Source : IMF
1.1.2
INFLATION
Singapore has historically enjoyed low levels of inflation, averaging approximately 2.2% per annum from 2001-2012 and rarely exceeding the range of 2%, as shown in Chart 1.3. Years in which Singapore experienced inflation above historical trend levels include 2008, 2011 and 2012. In 2008, consumer price inflation (CPI) reached 6.6% largely fuelled by high import prices on food and energy. In 2011, CPI reached 5.2%, and is estimated at 4.6% in 2012. Uncharacteristically high growth in consumer prices over the past few years can be traced back to rising housing, food and transport costs. The EIU forecasts CPI to moderate over 2013 and 2014, with prices expected to rise by 3.8% and 2.9% in these years respectively. From 2013 to 2018, CPI is expected to stabilise to average around 2.2% per year within the range acceptable to the Monetary Authority of Singapore, the central bank of Singapore. Retail Price Inflation (RPI) measures the price increase of retail goods and services, and is a subset of CPI. From 2001 to 2011, RPI in Singapore averaged 1.2% per annum, trending marginally below CPI. RPI in 2012 was 0.8%, driven down by lower relative growth in the price of non-food goods partially offsetting rising food prices. RPI is forecast at an average annual rate of 1.3% from 2013 to 2018.
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Consumer and Retail Price Inflation

7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
CHART 1.4
Forecast
CPI RPI Average annual growth CPI (2.2%) & RPI (1.1%) 2001-2012
Average annual growth CPI (2.7%) & RPI (1.3%) 2013-2018
1.1.3
PRIVATE CONSUMPTION EXPENDITURE
Private consumption expenditure (PCE) is the contribution of households to GDP. Typically, PCE growth tracks that of GDP, although it is normally less volatile. PCE is closely linked with retail sales growth, with retail spending by households estimated to constitute approximately 71% of the Singapore retail market in 2012. Chart 1.5 shows Singapores historical and forecast real PCE growth rate from 2001 to 2016. Growth averaged 4.2% from 2001 to 2012, with notable contractions in the growth rate during the Severe Acute Respiratory Syndrome (SARS) epidemic in 2003 and the GFC in 2008 and 2009. 2012 also saw a contraction in the real PCE growth rate, which was associated with decreased consumer confidence related to weaker global economic conditions. The EIU forecasts real PCE growth to rebound over the forecast period, particularly between 2012 and 2015. From 2013 to 2018, PCE growth is expected to reach a peak of 5% per annum in 2016, and average 4.7% per year to 2018.
Private Consumption Expenditure

8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 -1.0% Average annual growth 2001-2012 4.2% Forecast Average annual growth 2013-2018 4.7%
CHART 1.5
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1.2
POPULATION TRENDS
In June 2012, Singapores population was estimated to be approximately 5.3 million, comprising 3.8 million citizens and permanent residents, and 1.5 million non-residents. Non-residents are primarily expatriate workers on long term working visas, including both skilled professionals and unskilled workers in manufacturing and construction. It is noted that in 2012, the Singapore Government tightened the criteria for worker permits, specifically in the hotel and hospitality industries, in an effort to moderate the growth of Singapores non-resident population. Population growth from 2005 to 2012 averaged 3.2% per annum, or 140,000 per annum. Urbis forecasts that between now and 2018 the total Singapore population will grow at an average annual rate of 1.6% per annum, and by 2018, the population is forecast to reach 5.9 million. Singapore residents are expected to account for 70% of the population in 2018, down from 81% in 2005. This trend reflects substantial inflows of foreign workers and a low fertility rate. Long term, the Government is planning infrastructure for an expected population of 6.9 million by 2030. The Singapore Governments Population White Paper, released in 2013, outlines specific infrastructure projects to support a growing population, including a 20% increase in bus transport capacity over the next 5 years, and the extension of the rail network by 100 to 280km by 2021. It is recognised that the projected aggregate population growth rate of 1.6% per annum (or 90,000 per annum) is lower than historical trends; however, this is reflective of a moderated economic growth outlook for Singapore relative to the previous decade, and a tightening in immigration policy.
Singapore Population
2005-2018 (MILLION)
7 6 5 4 3 2 1 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 4.22 4.40 4.59 4.84 4.99 5.08 5.18 Forecast 5.31 5.43 5.52 5.62 5.70 5.78
CHART 1.6
5.85
1. Total Population comprises residents and non-residents staying in Singapore for at least one year. Population is at June each year. Source : Singapore Census 2012; 'Population Trends 2012' Singapore Statistics Department; Urbis.
1.3
TOURISM OUTLOOK
Tourism has grown strongly in Singapore over the last decade, and is a significant contributor to Singapores economy. In 2012, tourists generated an estimated 19% of retail sales in Singapore, and up to 40% of sales on Orchard Road. In Chart 1.7, total visitor arrivals by year are shown from 2001, with forecasts to 2018. From 2009-2011, an average annual growth rate of 16.6% was recorded. The countries that account for the largest proportion of international visitors to Singapore in 2011 were Indonesia (19.7%), China (12.0%) and Malaysia (8.7%). China is the source country that has exhibited the strongest growth in visitors to Singapore, averaging 15.5% growth from 2009 to 2011. In 2012 tourism growth is estimated to have remained strong, with estimated total international arrivals at 14.4 million, 9.1% higher than the number recorded in 2011.
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The average length of stay for tourists to Singapore was 3.73 days in 2011, decreasing from 3.86 days in 2010. This trend is expected to continue as Singapore further develops its exhibition, convention, and business tourism industry, resulting in more visitors but of shorter stay for MICE events. Over the last decade there has been a strong initiative, via the Singapore Exhibition & Tourism Bureau, to enhance Singapore as a destination for exhibition and convention tourism. Testament to this is Singapore being awarded the Top International Meeting Country in 2011, and the 5th ranked Convention City in the World in both 2010 and 2011. The completion of a number of large-scale tourist-oriented developments, such as Marina Bay Sands and Resorts World Sentosa, has supported high rates of growth in international visitors in recent years. Additionally, the growth popularity of internationally renowned events, examples of which are the Singapore Grand Prix and Singapore Arts Festival, has served to further establish Singapore as a holiday tourism destination. Upcoming tourist attractions include River Safari (2013), Singapore Sports Hub (2014), and the National Art Gallery of Singapore (2015). International visitor arrivals are expected to continue growing from 2013-2018, albeit at a slower rate averaging 5.0% per annum, as compared with the average growth of 6.1% per annum achieved from 2001-2011. The slowing in the growth rate of international visitors to Singapore is partly due to an expected moderating in the global tourism growth rate, as well as increased regional competition. Our estimates have tourist arrivals reaching 17.1 million by 2015, consistent with the Singapore Tourism Boards target of 17 million tourist arrivals, constituting S$ 30 billion in tourism receipts by 2015.
International Visitor Arrivals

28 26 24 22 20 18 16 14 12 10 8 6 4 2 0 Forecast
CHART 1.7
Average annual growth 2013-2018 5.0% 18.5 19.3 17.1 17.8
7.5
7.6
8.3 6.1
8.9
9.8
10.3 10.1
9.7
11.6
13.2
14.4 15.4
16.3
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Source : Singapore Tourism Board; Urbis. *Figures exclude Malaysian visitors by land, who mainly constitute day-trippers from Johor Bahru. * 2012 figures are estimates based on Singapore Tourism Board growth estimates.
1.4
FORECAST RETAIL SALES GROWTH
As shown in Chart 1.8, retail sales growth in Singapore has historically been fairly strong, with mild downturns caused by external shocks including 9/11 in 2001, SARS epidemic in 2003 and the GFC in 2008-09. Nominal retail sales growth from 2001-2012 averaged 3.8% per annum. The retail market bounced back particularly strongly post-2009, recording a sales growth rate of 6.8% in 2010. In 2011, nominal retail sales continued this rebound, with a growth rate of 7.1% recorded. 2012 saw a moderation of sales growth to around 3.0% as a result of moderated domestic economic growth and subdued global economic conditions. Average sales growth for Singapore over the four year period 2009-2012 has been 3.8% per annum. Retail sales growth is expected to remain strong from 2013 to 2018, averaging approximately 5.0% per annum over the forecast period, driven by expanding PCE and growth in the tourism retail spending market.
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Retail Sales Growth1

10% 8% 6% 4% 2% 0% -2% -4%
Real Retail Sales Nominal Retail Sales
CHART 1.8
GFC
Forecast
9/11
SARS
-6% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
1. Excludes motor vehicle sales but includes food catering sales. Source : Indices of Retail Sales and Catering Trade, Singapore Department of Statistics; Urbis.
Chart 1.9 shows tourist retail sales from 2001 to 2018. From 2001 to 2011, annual retail growth averaged 6.4% per annum. In 2012 tourist retail spending is estimated to be approximately S$ 7.8 billion, accounting for around 18.9% of total retail sales, as opposed to S$ 7.1 billion, or 17.7% of total retail sales in 2011. The high proportion of retail sales accounted for by tourism spending is testament to the importance of the tourism industry to the overall retail market in Singapore. Strong growth in tourist retail sales is forecast from 2013 to 2018, constituting an expected average annual growth rate of 7.0%, versus an overall retail sales growth rate of 5.0% for the same forecast period. In 2011, leading source countries in terms of tourism receipts were Indonesia (S$ 2.9 million), China (S$ 2.1 million), India (S$ 1.1 million), followed by Australia and Malaysia. Receipts from Chinese tourists in particular have been growing rapidly in recent years, increasing in 2011 by 28% from 2010 levels. Other source countries that exhibited significant growth from 2010 to 2011 were India (21%) and India (10%). A significant proportion of retail spending takes place on Orchard Road, Singapores main shopping strip and annual tourist destination, with tourists accounting for an estimated 40% of Orchard Road retail sales in 2012. The strong forecast growth in tourist retail sales is projected to benefit Orchard Road retail disproportionately.
Tourist Retail Sales

SINGAPORE, 2001-2018 (S$ MILLION)
16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Source : Urbis * 2012 figures are based on Singapore Tourism Board visiotr growth estimates. 3,618 3,556 2,849 3,998 4,275 4,739 4,875 5,119 4,706 5,828 6,728 7,414 8,052 8,705 9,323
CHART 1.9
Forecast Average annual growth 2001-2012 6.7%

9,890 10,492 11,130
10
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1.5
1.5.1
RETAIL SUPPLY
TOTAL SUPPLY
Chart 1.10 shows the total amount of retail floorspace in Singapore from 2004 to 2018. At the end of 2012 we estimate that there was approximately 57.6 million sq ft of retail floorspace provision across Singapore. Approximately 25.0 million sq ft (43.4%) of this floorspace was shopping centre floorspace. Total retail floorspace is forecast to increase to 63.8 million sq ft, representing an annual growth rate of 1.5% from 2013 to 2018.
Retail Floorspace Supply1

SINGAPORE, 2004-2018 (NLA SQ FT MIL.)
90 80 70 60 50 40 30 20 10 2004
1. At year end Source : Urbis
43.8 45.2 47.4 48.3 50.0
CHART 1.10
Forecast
61.1
Other Shopping Centre
Average annual growth Shopping Centre Floorspace (6.2%) & Total Floorspace (3.5%) 2004-2012
Average annual growth Shopping Centre Floorspace (2.8%) & Total Floorspace (1.5%) 2013-2018
62.0 62.4 63.1 63.8
52.7
55.1
56.4
57.6
59.1
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
1.5.2
SHOPPING CENTRE SUPPLY
Table 1.1 shows current shopping centre floorspace by region (based on the planning regions defined by the URA) and per capita retail provision.
Shopping Centre Floorspace by Region1

SINGAPORE, 2012 (SQ FT)
Planning Region Central Region Central Core Central West Central East Total Central Region Outer West North North-East East Islands and Others Total Outer Total Singapore
1. Defined as centres over 100,000 sq.ft NLA. Source : URA; Urbis
TABLE 1.1
Total Floorspace (sq ft) 10,705,316 2,708,919 1,862,151 15,276,385 2,165,448 1,043,328 1,412,553 2,489,847 280,000 7,391,176 22,667,562 Est Population ('000) 202 660 649 1,511 1,257 639 871 894 75 3,737 5,248 Per Capita Provision (sq ft) 53.1 4.1 2.9 10.1 1.7 1.6 1.6 2.8 3.7 2.0 4.3
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The Central Core contains the largest provision of shopping centre floorspace, comprising 53.1sq ft of shopping centre floorspace per capita. The total Central Region comprises approximately 15.3 million sq ft of shopping centre floorspace (67% of total floorspace). The Orchard Road shopping district contains 43 retail centres and which collectively occupy 6.8 million sq ft NLA. This represents some 93% of the total retail floorspace in Orchard Road which is estimated at 7.3 million sq ft NLA as at the end of 2012. Orchard Road therefore accounts for 64% of Central Cores shopping centre floorspace. Virtually all of the high-end and luxury malls in Singapore, including Paragon, are located within the Central Core. Throughout the Central districts, the provision of retail floorspace is materially higher than in the outer regions per capita. Even excluding the Central Core (which contains Orchard Road) the Central Region has a higher provision than all of the outer districts (excluding the Islands). The supply in the outer suburbs is highly contained and well planned, generally limiting the potential for oversupply of retail floorspace.
1.5.3
PER CAPITA SUPPLY
Chart 1.11 shows Urbis estimate of Singapores 2012 retail supply per capita relative to selected countries. Retail floorspace per capita in Singapore is estimated at 10.9 sq ft per capita in 2012, and is expected to remain relatively stable to 2018. This provision is relatively low compared with other developed Asian economies such as South Korea (14.4 sq ft) and Japan (16.6 sq ft). However the 2012 proportion of floorspace contained in shopping centres (43.4%) is high compared with Asian economies such as China (21%) and Japan (22%). Conversely, the proportion of floorspace in Singapore contained in shopping centres is marginally lower than in Australia (46%) and the United States (47%).
Estimated Total Retail Floorspace Per Capita

SELECTED COUNTRIES, (SQ FT)
Singapore (2018) Singapore (2012) Hong Kong (2012) China (2012) South Korea (2010) Japan (2009) Australia (2012) USA (2010) 0
Source : Urbis 10.9 10.9 11.3 12.9 14.4 16.6 23.7 50.5
CHART 1.11
10
20
30
40
50
60
1.6
1.6.1
FUTURE SUPPLY
PROJECTED SHOPPING CENTRE COMPLETIONS
Expected shopping centre completions from 2013 to 2016 are shown in Table 1.2. The most active planning regions for new shopping centre development are expected to be the Central Core, Central East and West Region.
12
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Planned Major Shopping Centre Developments

SINGAPORE 2013-2016 TABLE 1.2
Planning Region Central Core Suntec City Expansion The Heeren Refurbishment Retail at Capitol Site Orchard Gateway (Hotel Phoenix) 268 Orchard Road Tanjong Pagar Site South Beach Central East & West Sports Hub Lion City Redevelopment One KM West Region JEM Westgate Jurong Big Box North-East Region The Seletar Mall Waterway Point East Region Bedok Interchange
Source : Urbis
Completion Year
NLA (sq ft) 187,000 165,100 200,000 143,900 95,900 150,000 83,400 250,000 210,000 210,000 560,000 420,000 366,000 192,000 365,000 220,000
Owner
2013 2013 2014 2014 2014 2016 2016 2014 2014 2014 2013 2014 2015 2014 2015 2014
Suntec REIT Swee Cheng Holdings Capitol Investment Holdings Pte. Ltd. OCBC, Great Eastern, UE RE Properties GuocoLand City Developments Ltd Singapore Sports Hub Consortium UOL Property Investments UOL Group Limited Lend Lease CapitaMall Trust TT International SPH & UEL Frasers Centrepoint Trust/Far East CapitaMalls Asia
1.6.2
NEW SUPPLY BY REGION
Chart 1.12 displays new shopping centre floorspace by region in Singapore from 2013-2018 (these are based on the planning regions defined by the URA). As shown, there is a significant amount of new shopping centre floorspace expected in the Central Core, Central East and West, and West Regions, with a moderate amount planned for the East Region. The Central Core is expected to have 1.5 million sq ft of new shopping centre retail floorspace completed over 2013-2018, which comprises approximately 6.0% of existing stock. The majority of this stock is expected to come to market in 2013 and 2014, with 268 Orchard Road and Orchard Gateway, as well as The Heeren refurbishment and Suntec City Mall expansion scheduled for completion over these years. Supply of shopping centre retail floorspace is forecast to grow at 3.9% per annum from 2013 to 2016. Orchard Road is set to add 404,900 sq ft (268 Orchard Road, Orchard Gateway and The Heeren) of new and reintroduced shopping centre retail floorspace over the same period, or approximately 5.5% of existing stock. The Central East and West are also set to undergo considerable additions to their stock of shopping centre retail floorspace, equating to 1.4 million sq ft, and approximately 20% of additions to total stock in Singapore. The majority of these additions are forecast for 2014, with Sports Hub, Lion City redevelopment and One KM expected to open in this year. It should be noted that the majority of additions to shopping centre retail floorspace will be in Central East as opposed to the Central West. The West Region is forecast to receive an additional 1.8 million sq ft of shopping centre retail floorspace from 2013 to 2018, accounting for approximately 27% of the total new shopping centre stock expected across Singapore. The most significant additions are forecast in 2013 and 2014 with the completion of Westgate and Jem.
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Planned Shopping Centre Floorspace by Region1

SINGAPORE, 2013-2018 (SQ FT)
900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 Central Core Central East & West West Region 2013
1. At year end Source : URA; Urbis
CHART 1.12
Paragon Mall
Clementi Mall
North Region 2015 2016
North-East Region 2017
East Region 2018
Islands & Others
2014
Taking into account the forecast completion together with making some allowance for deletions due to obsolescence, we estimate that for the year ending December 2013 the total stock will be as follows:
SHOPPING CENTRE NLA MILLION SQ FT Total Singapore Orchard Road 26.2 7.0 TOTAL RETAIL NLA MILLION SQ FT 57.5 7.5 SHOPPING CENTRE NLA AS A % TOTAL NLA 46% 93%
1.7
1.7.1
RETAIL PERFORMANCE METRICS

RETAIL RENTAL OUTLOOK
Chart 1.13 shows year on year median rental growth in the suburbs and Orchard Road from 2010 to 2018. According to the URA, the rental growth in the suburbs was moderate from 2010 to 2012, averaging 2.9% per annum. Growth in this market is expected to remain relatively stable, at around 3.0% per annum from 2013 to 2018, as scheduled new supply is balanced by suburban capacity to support the influx of retail supply. It is also our understanding that there has been strong interest and take-up from retailers for retail space in the proposed new suburban mall developments. Accordingly, the forthcoming supply is not expected to adversely affect rents. Rental data from the URA for 2011 and 2012 indicates that Orchard Road rents have emerged from the bottom of the decline attributable to the 2008/2009 GFC and the significant increase in retail floorspace supply in 2009 and 2010.1 For Q1 2013 the URA estimated the median rental on Orchard Road to be S$ 10.73 per sq ft per month. Over the next few years, it is expected that retail sales growth and a limited schedule of forthcoming supply will lead to rental growth of around 3.0% per annum, up from 0.7% in 2012.
Rental indices such as this are typically derived from rental deals struck during the relevant period. As a result, they can be influenced by the type of stock (e.g. mass market versus luxury) being brought into the market at that time.
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Rental Growth Outlook1

Suburbs Rental Growth 8% 6% 4% 2% 0% -2% 2010 2011 2012 2013 2014 2015 2016 2017 2018
1.9% 1.1% 5.6%
CHART 1.13
8% 6%
4.1%
Orchard Road Rental Growth Forecast: 3.0% average annual growth
Forecast: 3.0% average annual growth
4% 2% 0% -2%
-1.1%
0.7%
2010 2011 2012 2013 2014 2015 2016 2017 2018
1. Median rentals based on lease commencement date. URA definition of "Shop" space excludes entertainment and F&B. Source : URA; Urbis
1.7.2
OCCUPANCY RATE OUTLOOK
Chart 1.14 shows occupancy rates in the suburbs and Orchard Road from 2010 to 2018. Current occupancy rates in the suburbs are already high, averaging 95.5% in 2012. Taking into account future retail developments in this market as well as frictional vacancy, we do not expect this rate to increase significantly. The strong interest from retailers with regard to upcoming developments in suburban areas is forecast to be sufficient to maintain this occupancy rate from 2013 to 2018. On Orchard Road occupancy rates are expected to increase in line with rents over the next few years. Occupancy rates averaged 91.8% over 2012, and a moderated supply forecast in conjunction with retail sales growth is expected to drive occupancy rates toward 95% by 2015, continuing to 2018.
Retail Occupancy Rate Outlook

Suburbs Occupancy Rate 100% 99% 98% 97% 96% 95% 94% 93% 92% 91% 90% Forecast 100% 99% 98% 97% 96% 95% 94% 93% 92% 91% 90%
CHART 1.14
Orchard Road Occupancy Rate Forecast
95.5% 95.5%
95.5% 95.5% 95.5% 95.5% 95.5%
94.1%
94.0%
94.5%
95.0% 95.0%
95.0% 95.0%
93.3% 92.5%
91.8% 91.1%
2010 2011 2012 2013 2014 2015 2016 2017 2018

Source : URA; Urbis
2010 2011 2012 2013 2014 2015 2016 2017 2018
1.8
IMPLICATIONS FOR PARAGON & CLEMENTI MALL
Singapores economy is integrated with regional and global economic players and is therefore sensitive to fluctuations in the global economy, as evidenced by the decrease in growth rates during the GFC in 2008 and 2009. This high level of integration does allow the Singapore economy to rebound quickly and strongly after a downturn. This was shown to be the case post-2009, with GDP growth rebounding to 14.8% in 2010, moderating to trend levels in 2011.
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Despite some volatility attributable to fluctuating global growth over the past decade, Singapores economy has grown relatively strongly, averaging 5.3% per annum from 2001 to 2012. Over the same period, growth in PCE has also been strong, averaging 4.1% per annum. Inflation has remained under control, although it has risen over the past few years on the back of rising housing, food and transport costs. Growth in the Singapore economy is expected to further improve over the next few years assuming the continued recovery in global economic conditions, with real GDP growth forecast to average around 4.2% per annum from 2013 to 2018. China is the source country that has exhibited the strongest growth in visitors to Singapore in recent years, averaging 15.5% growth from 2009 to 2011. In 2012 tourism growth is estimated to have remained strong, with estimated total international arrivals at 14.4 million, 9.1% higher than the number recorded in 2011. International visitor arrivals are expected to continue growing from 20122018 at an average rate of 5.6% per annum Retail sales have risen with economic growth in Singapore over the past decade with nominal growth averaging 3.8% per annum from 2001 to 2012. Assuming a continuation in global economic recovery and continued domestic growth, we expect that nominal retail sales growth will average 5.0% per annum from 2013 to 2018. Tourist spending is a major component of the retail spending market in Singapore, generating an estimated 19% of total retail sales and up to 40% of sales on Orchard Road in 2012. Tourist sales as a proportion of total retail sales are forecast to continue to increase to 2018. In recent years, retail rental growth has been influenced by both growth in retail sales and significant increases to the stock of retail floorspace, particularly in the Central Region. Orchard Road rents have rebounded from weaker years in 2009 and 2010, attributable to the GFC and large additions to retail supply. Suburban markets did not experience the same downturn as they were not impacted by such large additions to retail floorspace. Both markets are seen to drive growth in the coming years. Nominal rental growth in both markets is forecast to average 3.0% per annum over the next five years. Occupancy rates in Suburban markets have grown strongly over the past few years, particularly in in 2012, reaching 95.5%. Given frictional vacancy and scheduled increases to retail floorspace in these markets, we expect average occupancy to maintain a level around 95.5% to 2015. Occupancy rates on Orchard Road are expected to tighten over the next three years stabilising at 95% by 2015, with this rate expected to be maintained to 2018.
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Paragon Mall
In the previous section, an overview was provided on the economy and retail market in Singapore. In this section we review Paragon retail mall, including the role it performs within the overall market and its future outlook.
2.1
2.1.1
OVERVIEW OF PARAGON
LOCATION
Paragon Mall is an upscale retail mall located in Orchard Road, Singapores most famous shopping and tourist precinct and which is located in the heart of Singapores Central Core. Map 2.1 shows the locations of Paragon and The Clementi Mall in Singapore. REGIONAL CONTEXT MAP 2.1
The Orchard Road shopping district extends some 2.2 km from Tanglin Mall at the western end to Plaza Singapura at the eastern end. Orchard Road is a one-way boulevard flanked by around 43 retail centres and had an estimated total retail NLA (including retail centres plus other retail) of 7.3 million sq ft as at the end of 2012. Orchard Road is also a very popular hotel and serviced apartment location with 33 establishments and more than 10,600 guest rooms in its vicinity. It is also an established office and upmarket residential location. Orchard Road is an epicentre for shopping, lifestyle, leisure, entertainment, events and festive celebrations that is regularly visited by the local population and tourists. It has a very wide boulevard of 32 metres and has a lush tropical setting. It has an extensive retail, dining and entertainment offering including high street fashion brands, luxury retail and major department stores as well as cafes and fine dining restaurants. According to the Orchard Road Business Association, Orchard Road has more than 5,000 fashion and lifestyle shops, 800 restaurants and cafes, seven department stores and four cinema centres with 38 screens.
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ORCHARD ROAD
MAP 2.2
F-28
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PARAGON MALL
Orchard Road remains one of the most highly visited tourist attractions in the country despite the additions of new attractions to Singapore in recent years including Marina Bay Sands and Resorts World Sentosa. Over recent years the government has spent S$ 40 million on general enhancement works to improve the pedestrian experience and there have been major new shopping centres completed, such as ION and 313@Somerset, as well as significant upgrades to existing centres such as Paragon and Wisma Atria. Year-round events are organised by the Orchard Road Business Association such as: Fashion Steps Out @ Orchard (March to April), a six-week fashion extravaganza that showcases the latest season collections from around the globe; Rev-up @ Orchard (September), celebratory events during the Grand Prix Season Singapore; and Christmas Light-up @ Orchard (November to December), a six week-long Christmas light-up and festival with live musical shows.
The Singapore Retailers Association organises the annual Great Singapore Sale (May to July), a sale period of retail discounts offered by retailers across the country, with many promotions being offered by retailers on Orchard Road. Orchard Road has consistently been as the most visited free access attraction in Singapore, and was recent ranked No.1 in the The Worlds Most Beautiful Avenues survey of 2011/12 conducted by the French market consulting group, Presence. The ranking of the five top avenues was: 1. 2. 3. 4. 5. Orchard Road, Singapore Avenue de la Libert, Luxembourg PC Hooftstraat, Amsterdam Badat Avenue, Istanbul Oscar Freire, Sao Paulo
Most Visited Attractions

SINGAPORE, VISITORS (MILLION) 2011
50 45 40 35 30 25 20 15 10 5 30 23 19 18 10 8 31 24 45 Free-access Paid-access
CHART 2.1
Orchard Road
Little India
Sentosa
Night Safari
Chinatown
Singapore River
Merlion Park
Source : Singapore Tourism Board
Singapore Flyer
Singapore Zoological Gardens

PARAGON MALL
Integrated Resorts
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By international standards prime rentals in Orchard Road are relatively moderately priced compared to the worlds top retail boulevards and streets. According to the annual Cushman & Wakefield survey, Orchard Road was ranked 16th in terms of the average prime rent for the worlds top retail boulevards and streets in 2012. In Chart 2.22 the average prime rent for Singapore is compared with the other top retail boulevards and streets.
! Most Expensive Retail Strips Worldwide Nptu!Fyqfotjwf!Sfubjm!Tusjqt!Xpsmexjef
SRENT, F O U! VUSD TE ! QPER FS ! TSQ R! GFT U! QPER FS ! BANNUM OOVN !

3,000 !4-111 2,500 !3-611 2,000 !3-111 1,500 !2-611 1,000 !2-111 500 !611 !.2,630 3-741 2,500 3-611
DCHART I B S U! 32.2 / 3
1,129 1,057 2-23: 2-168 952 936 :63 :47 854 936 825 965
686 797
495 592 481 536 5:6 425 529 418 514 403 486 375 471 360 442 331 441 330 432 321 425 314
Source : Cushman & Wakefield; Urbis. Tpvsdf!;!Dvtinbo!'!Xblfgjfme<!Vscjt/
PICTURE 1 ORCHARD ROAD
Chart 2.2 refers to Cushman & Wakefield Main Streets Across the World 2012/2013 report. The report has been prepared solely for information purposes. It does not purport to be a complete description of the markets or developments contained in the material. The information on which the report is based has been obtained from sources we believe to be reliable, but we have not independently verified such information and we do not guarantee that the information is accurate or complete.
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2.1.2
SITE CHARACTERISTICS & SURROUNDING LAND USES
Paragon is situated at the heart of Orchard Road with its closest retail neighbours including Knightsbridge, Ngee Ann City and Wisma Atria as shown in Map 2.3. Paragon is located immediately adjacent to Mount Elizabeth Hospital and Mount Elizabeth Medical Centre, a renowned private hospital and its medical centre, respectively. SURROUNDING LAND USES MAP 2.3
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Paragon comprises two properties that were merged together some 10 years ago - the original Paragon on the corner of Orchard Road and Bideford Road and The Promenade Shopping Centre located to the immediate west on Orchard Road. These two properties have been combined and redeveloped into a major new shopping mall with a medical suite/office tower above. The entire site area for Paragon, including the Paragon Medical, is some 135,000 sq ft and the site has road frontage to Orchard Road, Bideford Road and Mount Elizabeth Road. In addition to the strong retail presence surrounding Paragon, this part of Orchard Road is also a popular location for offices (e.g. The Tong Building and Ngee Ann City); for hotels (e.g. Mandarin Orchard Singapore, Marriott, Grand Hyatt and Four Seasons) and high end residential with nearby luxury condominium towers including The Orchard Residences, Scotts Square, Richmond Park Urban Resort Condominiums, and Urban Suites@ HulletRoad, which is scheduled from completion mid-2013.
2.1.3
ACCESSIBILITY
Paragon is well-served by the CTE and the property has a 416-lot car park with valet service which is appreciated by affluent customers who prefer to drive or be driven when out shopping. Paragon has excellent accessibility by foot given its extensive Orchard Road frontage and its location 200 metres from the Orchard MRT station and 350 metres from the Somerset MRT station. The closest MRT station, Orchard, has an underground connection via ION through Wisma Atria and Ngee Ann City which in turn, connects to the northern side of Orchard Road via an underground passage coming out at Lucky Plaza and Tangs. The location of the Orchard and Somerset MRT stations are shown in Maps 2.3 and 2.4. Paragon is well served by shuttle bus services with bus stops at key hotels in Singapore, as well as the public bus network, with the nearest bus stop directly outside Lucky Plaza. It also enjoys good access by taxi with a dedicated drop-off/pick up point on Bideford Road. In addition to being located in a prime tourist area itself, namely Orchard Road, Paragon is located in relative close proximity to most of the other landmark tourist attractions in Singapore including:
ATTRACTION The Istana Clarke Quay Singapore Botanic Gardens Boat Quay Singapore Flyer Marina Bay Sands Sentosa DISTANCE FROM PARAGON 0.9 km 1.8 km 2.4 km 2.4 km 3.4 km 3.4 km 5.5 km
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MRT
MAP 2.4
2.1.4
TENANCY COMPOSITION
Paragon had 285 tenants as at 28 February 2013. The major tenants in Paragon include Metro, Marks and Spencer, MUJI and Paragon Market Place. Paragon's Orchard Road facade is fronted by top international brands with duplex stores like Gucci, Prada, Salvatore Ferragamo, Tod's and Miu Miu. The shopping podium of Paragon is also home to more designer names such as Burberry, Canali, Ermenegildo Zegna, Etro, Givenchy and Jimmy Choo. The 10 largest tenants of Paragon accounted for 30% of gross rental income for the month of February 2013 as at 28 February 20133. In the same period, no more than 49% of gross rental income from Paragon was derived from any one trade sub-sector.
3 Excludes one tenant, who has not consented to the disclosure of any information regarding its tenancy arrangements.
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Paragon is an integration of the buildings previously known as Paragon by Sogo (located at former Lot 982A of Town Subdivision 27) and the 'Promenade' (located at former Lot 982A of Town Subdivision 27) which had been adjacent to each other4. Following the acquisition of Paragon by Sogo and Promenade in 19975, the Sponsor created Paragon and has extensively and continually upgraded the mall and optimised its tenant mix. Various asset enhancement initiatives include: 1998 1999, the property was extensively renovated, to create a more modern outward-looking mall, with a central atrium rising from Level 1 to Level 6 to introduce natural skylight into the mall. The mall layout was simplified to make it friendly for shoppers to navigate around the seven retail floors, whilst simultaneously ensuring line-of-sight visibility for the retail units. A 14-storey medical tower was built on top of the retail podium, to offer elective healthcare services to the mall's target customers. 2002 2003, Additional asset enhancement works were carried out, which involved the tearing down of the former Promenade building to facilitate the construction of the present-day integrated building and the forming of a contagious 136-metre frontage along Orchard Road. 2008 2009, in keeping with evolving market demands, Paragon underwent extensive asset enhancement program costing S$82 million which involved: the expansion of prime retail space of 11,000 sq ft fronting Orchard Road; the addition of two storeys of medical suite/office space totalling 29,000 sq ft on top of the Paragon retail podium; and upgrading works which created a transparent facade and allowed several top international fashion brands to create prominent duplex flagship stores fronting Orchard Road
Other, smaller scale but more regular asset enhancements include the upgrading of internal spaces and toilets. More recently, external upgrading works undertaken include the development of a wider plaza on the Orchard Road frontage and the addition of a new taxi stand.
Paragon has a total NLA for the entire property of 706,690 sq ft including Paragon Mall, the three levels above Podium 2 which accommodate a gymnasium (Level 8) and medical suites (Levels 7 and 9) and the 14 storey tower, Paragon Tower, situated above Podium 1. We refer to Levels 7-9 of Podium 2 and Paragon Tower as Paragon Medical. Excluding Paragon Tower and Levels 9 of Podium 2, the NLA for Paragon Mall is 483,690 sq ft, of which 455,163 sq ft or 94% can be classified as retail space. The remaining space is classified as non-retail and includes all of the uses on Level 6 (above Podium 1) with the exception of Toys R Us. These nonretail uses on Level 6 include the medical suites, the MindChamps PreSchool, Aveda Spa and the Citi Gold Private Client centre. Other non-retail uses on other levels in Paragon include banks/ATMs and the currency exchange at Basement 1.
4 The said Lots 906X and 982A both of Town Subdivision 27 were subsequently amalgamated to form the current lot 1139C of Town Subdivision 27 (being one of the land lots on which the present-day Paragon is located). 5 The remaining shares in O290 were acquired in 2001, resulting in Times Properties Private Limited (a wholly owned subsidiary of the Sponsor) owning a 100.0% stake in O290.
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PARAGON LAYOUT LEVEL 1
FIGURE 2.1
The tenancy composition for Paragon is summarised in Table 2.1 and the key retail layout plans for the six levels are shown in Appendix A, together with the non-retail levels above Podium 2 on Levels 7, 8 and 9 included in Appendix C.
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Tenancy Composition
PARAGON, MARCH 2013
Tenancy Category Department Store & Supermarket Luxury tenants, Jewellery & Watches Fashion, Handbags, Shoes & Accessories F&B Lifestyle Non Retail Services Total Retail Mall (Excluding Medical & Office) Medical Suites/Offices Total (Including Medical & Office)
Source: The Manager
TABLE 2.1
NLA (sq ft) 123,429 76,209 69,949 69,551 116,025 28,527 483,690 223,000 706,690 Average Base Rental (S$/sq ft/month) 7.0 48.5 22.1 14.7 11.4 8.0 18.6 9.7 15.7
Overall, the Paragon retail mall has seven retail levels in Podium 1 (Basement 1 plus Levels 1-6) and six levels in Podium 2 (Basement 1 plus Levels 1-5). The key points in relation to the current composition of the Paragon retail mall include: Paragon is positioned to focus on upmarket shoppers with its extensive provision of luxury retail and fashion, including childrens apparel, as well as its extensive F&B offer and its gourmet supermarket (Paragon Market Place). At 483,690 sq ft NLA it is currently the fourth largest mall in Orchard Road and is only exceeded by Ngee Ann City (710,900 sq ft), ION Orchard (636,000 sq ft) and Plaza Singapura (498,200 sq ft). Paragon has three anchor tenants an 82,000 sq ft Metro department store over three levels, an 18,300 sq ft gourmet supermarket (Paragon Market Place) and an 18,800 sq ft Marks & Spencer junior department store, which collectively account for 119,100 sq ft or 24.6% of Paragon Malls NLA. It offers two retail mini majors Toys R Us on Level 6 and a MUJI homewares/apparel store on Level 5. The centre also has two well-known large Chinese fine dining restaurants on Level 5 which are also classified as retail mini majors the Crystal Jade Golden Palace and the Imperial Treasure Super Peking Duck Restaurant. Non-retail mini majors include Citi Gold Private Client, Aveda Spa the MindChamps PreSchool on Level 6 of Podium 1 and Fitness First, the Singapore Medical Specialist Centre and Pacific Healthcare on the upper levels of Podium 2. Collectively the anchors and mini anchors (including non-retail mini anchors), account for some 44% of the total NLA for Paragon Mall. A strong feature of Paragon is the street frontage emphasis on luxury retail with seven flagship luxury stores fronting onto Orchard Road or Bideford Road and with five of these stores being duplexes (i.e. larger flagship stores located over two levels). The seven flagship luxury stores include Gucci, Prada, Salvatore Ferragamo, Tods, Miu Miu, Ermenegildo Zegna and Burberry. Collectively these tenants account for some 40,800 sq ft or 8.4% of retail mall NLA. Inside the centre there are also other luxury related tenants including Canali, Etro, Givenchy, Jimmy Choo, Georg Jensen and Cortina Watch. The diffusion and high street brands are also well represented including amongst others Adolfo Domnguez, Agnes B, A|X Armani Exchange, Banana Republic, Blackbarrett, CK Calvin Klein, DKNY, Evisu, Furla, G-Star, Karen Millen, Longchamp, Miss Sixty and Raoul.
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Another unique feature of Paragon is its strong childrens offering on Level 5 in Podium 1. This includes 19 such tenants in addition to Mothercare and the Kawai Music School on Level 5 and Toys R Us on Level 6. Additional attractions for families with children include the common play area on Level 5 (next to Mothercare and the atrium) and the MindChamps PreSchool on Level 6. Paragon has 235 retail and three non-retail specialty shops (i.e. shops smaller than 4,000 sq ft) which collectively occupy a total NLA of 250,000 sq ft or 52% of the total retail mall NLA. This is a relatively low proportion compared with many other regional malls in Singapore where specialties can often account for more than 60% of total NLA. Average specialty shop size is 1,050 sq ft which is in line with mall specialty shop sizes elsewhere in Singapore. Shops larger than 4,000 sq ft represent the remaining 48% of total NLA and can fall under the categories of supermarkets, department stores, mini anchors and anchors. There are a total of 25 F&B outlets at Paragon including the two aforementioned fine dining mini anchors on Level 5 as well as other restaurants, cafes and take-away food stores. F&B totals 69,551 sq ft or 14.4% of the total retail mall NLA. This is a relatively low proportion when compared with most other Singapore shopping malls, where the proportion is usually in excess of 20%. In keeping with its luxury upmarket status the centre does not contain a food court but rather has a more sophisticated F&B offer with a variety of table service establishments as well as quality take-away. One of Paragons key attractions is the anchor tenant, Metro department store which is the only Metro department store in Central Singapore. It is also Metros largest store in Singapore at 82,000 sq ft and it provides Metros most upmarket offer. The store is situated over three levels (Levels 2-4) at the rear of the centre and with its own escalators. Metros other stores in Singapore are smaller suburban outlets, including stores at Causeway Point, Compass Point and City Square all of which are around 50,000-60,000 sq ft. Another feature of Paragon is its extensive medical offer located on Level 6 in Podium 1, on Levels 7 and 9 in Podium 2 and in a separate building, the Paragon Medical Centre, at the rear of the property and above Podium 1. Over time the amount of space occupied by medical related tenants has increased within the centre and the tower. The success of Paragon Medical, in part, is due to its excellent location situated directly across from the Mount Elizabeth Medical Centre and the Mount Elizabeth Hospital. These medical services are popular with Singapore residents and foreigners, and also provide additional footfall to the mall. The overall retail vacancy rate for Paragon as at March 2013 was 0.2% but all of this vacant space is committed, and the committed occupancy is 100.0%. Significantly, lease income is received in respect of committed occupancy. A vacancy level of this magnitude is not unusual for a successful centre given that there will always be some tenant change resulting in some tenancies being temporarily vacant as the new tenants take over from the departing tenants.
2.1.5
LEASE EXPIRY PROFILE
In floorspace terms, Paragon Mall has a fairly balanced and well staggered lease expiry with 30.3%, 39.7% and 30.0% of retail mall NLA up for renewal in FY2013, FY2014 and FY2015 respectively. The majority of leases at Paragon are for three years, consistent with market practice for retail space in Singapore. The proportion of leasable space within the retail mall that is coming up for renewal is shown in Chart 2.3.
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Lease Expiry
PARAGON, % OF TOTAL RETAIL MALL NLA (FINANCIAL YEARS)
45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 2013
Source : The Manager
CHART 2.3
39.7% 30.3% 30.0%
0.3% 2014 2015 2016
For centre management the lease expiries provide an opportunity to optimise long term profitability and review the rents in light of current market conditions, tenant waiting list, the tenant fit-out and the overall merchandising and positioning strategy for the centre; as well as the performance and potential performance of tenants within the centre. Lease expiries also allow tenants to be relocated within the centre to higher productivity (and higher rent) areas. Over the next few years we would expect lease renewals within Paragon to result in higher rents in most instances and as outlined later we are anticipating average rental growth of 3% per annum.
2.1.6
CAR PARKING
Paragon, including the Paragon Medical, has some 416 basement car spaces with the car park layout plan shown in Appendix A. This represents an overall provision of 0.59 spaces per 1,000 sq ft NLA over the entire complex. This is slightly lower that than the traditional regional centre provision for Singapore, which is typically around 0.8 to 1.5 spaces per 1,000 sq ft, but is not unusual for a Central Area mall where the majority of customers are coming via MRT, and where stations are located in very close proximity. There are other nearby parking stations available for Paragon customers, such as Ngee Ann City. In the future, the provision will improve as a result of the completion of a significant public car parking facility which will form part of a larger redevelopment of Somerset Grand Carnhill next to the Thongsia Building site in Bideford Road, directly opposite the entrance to the Paragon car park. Access into the Paragon car park is off Bideford Road and there is good escalator access into the retail mall, with one set of escalators serving Podium 2 and two sets of escalators serving Podium 1. The car park charges for Paragon as at March 2013 were as follows: Monday to Saturday Daytime S$ 2.58 for the first hour, S$ 1.48 for each subsequent 30 minute block or part thereof. Evening S$ 3.48 flat.
Sunday and Public Holidays Daytime S$ 3.48 for the first two hours, S$ 0.05 for every subsequent minute through to 6pm. Evening S$ 3.48 flat.
The official opening hours for Paragon are 10am to 9pm daily, although there are some F&B tenants which open earlier and some close beyond 10pm.
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2.1.7
DESIGN & LAYOUT
The overall layout of the Paragon Mall is relatively simple and legible despite the fact that it involved joining two originally separate malls (Paragon and Promenade) into a single entity. The layout is an L-shape centred around two atria, the first being in Podium 1 and the second in Podium 2. The atria in turn, span over some 5-6 levels and provide a unique feature for the centre particularly given the fact that the ground floor space at the foot of the atria is open and, unlike many of the other centres, is not filled up with kiosks. Key features of the design and layout of the mall are as follows: Reflecting the upscale market positioning of Paragon Mall, the overall ambiance, fit-out and feel of the centre internally is of a sophisticated timeless mall which is more spacious and less cluttered than its main competitors. The average width of the atria is 16 metres in Podium 1 and 22 metres in Podium 2. Podiums 1 and 2 have open spaces which extend vertically through from the Level 1 podium through to Level 6 with clearstory windows above that introduce natural daylight into the building. Vertical circulation is well placed throughout the mall with escalators at either end of the Podium 1 atrium and either side of the Podium 2 atrium. The escalators are supplemented by elevators serving Podium 2 and the higher levels (Levels 7, 8 & 9) and for Podium 1 there are a set a lifts at the Metro end of the centre. A strong feature of Paragon is its extensive 136 metre frontage to Orchard Road together with its corner location and extensive frontage to Bideford Road. This gives the centre excellent exposure and high visibility which has been capitalised upon with the impressive faade treatment and the incorporation of five luxury flagship stores located over Levels 1 and 2 and fronting onto Orchard Road. These stores include Miu Miu, Tods, Prada, Salvatore Ferragamo and Gucci. In addition, there are two one level luxury flagship stores (Ermenegildo Zegna and Burberry) facing directly onto Bideford Road, perpendicular to Orchard Road. These seven flagship luxury stores provide a very strong external statement and positions Paragon as a luxury mall. The retail mall has a number of entry points on the ground level, three of which are directly off Orchard Road serving Podium 1 and 2 respectively. There are also ground level entries off the concierge set-down area off Bideford Road, and there is a rear entry via stairs off Mount Elizabeth Road into Podium 2 and directly opposite the Mount Elizabeth Medical Centre, and Mount Elizabeth Hospital. The main car drop off point and taxi area for the mall is off Bideford Road, and there is separate vehicle drop off point off Mount Elizabeth Road for Paragon Tower. Servicing for the centre works well via a loading dock at the rear of the centre off Mount Elizabeth Road.
The retail layout for Level 1 is shown in Figure 2.2 with the full set of layout plans for all levels included in Appendix A. Some images of the mall (both external and internal) are shown in Pictures 5-10. PARAGON, LEVEL 1 RETAIL LAYOUT FIGURE 2.2
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PICTURE 5 PARAGON FAADE
PICTURE 6 PARAGON FAADE
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PICTURE 7 PARAGON MARKET PLACE (BASEMENT)
PICTURE 8 PODIUM 1 ATRIUM
PICTURE 9 LINK CONNECTING PODIUM 1 & 2
PICTURE 10 PODIUM 2 ATRIUM
Whilst Paragon has a number of medical facilities within the two podium buildings on Level 6 in Podium 1 and Levels 7 & 9 in Podium 2, the majority of the medical suites are located within Paragon Tower which is a separate building sitting above Podium 1. Paragon Tower has a separate point of entry and drop off and, as a consequence, does not interfere with the retail mall or its pedestrian circulation, although it does add to footfall at the mall.
2.1.8
ENHANCEMENT POTENTIAL
One of the features and strengths of Paragon has been its ability to change over time in terms of tenant mix and dcor, thus enabling it to stay relevant to its target market and remain one of the top shopping malls in Singapore. The centre has been adapted and changed in response to changing market circumstances, with the most recent change being in 2008 and 2009. In this instance the Sponsor took advantage of GFA incentives provided by the URA to promote upgrading of existing shopping malls along Orchard Road. The enhancement works included a faade makeover together with some tenancy changes and the addition of three more floors of office space and medical suites. The market position of Paragon however, has not changed and it remains one of the top luxury retail malls in Singapore. The Manager could potentially create additional NLA within the existing GFA of Paragon should they choose, given its relatively spacious nature, particularly in relation to its atria and other common areas. However, part of the attraction of Paragon is its spaciousness, and it is questionable as to whether there would be a net benefit from converting some of this common space into rentable space. The potential nevertheless exists in the future to explore such enhancements.
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Whilst the Metro department store continues to be an important contributor to the overall success of Paragon, in the longer term when the Metro lease expires there may be a case to downsize this store or remove it completely and convert it to higher yielding specialty or mini major space. The case for such an approach would need to be evaluated in detail to determine whether such a change would be beneficial to the overall performance of the centre.
2.2
2.2.1
TRADING PERFORMANCE METRICS

PEDESTRIAN FOOTFALL
The number of visitors coming to Paragon have been counted electronically by sensors at the various entrances to the centre. Annual calendar year visitor numbers to Paragon are summarised below: YEAR
2009 2010 2011 2012
Source: The Manager
VISITORS
17,410,068 17,797,387 18,569,909 18,532,155
DAILY AVERAGE
47,699 48,760 50,876 50,773
Paragon enjoys good visitor flow throughout the week. From a visitation perspective the busiest days at Paragon are Friday and Saturday. There are three factors contributing to the relatively even distribution of visitors throughout the week and these are: The contribution of tourists to footfall Office worker and medical market visitors on weekdays (Monday to Friday) Strong customer base of non-working mothers who frequent the mall on weekdays (Monday to Friday).
Footfall
PARAGON, AVERAGE DAILY TRAFFIC
70,000 60,000 50,000 40,000 30,000 20,000 10,000 Monday
Source : The Manager; Urbis.
CHART 2.4
59,580 17.0% 47,684 13.6%
55,320 44,929 12.8% 45,937 13.1% 47,661 13.6% 48,876 14.0% 15.8%
Tuesday
Wednesday
Thursday
Friday
Saturday
Sunday
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For 2012, the visitation at 18.53 million is very similar to the previous year. This is considerably lower than some of the other competing retail malls in Orchard Road. This is largely a consequence of Paragons upscale market positioning and the fact that it is not directly integrated with an MRT station and therefore footfall at the mall excludes transient visitors. Many of the other centres such as ION, Wisma Atria, Ngee Ann City, 313@Somerset and Plaza Singapura have higher pedestrian numbers but this is attributable, in part, to MRT commuters just walking through the centre on the way to or from the MRT station. One of the attractions of Paragon for many shoppers, particularly the higher income shoppers, is the fact that Paragon is not crowded, it is more spacious, which adds to the upscale positioning of the mall. The net result of this is that the average spend per visitor at Paragon (estimated at S$ 40 based on visitor and sales data provided by the Manager) is higher than most of the other centres.
2.2.2
HISTORICAL SALES PERFORMANCE
Table 2.2 shows the centre sales history of Paragon for four full calendar years.
Sales History
PARAGON RETAIL MALL*, CALENDAR YEARS 2008-2012
2008 Retail Mall NLA (sq ft) Total Sales (S$ million) Sales Growth (%) Sales Density (S$/sq ft/month)
* Excluding Paragon Medical Centre, Levels 7,8,9 & Podium 2 Source: The Manager
TABLE 2.2
2010 474,209 666 9.2% 117 2011 474,302 717 7.7% 126 2012 475,078 738 2.9% 130
2009 465,626 610 -9.9% 109
459,590 677 123
For the calendar year 2012 the total sales for Paragon was S$ 738 million which represents 2.9% growth over the previous year, following growth of 7.7% in 2011 and 9.2% in 2010. For the full 2008-2012 period, average growth has been 2.2% per annum and the average sales density for the centre was a very healthy S$ 130 per sq ft per month. The key factors influencing recent performance include: 1. 2. 3. There was a substantial increase in new supply in Orchard Road in 2009 and 2010 with the opening of Orchard Central, ION Orchard and 313@Somerset. The overall economy and the retail market in general in Singapore, was adversely affected in 2009 and 2010 in particular as a result of the slower economic conditions arising from the GFC. The S$ 82 million enhancement programme undertaken by Paragon was underway in 2008 and 2009 and although the centre traded throughout this period there was some disruption and this, in turn, contributed to the 9.9% decline in FY2009.
2.2.3
HISTORICAL RENTAL PERFORMANCE
According to the Sponsor, between FY2003 and FY2012, Paragon Mall has achieved 100.0% committed occupancy and has delivered positive annual rental growth, averaging 7.1% per annum over the period. The average gross rental achieved at 31 August 2012 was S$20.5 per sq ft per month. The resilient longer term performance was delivered in spite of economic shocks including the SARS epidemic in 2003 and the GFC, as well as entry of new retail competition into the market which included ION Orchard (2009), Orchard Central (2010) and 313@Somerset (2010). This outperformance in rental growth has been driven by a combination of Paragon Malls luxury market positioning, which has shielded it to some degree shielded it from the impact of new supply, and the refurbishment and maintenance of the property. It should also be noted that, while indicative, the Paragon Mall rental index is not directly comparable with the Orchard Road rental index. The Paragon Mall index captures average centre rents, while the Orchard Road index captures only new rental agreements and is therefore influenced by the type of stock available in the market in a given period.
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Paragon Mall Rental Growth & Committed Occupancy

PARAGON MALL & ORCHARD ROAD, 2003-2012 (FINANCIAL YEARS)
Paragon Mall committed occupancy (100%) Paragon Mall rent index
CHART 2.5
Orchard Road rent index
SARS
200
Global financial crisis 184

(2)
1 20.0 %
1 00.0 %
8 0.0%
100
100
100
(1)
6 0.0%
4 0.0%
2 0.0%
0 .0%
FY2003
FY2004
FY2005
FY2006
FY2007
FY2008
FY2009
FY2010
FY2011
FY2012
Key asset enhancement initiatives to remain market relevant...

2002 to 2003: Amalgamation of Paragon with The Promenade 2006 to 2007: Addition of 1 floor of medical suite / office
Completion of ION Orchard (2009), Orchard Central (2010) and 313@Somerset (2010) (1,179,600 sq ft in total) 2012: External upgrading works, extension of plaza and addition of new taxi / coach bay and driveway
2008 to 2009: S$82m asset enhancement (i) Facade upgrading (ii) Expansion of prime retail space (11,000 sq ft in total) (iii) Addition of 2 floors of medical suite / office (29,000 sq ft in total)
(1) (2)
Orchard Road rent index reflects ground floor tenants only, on a quarterly average basis. Paragon Mall rent index reflects retail tenants, on a monthly average basis.
2.2.4
FACTORS INFLUENCING PERFORMANCE TO DATE
Paragon has performed steadily over the past four years of operation following the completion of the faade enhancement works and some tenant changes in 2009. This has been a noteworthy performance given the entry of new competition into the market including ION (2009) and then 313@Somerset (2010) and Orchard Central (2010) as well as other new entrants such as Knightsbridge, the Mandarin Gallery, H&M and others. It has also coincided with some relatively tough years from the point of view of the economy, particularly in 2009 and 2010, but to a lesser extent 2011 and 2012. As discussed in Section 1, growth in retail sales over the past two years for Singapore as a whole has averaged 5.0% per annum. This means the 5.3% per annum sales growth achieved by Paragon over the past two years is a strong performance. Paragon is a mature and well established centre with a distinct market positioning. As a consequence of its prime location, tenant mix, high quality and loyal customer base, the centre is well positioned to trade successfully over the coming years.
2.2.5
FORECAST PERFORMANCE FOR YEAR ENDING AUGUST 2013
Table 2.3 outlines the forecast sales and rent performance for the retail mall at Paragon for the 12 months ending August 2013. In relation to these estimates we make the following comments: The NLA of 483,690 sq ft represents a small increase over the previous years retail mall NLA of 475,078 sq ft. This is in accordance with floorspace estimates provided by the Manager. Total sales have been estimated at S$ 753 million by Urbis representing a 2% increase over the previous calendar year figure of S$ 738 million. Forecast gross rent at S$ 118.0 million or S$ 20.30 per sq ft per month takes into account base rent, estimated turnover rent plus service charges and the promotional and advertising levy. Again this information has been provided by the Manager.
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It is clear from the centres performance metrics that Paragon is a high performing retail mall in terms of sales density and average gross rents. The average occupancy cost ratio (OCR), calculated as the ratio of gross rental to sales, is 15.7% and from our knowledge of other centres elsewhere in Singapore and Orchard Road, is considered reasonable for a centre of this type with its heavy emphasis on luxury. The average gross rental is forecast at S$ 20.30 per sq ft per month with the rentals varying considerably between the different categories with the lowest rentals being the department stores and supermarket averaging around S$ 7 per sq ft per month but with the luxury brands, jewellery and watches stores averaging nearly S$ 49 per sq ft per month.
Forecast Turnover & Rent Performance

PARAGON, FINANCIAL FY 2013
FY 2013 Paragon Mall Retail Mall NLA (sq ft) Estimated Total Sales (S$ Mill.) Sales Density (S$/sq ft/month) Forecast Gross Rentals2 - Retail Mall S$ Mill. S$/sq ft/month Occupancy Cost Ratio (%) Medical Suite/Office Medical Suite/Office NLA (sq ft) Forecast Base Rentals - Medical Suite/Office S$ Mill. S$/sq ft/month Total Paragon Total Paragon NLA (sq ft) Forecast Gross Rentals2 - Total Paragon S$ Mill. S$/sq ft/month
(1) Includes base rent only. (2) Includes base rent, turnover rent, service charge and permit levy. Source: The Manager
1
TABLE 2.3
483,690 753 129.7 118.0 20.3 15.7% 223,000 26.0 9.7 706,690 150.4 17.7
2.2.6
CENTRE MANAGEMENT & MARKETING
From our inspection of the property, it appears that Paragon is well managed, with the state of cleanliness throughout the centre being of a high order. There is also a very strong and prominent concierge provided on the ground floor in the Podium 1 atrium. The open ground floor atrium space in both Podium 1 and Podium 2 also provides the opportunity to have performing musicians as well as certain promotions from time to time.
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The promotions undertaken by Paragon for 2012 included the following:

PROMOTION Chinese New Year Spring/Summer Mothers Day Great Singapore Sale National Day Lifestyle Promo (Sports & Home) Formula 1 Fall/Winter Christmas Music en Vogue DATES 6 24 January 15 May 8 April 27 April 13 May 25 May 24 June 27 July 12 August 3 26 August 17 23 September 27 September 14 October 9 November 25 December Whole Year TYPE Promotions, Dcor Promotions, Stage, Fashion Shows Promotions, Flower Display Promotions, VM Displays Promotions, Performances Promotions, VM Displays Promotions, Luxury car Tie-Ups Promotions, Stage, Fashion Shows Promotions, Dcor Daily Lunch Music Performances
In order to attract repeat business, Paragon and Citibank entered into a joint venture with a loyalty card by way of the Citibank Paragon World Mastercard. This was launched in November 2005 and has been highly successful. There are now some 42,900 card members. Entitlements for members include the following: 10% rebate in Style dollar vouchers at 119 participating stores in Paragon. 3% rebate at Paragon Market Place. Free coffee, 2 hours parking with S$ 100 charged to the card. Premium tier S$ 500 Paragon shopping vouchers, 52 x 3 hour parking coupons, VIP ladies toilet.
2.2.7
CAPITAL EXPENDITURE
As previously mentioned, Paragon has been adapted and changed over the years to meet changing market circumstances, as well as to make sure the centre remains fresh and relevant from the point of view of dcor and tenant mix. Following the S$ 82 million faade enhancement project and the addition of the three-storey tower atop Podium 2, carried out in FY2008 and FY2009, there has not been any other significant enhancement works undertaken at the centre. This is not surprising, given the extent of the works completed in 2009. We understand there are no enhancement works planned by the Manager at this stage for the centre that will require capital expenditure. As with any major retail mall however, it is prudent to make an ongoing allowance for capital expenditure associated with the centre and normally the equivalent annual allowance is around 2.5%-3.0% of total operating income.
2.3
CUSTOMER PROFILE
The most recent customer survey undertaken at Paragon was in 2009 and this was by the market research company, Acorn. Whilst slightly dated, the Acorn survey results are still helpful in understanding the customer profile.
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The key results from this survey are now summarised: The male/female split is 49%/51% Most customers are above 35 years old. This result is unsurprising it is apparent that Paragon appeals to a more mature and wealthier age group rather than teenagers and young adults who tend to prefer some of the other centres such as ION Orchard, Wisma Atria and 313@Somerset. The average income is typically above S$ 70,000. This was considerably higher than the average full time wage in Singapore (S$ 50,018) for the same year. Main customer segments include an aspirational, upper income demographic with a global shopping focus (often from Indonesia), and patients and accompanying relatives from Mount Elizabeth Hospital, Mount Elizabeth Medical Centre and Paragon Medical. The main features of Paragon that customers like include: Spacious car park with free valet services, high quality restrooms and a well-trained concierge staff. Ambiance (high end but relaxed atmosphere). The tenant mix. The easy to navigate layout. The uncrowded and uncluttered nature of the centre. The fact that the customer base tends to be higher income. There are cafes on every floor. There is music in the atrium space which provides background entertainment similar to that provided in the lobbies of 5 and 6 star hotels.
2.4
RETAIL COMPETITION
The trading performance of Paragon as a retail mall is influenced by competition from other major malls or retail clusters in Singapore. Singaporeans and tourists face multiple choices when deciding where to spend their shopping dollars. The majority of Paragons competition is expected to come from competing malls located within the Orchard Road district but with some limited competition also provided from other centres located elsewhere within the Central Region such as Raffles City, Suntec City Mall and the Shoppes at Marina Bay as well as from some of the other larger retail malls in the suburbs. Paragon is excellently located within Singapores premier shopping destination (Orchard Road), has a unique market positioning and is highly accessible by MRT, bus and car, taxi, and for hotel guests, the free shuttle bus service. Moreover, Paragon has a distinct market positioning that effectively limits its competition. The particular attributes and unique selling points the centre offers include: 1. 2. 3. 4. The integrated offering of luxury brands, diffusion brands, F&B, childrens stores and quality medical services, catering to the affluent shopper. The distinct ambiance of the centre which includes its elegance, spaciousness and timelessness. Located immediately adjacent to Mount Elizabeth Hospital and Mount Elizabeth Medical Centre. The very strong luxury flagship store offering fronting onto Orchard Road.
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5. 6. 7.
The Metro department store, being the largest Metro store in Singapore and the only one in the Central Area. The very strong (Paragon Junior) childrens offer on Level 5. The two well-known Chinese fine dining restaurants on Level 5.
An extensive list of competitors to Paragon is contained within Appendix B1. The retail centres are categorised by their straight line distance from Paragon and their location as defined by trade area sector. The most relevant trade area sector to Paragon is the Central Core (refer Map 2.5). The strongest competitors to Paragon are: Ngee Ann City is a high-end luxury mall anchored by a Takashimaya department store. Some of the luxury brands located within Paragon are also located in Takashimaya but in general they tend to be much smaller stores within Ngee Ann City. ION Orchard, a recently opened centre catering for the middle and luxury markets and located above the very busy Orchard MRT station. This centre has a substantial luxury offer on the ground floor with some of the stores having direct external frontage, such as Louis Vuitton and Chanel. RETAIL COMPETITION ORCHARD ROAD MAP 2.5
Paragon has two distinct advantages over ION Orchard in relation to upmarket or luxury shopping: 1. 2. Paragons layout is far simpler and more legible and the overall ambiance is more relaxed and elegant. Paragon is substantially less crowded than ION Orchard, which may attract many luxury shoppers to Paragon.
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After Ngee Ann City and ION Orchard the two other most relevant competitive centres to Paragon are Mandarin Gallery and Scotts Square, both of which are upscale specialist centres. In both cases however, these centres are far smaller than Paragon (130,000 sq ft and 80,000 sq ft respectively) and therefore of lesser relevance. Most of the other centres in Orchard Road are pitched more towards the mid-market or value end or to younger fashion and are only partly competitive and basically serve a different market. In terms of department store competition in Orchard Road, Robinsons and Tangs are direct competitors to Metro (Robinsons and Tangs are significantly larger than Metro), as is Isetan at the Shaw Centre and Wisma Atria. Takashimaya tends to pitch itself slightly more upmarket than Metro and some of the concessions and brands within Takashimaya are competitive. The main supermarket competitor to Paragon Market Place comes from Cold Storage at Ngee Ann City and The Centrepoint. There is also a recently opened FairPrice Finest at Scotts Square. Outside Orchard Road the other main locations for luxury retail in Singapore include the Shoppes at Marina Bay Sands; the luxury Fashion Galleria at Resorts World Sentosa; the retail associated with Raffles Hotel and the retail provided airside at Changi Airport. The retail provision at Marina Bay Sands provided in the Shoppes at Marina Bay Sands complex totals in excess of 600,000 sq ft NLA and with a very extensive luxury offer including flagship stores, most of which are also at Paragon. Similarly at Resorts World Sentosa the luxury fashion galleria has some 30,000 sq ft of luxury retail space, but as with the Shoppes at Marina Bay Sands, it is primarily aimed at tourists rather than local residents, particularly those tourists staying at the respective hotels at these venues. They therefore only provide limited competition to Paragon. The luxury offer at Raffles Hotel is relatively small and is unable to match Paragon whereas the offer at Changi Airport is obviously more comprehensive but again is relatively limited due to the small store sizes and with the target market mainly being tourists departing the country. The most significant childrens fashion and toys offer to Paragon comes from Plaza Singapura, which is much more of a mass market offer and with a greater concentration on toys rather than fashion. Most of the childrens competition comes from suburban malls such as VivoCity, Nex and Jurong Point which have much more of a suburban family orientation.
PICTURE 11 NGEE ANN CITY
PICTURE 12 ION ORCHARD
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PICTURE 13 MANDARIN GALLERY
PICTURE 14 SCOTTS SQUARE
PICTURE 15 WISMA ATRIA
PICTURE 16 SHAW HOUSE
2.4.1
FUTURE RETAIL PROJECTS OF RELEVANCE
Appendix B2 details the proposed new retail centres expected to be completed over the next four years. The most relevant centres to Paragon are those located on Orchard Road: 268 Orchard Road. This project is 100 metres to the immediate east of Paragon between The Knightsbridge building and The Heeren refurbishment. The project is currently under construction on a site that was formerly occupied by the Yen San Building. The completed development will comprise 12 above ground levels and one basement level, and will have the overall appearance of a glass box. Total anticipated retail NLA for 268 Orchard Road is 95,900 sq ft over several levels. The tenant mix proposed for this centre at this stage is unknown and the anticipated completion/opening date is 2014. The developer of this project is RE Properties. Orchard Gateway. This is a complex development which comprises two properties 218 Orchard Road (formerly Orchard Emerald) and 277 Orchard Road (formerly the Specialist Shopping Centre and Phoenix Hotel). The two properties are being jointly developed by OCBC, United Engineers and Great Eastern. The two properties are on either side of Orchard Road. The development will have separate buildings on either side of Orchard Road linked by the only overhead bridge on Orchard Road at Level 2, and an underground connection in Basement 2. The 277 Orchard Road property will be redeveloped to include a 500 room Traders Hotel together with six levels of retail space comprising two basements and four above ground levels, with a total NLA of 113,300 sq ft. It will include a new community library on Levels 3 and 4, which will be relocated from its previous location in Ngee Ann City.
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On the other side of Orchard Road, the 218 Orchard Road property will be redeveloped to include two basements and four upper levels of retail (27,900 sq ft) together with 37,353 sq ft of office space in a tower above. Savills are the leasing agent for Orchard Gateway and they have indicated that approximately half the retail space has been leased, including leasings to Crate & Barrel, Religion, Swatch and Nike. The project is expected to be completed in 2014 and will primarily be fashion oriented but will also have a comprehensive F&B offering. The Heeren refurbishment. At present there is a major refurbishment and upgrade occurring at The Heeren which is next to 268 Orchard Road and on the corner of Orchard Road and Cairnhill Road. On completion The Heeren will comprise some 165,100 sq ft NLA of retail floorspace, anchored by a 150,000 sq ft Robinsons department store which will relocate from its existing location at The Centrepoint. The expected completion date for The Heeren refurbishment is late 2013 but we understand that Robinsons will continue to trade at The Centrepoint as well as The Heeren up until the expiry of their lease at The Centrepoint at the end of 2014.
Other projects coming on-stream over the next few years but which are expected to provide only limited competition to Paragon, given their distance and market positioning, include: A refurbishment and expansion to Suntec City Mall (187,000 sq ft NLA in 2014). The opening of two regional malls at Jurong East including Lend Leases Jem at 560,000 sq ft NLA opening in 2013 and CapitaLands Westgate (420,000 sq ft NLA) one year later in 2014. Both of these centres will be anchored by a department store and will be of a considerably higher standard than the current offer available in that area of Singapore. Another smaller development of relevance within the Central Core area but not of a large scale will be the retail component of the South Beach project near Raffles City. This will comprise some 83,400 sq ft of leasable retail space in addition to the other components of the project, which include 190 apartments, 650 hotel rooms and 527,000 sq ft NLA of office space. It is expected that the retail offer in this project will be of an upscale nature given the positioning of the overall project but will also have a very strong emphasis on F&B. The development will have a unique offering due to the very spacious and enclosed garden-like setting stretching over the site.
Over time, it is anticipated that the URA will release other retail sites for development, in particular, to match population growth in the outer areas. There will also be other sites released from time to time which are more of a mixed use nature but on which a significant retail component can be built. As noted earlier however, Singapore is quite different to many other markets to the extent that retail supply is tight and restricted due to planning controls. This in turn provides operators and investors with a degree of certainty and protection from future competition.
2.4.2
SUPPLY FORECASTS
There is expected to be a moderate increase in supply over the next four years in Singapore (averaging around 900,000 sq ft NLA of new shopping centre space per annum), with the overall retail floorspace per capita provision remaining basically stable at close to 11 sq ft per person. Within Orchard Road there is some retail development activity, particularly in the Somerset area close to Paragon, which will result in there being an additional 405,000 sq ft being completed over the next two years. This represents a 6% increase in total retail stock for Orchard Road. The addition of the three aforementioned new centres on Orchard Road including the Robinsons store, together with the new above ground and below ground connections across Orchard Road, will strengthen this particular part of Orchard Road as a retail destination, and Paragon should benefit from the additional foot traffic coming into the area. At the same time, however, there will be additional competition to Paragon including direct competition from Robinsons for Metro. As a consequence, it is important for Paragon to continue to remain fresh and to build on its strengths, including its point of difference from the other centres.
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2.5
2.5.1
TRADE AREA ANALYSIS & SPENDING FORECASTS

RELEVANT MARKET SEGMENTS
The most relevant market segments for Paragon include: Residents from the defined trade area. Workers in the nearby office buildings, retail centres, hotels and hospital in Orchard Road. Tourists including those staying in hotels in Orchard Road as well as other visitors to Singapore. Visitors to Paragon Medical and their family and friends, a significant proportion of whom are from overseas.
Each of these markets has different income and spending characteristics, and these are discussed in more detail below.
2.5.2
RESIDENT TRADE AREA DEFINITION
The trade area for a shopping centre is dependent upon a number of factors including: Strength, range and appeal of goods and services offered by the centre. The proximity, composition and strength of competitive centres. The level of accessibility by road and public transport. Physical barriers such as rivers, mountain ranges, freeways and railways which impede direct access to the centre.
In addition to the 2009 shopper survey by Acorn, we have undertaken surveys for other centres in the Orchard Road area and from this it is apparent that the Orchard Road shopping centres such as Paragon draw customers from all over Singapore. This is due to the CBD location, the very extensive retail offer being the largest in Singapore, and Singapores excellent public transportation system, which makes Orchard Road highly accessible. Map 2.6 displays the defined trade area for Paragon and includes a number of different sectors: The Central Core encompasses Singapores CBD and surrounding area. It covers the whole of the Central Area as defined by the URA Master Plan 2008. Orchard Road and Paragon are included in the Central Core. The Central West sector is the western part of Singapores Central Region, made up of CBD fringe suburbs. It comprises the Planning Zones of Bukit Timah, Queenstown, Tanglin, Bukit Merah and Novena. The Central East sector is the eastern half of Singapores CBD fringe. It includes Bishan, Toa Payah, Kallang, Geylang and Marine Parade Planning Zones. The Outer West is the entirety of Singapores west region. It comprises the Planning Zones of Boon Lay, Bukit Batok, Bukit Panjang, Choa Chu Kang, Clementi, Jurong East, Jurong West, Pioneer and Tuas. The Outer North sector comprises Singapores north region and contains the Planning Zones of Lim Chu Kang, Mandai, Sembawang, Simpang, Sungei Kdut, Woodlands and Yishun. The Outer North-East sector is made up of the Planning Zones of Ang Mo Kio, Hougang, Punggol, Seletar, Sengkang and Serangoon.
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The Outer East sector comprises the Bedok, Changi, Pasir Ris, Paya Lebar and Tampines Planning Zones. Islands and Others covers all other areas of Singapore, including Sentosa Island. PARAGON TRADE AREA MAP 2.6
2.5.3
RESIDENT TRADE AREA DEMOGRAPHICS
Table 2.6 summarises the demographics of the trade area population by sector in 2010. In relation to these demographics, they only apply to the resident population as the Census specifically excludes nonresidents. While all of Singapore is of relevance to Paragon, the Central Region is clearly its most important sector. The key points to note when comparing the Central Region with elsewhere in Singapore are as follows: The age profile for the Central Region tends to be older than for the balance of Singapore, particularly in the Central Core. The household size is smaller again for the Central Region and Central Core and this particularly relates to the housing type and the higher incidence of private housing in this area as compared with Singapore as a whole. Average incomes are considerably higher in the Central Region, particularly in the Central Core.
In summary, for the Central Region, which is the most important sector for Paragon, the population tends to be slightly older and wealthier, and there is a much higher incidence of private housing.
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Trade Area Demographics

PARAGON TRADE AREA, 2010
Trade Area Sector Central Region Central Core Central West Central East Total Central Region Outer Singapore Total Singapore
Source : Census of Population 2010; Urbis.
TABLE 2.4
Average Household Size 2.7 3.1 3.2 3.1 3.6 3.5 Condos/Private Flats (% Total Buildings) 33.4% 18.2% 12.2% 16.0% 7.7% 9.8% Monthly Income Per Person (S$) 2,520 2,416 2,120 2,267 2,006 2,070
Median Age 42.1 40.7 40.3 40.6 36.4 37.4
2.5.4
RESIDENT TRADE AREA POPULATION FORECASTS
For 2013, the estimated total resident population for Singapore, including permanent residents as well as temporary residents, is 5.37 million with permanent residents accounting for 3.9 million. The relevant region for Paragon, the Central Region, accounts for 1.55 million, or 29% of the total population. Population forecasts for the various sectors within the trade area are outlined in Table 2.5. For Singapore as a whole, Urbis estimates the population will grow from 5.37 million in 2013 to 5.82 million by 2018, growing on average by 1.6%, or 89,500 people per year. For the Central Region, population growth is expected to be slightly higher at 2.1% with the population growing from 1.55 million, in 2013 to 1.66 million in 2018. For the Central Core alone population growth is forecast to average 1.7% or 3,600 persons per annum.
Trade Area Population

PARAGON TRADE AREA, 2012 - 2018
Trade Area Sector Central Region Central Core Central West Central East Total Central Region Outer West North North-East East Islands and Others Total Outer Total Trade Area
Source: Urbis
TABLE 2.5
Average Annual Growth Rate 2013-2018 (%) No. ('000) 1.7% 1.4% 1.3% 1.4% 1.4% 2.0% 2.1% 1.4% 2.5% 1.7% 1.6% 3.6 9.9 9.1 22.6 18.1 13.5 19.8 13.4 2.1 66.8 89.5
2012 202 660 649 1,511 1,257 639 871 894 75 3,737 5,248
Population ('000) 2013 207 678 660 1,545 1,282 653 900 910 79 3,824 5,368
2018 225 728 705 1,658 1,372 721 999 977 89 4,158 5,816
2.5.5
TRADE AREA RETAIL SPENDING FORECASTS
For 2013 the average retail spending per capita in Singapore is estimated at S$ 6,567. This figure is derived by taking the total value of retail sales in Singapore, subtracting an allowance for spending by tourists and businesses, and dividing by the total population. The figure is benchmarked against the household expenditure survey (HES), the latest available being in 2007/08.
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The forecast growth in average retail spend per capita is determined by the outlook for the economy, as discussed in Section 1. In particular, the forecasts for PCE, inflation, population, tourism and the historic relationship with retail sales growth are used in estimating future growth in spending. Official statistics allow us to determine retail spending levels at the trade area sector level. The 2010 Census of Population reported household incomes by Planning Zone across Singapore. Using these income variations, we then use international benchmarks to estimate the variation in retail spend by capita per Planning Zone. The estimated 2013 retail spending per capita in the Central Region is estimated at S$ 7,374, around 12.2% above the Singapore average (refer Table 2.6). The highest spending sector in the Central Region is the Central Core, which has an estimated retail spending per capita some 30.2% above the Singapore average. The lowest in the region is the Central East, which has a retail spending per capita almost equal to the Singapore average. By 2018, the average retail spending per capita for the trade area is expected to grow to S$ 7,586 at an average growth rate of 2.9%. This figure is nominal, which means the growth rate includes retail inflation (assumed at 1.3% per annum) and assumed real growth in retail spending per capita (1.2% per annum).
Trade Area Retail Spend Per Capita1

PARAGON, 2012 - 2018 TABLE 2.6
Variation from Singapore Average 2013 (%) 30.2% 18.2% 0.6% 12.2% -8.9% -14.9% -1.8% 0.2% 45.1% -5.0% 0.0%
Per Capita Retail Spending (S$) 2012 2013 2018 8,495 7,710 6,560 7,321 5,946 5,554 6,404 6,534 9,468 6,197 6,521 8,552 7,763 6,605 7,374 5,986 5,592 6,447 6,579 9,532 6,242 6,567 9,879 8,967 7,630 8,522 6,915 6,460 7,447 7,599 11,012 7,213 7,586
Average Annual
Growth Rate (%) 2013-2018 2.9% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9%
1. Includes assumed average Retail Price Inflation of 1.3% p.a. between 2012 and 2018. Source: Household Income & Expenditure Survey 2007/08; Singstat; Urbis.
The total retail spending market for the trade area is outlined in Table 2.7, with the market calculated by multiplying the estimated population with the forecast retail spending per capita level. For Singapore as a whole, which is the total trade area for Paragon, the market is forecast to grow in nominal terms from S$ 35.3 billion in 2013 to S$ 44.1 billion in 2018, which represents average annual growth of 4.6% per annum. Considering the Central Region, the size of the market in 2013 is estimated at S$ 11.1 billion increasing to S$ 14.1 billion by 2018, with average nominal growth of 4.4% per annum.
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Trade Area Retail Spending Forecasts1

PARAGON TRADE AREA, 2012 - 2018
Total Market Retail Spending (S$ Mil.) 2012 2013 1,712 5,090 4,260 11,062 7,473 3,552 5,579 5,844 709 23,157 34,219 1,770 5,262 4,357 11,390 7,672 3,654 5,805 5,984 753 23,867 35,257
TABLE 2.7
Average Annual
2018 2,222 6,525 5,380 14,127 9,488 4,655 7,442 7,422 985 29,992 44,120 Growth Rate (%) 2013-2018 4.7% 4.4% 4.3% 4.4% 4.3% 5.0% 5.1% 4.4% 5.5% 4.7% 4.6%
1. Includes assumed average Retail Price Inflation of 1.3% p.a. between 2012 and 2018. Source: Household Income & Expenditure Survey 2007/08; Singstat; Urbis.
2.5.6
ORCHARD ROAD HOTEL GUEST SPENDING MARKET
Tourists form an important market segment for most of the retail malls on Orchard Road, including Paragon. Accordingly, we have estimated the size of this key spending market. For Paragon, we have broken this down into two different components. Firstly, those tourists staying in Orchard Road hotels and serviced apartments and, secondly, all other tourists to Singapore. Medical tourists are an important sub-group of the total tourist market. Often, such visitors are coming specifically to Singapore for medical purposes. Medical tourists are an important market segment for Paragon in particular, given its very extensive medical services offer within Paragon Medical itself and also its adjacency to the Mount Elizabeth Hospital. Table 2.8 outlines our estimated retail spending market for the guests at Orchard Road hotels. We have assumed an average hotel room occupancy rate for 2013 of 87%, which is equivalent to the rate for 3-5 star hotels for Singapore as a whole. It has been assumed that this occupancy rate also applies to 2018. An allowance has been made for growth in the number of rooms based on known projects. There has also been an allowance for growth in retail spending, with the average retail spend per tourist increasing from S$ 153 in 2013 to S$ 169 by 2018. The size of the retail spending market generated by the Orchard Road hotel guests is estimated at S$ 670 million in 2013 and is expected to grow strongly over the next five years, reaching S$ 788 million in 2018. This represents only part of the overall tourist market, and we estimate there is another S$ 7.8 billion of tourist retail-related spending from other tourists to Singapore in 2013, increasing to S$ 10.8 billion by 2018.
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Estimated Hotel Guest Retail Spending

ORCHARD ROAD HOTELS & SERVICED APARTMENTS, FY2013-2018
Unit No. Rooms Availability Room Nights Double Occupancy Factor Expected Occupancy Hotel Guests Average Spend Per Day Food Average Spend Per Day Non-Food Total Spending Food Total Spending Non-Food Total Sales Potential
Source : Urbis
TABLE 2.8
2013 2018 11,322 4,132,530 1.30 87% 4,666,370 68 101 315.1 472.7 787.8
Rooms Room Nights Persons Per Room % Visitor Nights S$ S$ S$ (Mil.) S$ (Mil.) S$ (Mil.)
10,600 3,869,000 1.30 87% 4,368,797 61 92 267.9 401.8 669.7
2.5.7
THE WORKER SPENDING MARKET
For FY2013, it is estimated there are around 62,200 workers on Orchard Road, comprising 30,500 office workers, 2,100 hospital workers, 20,800 retail workers and nearly 7,000 hotel workers. The average retail spend per Orchard Road worker is estimated to be around S$ 14 per working day and we have assumed this is expected to increase by approximately 3% per annum over the 2013-2018 period. The total size of the worker spending market is detailed in Table 2.9 and this indicates a total spending market of around S$ 255 million in 2013, increasing to S$ 296 million by 2018.
Estimated Worker Retail Spending

PARAGON TRADE AREA, FY 2013 - 2018
2013 Total Workers (in persons) Office Workers Hospital Workers Retail Workers Hotel Workers Total Workers Average Spend Per Worker Per Day (S$/day) Food Non-Food Total Total Retail Spend (S$ Mil.) Food Non-Food Total
Source : Urbis
TABLE 2.9
2018 30,457 2,116 20,829 8,750 62,151
30,457 2,116 20,829 8,750 62,151
6 8 14
7 9 16
113 142 255
131 164 296
2.5.8
PARAGON SALES & SHOPPER DISTRIBUTION
Table 2.10 outlines Urbis estimates of the distribution of shoppers and sales for Paragon by market segment. It should be noted that these estimates are not based on the results from an exit survey at the centre but rather are based on the experience of Urbis in examining other retail centres in Singapore and the Orchard Road area together with its experience in other countries. The proportions allocated should therefore be seen as a guide only rather than an exact distribution.
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We would expect that tourists would account for around 35-45% of Paragons sales but only 20-25% of the shoppers. On the other hand, Central Region residents would account for some 30-40% of the shoppers but would have on average a lower average spend, thereby contributing around 23-31% of total sales. For the local Orchard Road worker market, we would expect this segment to contribute around 5-10% of shoppers but only 3-5% of total sales.
Urbis Estimate of Distribution of Shoppers & Sales

PARAGON, FY2013
Shoppers (%) 10-15% 20-25% 30-40% 30-40% 5-10% 20-25% 100% Paragon Sales (%) 6-10% 17-21% 23-31% 25-35% 3-5% 35-45% 100%
TABLE 2.10
Segment Trade Area Residents Central Core Central West & East Total Central Region Outer Singapore Local Workers International Tourists Total
Source: Urbis
2.5.9
EXISTING MARKET SHARES
Table 2.11 summarises our estimated market shares for Paragon for FY2013. The steps taken in order to calculate the shares are as follows: 1. 2. 3. The size of the spending market by market segment is outlined. The total sales for FY2013 for Paragon are distributed between the different market segments based on the Urbis estimated distribution previously outlined in Table 2.10. The amount of retail sales allocated to each market segment is then divided by the total available spending from each segment in order to calculate the market share from that segment.
For FY2013, Paragon achieved an estimated market share of 1.8% from the Central Region and 0.9% from the Outer Regions. Whilst these shares may seem low, the trade area is the entire country with a population of over 5 million residents. In this context, the shares being achieved by Paragon are as we would expect. The share of the Orchard Road worker market is 8.9%, and the share of the retail spending generated by tourists staying in Orchard Road hotels is around 7.9%. This is approximately in line with Paragons share of total retail floorspace on Orchard Road. The total contribution of tourists to Paragons sales, as previously outlined, are estimated to be 40% and as such they are a very important market segment for the centre. In the future we would expect the sales attributable to tourists to increase at Paragon, both in dollar terms but also as a proportion of sales. This is principally due to the fact that the tourist spending market is expected to grow at a faster rate than the resident spending market.
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Urbis Estimated Market Shares

PARAGON TRADE AREA, FY2013
Retail Trade Area Sector Central Region Central Core Central West Central East Total Central Region Outer Singapore Total Trade Area Local Workers* Tourists Staying in Orchard Road Hotel Other Total Tourists Total Retail Market
Source : Urbis
TABLE 2.11
Estimated Paragon Retail Sales (%) (S$ Mil.) 8.0% 11.0% 8.0% 27.0% 30.0% 57.0% 3.0% 7.0% 33.0% 40.0% 100.0% 60 83 60 203 226 429 23 53 248 301 753 Market Share 1 (%) 3.4% 1.6% 1.4% 1.8% 0.9% 1.2% 8.9% 7.9% 3.3% 3.7% 1.7%
Spending Market (S$ Mil.) 1,770 5,262 4,357 11,390 23,867 35,257 255 670 7,455 8,125 43,381
1. Market Shares for trade area residents excludes expenditure from Orchard Road workers.
2.6
SWOT ANALYSIS
Prior to assessing the future outlook for Paragon, it is helpful to draw on the previous discussions and summarise the key strengths, weaknesses, opportunities and threats facing Paragon.
2.6.1

STRENGTHS
Paragon is one of Singapores most popular and well known luxury retail malls and it has a strong brand. Paragon is well located in Singapores premier retail district, Orchard Road. Paragon is of a significant size (483,690 sq ft), which enables it to have an extensive retail offer and sufficient critical mass. Paragon enjoys an extended Orchard Road frontage of some 136 metres. With the completion of the recent faade enhancement works it has a very strong presence and has become one of Orchard Roads most distinctive landmark buildings. Paragon has a number of unique attractions and tenants which provide a point of difference and these include, amongst others, the Metro department store; the strong luxury offer including the luxury flagship stores fronting onto Orchard Road; the childrens zone (Paragon Junior) on Level 5 and a variety of dining options, including two fine dining restaurants. Paragon is more spacious and elegant than many of its competitors and is also of a very high quality, pitched deliberately at a high income customer base. Paragon is very well located to draw on the tourist population visiting Orchard Road, visitors to Paragon Medical Centre and other surrounding medical centres and their relatives, as well as a significant local office workforce population. The centre is well managed.
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The centre is well served by road networks, buses, taxis and the MRT at Orchard and at Somerset and has excellent drop off points for customers arriving at the centre. The centre also has a spacious car park which provides a convenient exit to Orchard Road and the CTE. Paragon is well balanced in terms of its mix between anchor and mini anchors versus specialty and is not overly dependent on specialty tenants as is the case with many other centres. Paragon has a variety of F&B options not only in the basement, but also on the other levels and on Level 5 with the fine dining restaurant options. The two atria are a key attraction of the centre. The Level 1 atrium space provides Paragon with the opportunity to hold art and music performances in this space. In other centres, such atrium space is often filled up and cluttered with kiosks and temporary pop-up tenancies. The centre has a significant medical offer not only within the mall itself on Level 6 but also on Levels 7 and 9 in Podium 2 as well as in Paragon Tower. This medical offering is one of the best in Singapore and the centre benefits from having this on-site with users of the medical facilities not only being local residents but also from other countries. There is certainly some flow-on shopping coming from the medical centre visitors and their families. The centre has good on-site car parking provision, which in turn is well connected into the retail mall.
2.6.2

WEAKNESSES
The basement does not have any direct connection to the MRT or any other shopping mall. The northern side of Orchard Road between Scotts Road and Bideford Road in which Paragon is located, differs from the southern side to the extent that it is not one ongoing continuous retail strip. Immediately adjacent to Paragon is an office building (the Tong Building) and next to that is Lucky Plaza, which is a strata titled retail centre attracting a different clientele. Whilst the layout of the centre works reasonably well, the weakest part of the centre is probably the mall linking Podium 1 with Podium 2, (the link between the two original shopping centres) Paragon and The Promenade).
2.6.3

OPPORTUNITIES
New high end residential developments in the Orchard Road area, including one immediately adjacent to Paragon, will increase the number of wealthy residents in the immediate area. Some underperforming tenants and the lease renewal cycle will provide an opportunity to introduce new, interesting and innovative retailers to the centre. Both tourism and medical tourism are forecast to grow relatively strongly over the next few years and Paragon is well positioned and located to take advantage of this growth. In the longer term there is the potential to possibly downsize the department store tenancy and replace some of the space occupied by Metro with higher yielding specialty shops or mini anchors. There are some other minor income enhancement opportunities within the centre, including greater utilisation of the atria. There is also potential to improve the connectivity between either side of the atria on the upper levels in Podium 1 by providing more bridge connections.
2.6.4

THREATS
Singapores economy is highly dependent on external conditions. Any significant negative shock to the global economy is likely to dampen economic growth in Singapore, including retail spending. Competition and supply in Orchard Road is forecast to continue to increase over the next two years with the completion of a number of new centres, such as Orchard Gateway. This will provide some additional competition.
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Any external event or circumstance that impacts tourism to Singapore will also have a flow-on impact on the Orchard Road malls including Paragon. Paragon is highly dependent on the contribution to its sales from tourists and therefore any change in the tourist market would be of relevance. Fortunately, however, whilst there have been some significant downturns in tourist visitation to Singapore in the past caused by external events such as SARS, Singapore has invariably bounced back relatively quickly and the negative impact has been short lived. Further competition along Orchard Road associated with the repositioning or redevelopment of certain centres. Ngee Ann City/Takashimaya would be one such candidate where there may be an opportunity in the future for a major upgrade to the centre which, in turn, would possibly enable it to take much greater advantage of its extensive Orchard Road frontage. This would provide Orchard Road frontage opportunities for retailers, some of whom would be attracted out of existing centres.
2.7
2.7.1
FUTURE SALES & RENTAL GROWTH

FUTURE OUTLOOK FOR PARAGON
In examining the future outlook for the retail mall at Paragon, there are both positive and negative factors that need to be taken into account:
POSITIVE FACTORS
Orchard Road will remain the premier shopping district for Singapore and will continue to benefit from strong growth in tourism. Whilst the completion of some new centres in close proximity to Paragon will increase competition (e.g. Orchard Gateway, 268 Orchard Road and The Heeren refurbishment), these new malls will reinforce the northern side of Orchard Road as a strong retail area. There will be ongoing population growth within the Central Core close by to Paragon, which will increase the walk-up population. Most of this new population will be high income and therefore potential customers for Paragon. Paragon has a distinctive market offering and following and it is spacious and well planned, all of which differentiates it from its competitors. Paragon will benefit from future growth and demand for medical facilities and services, given its extensive medical suite offer both within the centre itself but also within the Paragon Medical Centre tower. Paragon will benefit from ongoing promotional activities associated with Orchard Road, and further improvements that will be made over time. There is a very strong and active promotions and marketing group (The Orchard Road Business Association), and Paragon will continue to benefit from their efforts.
NEGATIVE FACTORS
Further competition will be provided to Paragon by 268 Orchard Road, Orchard Gateway and Robinsons at the refurbished The Heeren. Additional new competition may also come on-stream over time such as possible upgrade/refurbishment of Ngee Ann City/Takashimaya. Over time, Paragon will date and it is therefore important for the centre to be maintained and kept fresh both physically and from a tenant mix point of view. This programme will require ongoing capital expenditure. To date however, the centre has fared very well in this regard and has been able to adapt over time. Importantly, the major upgrade completed in 2009 means that the centre is in good condition and over the next few years is unlikely to be in need of any significant capital expenditure.
The above factors are taken into account when undertaking our assessment of the retail sales and rental income potential for Paragon Mall over the next five years through to 2018.
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2.7.2
RETAIL SALES POTENTIAL FY2018
The retail sales potential for Paragon in FY2018 has been estimated using a market share approach in Table 2.12 below. As the table shows, we expect the market shares from the Central Region to decrease slightly from 1.8% in FY2013 to 1.5% in FY2018. Similarly, the shares from Outer Singapore are expected to decrease from 0.95% to 0.93%. A decrease in market share is normal for an established centre where the market is growing and when competition is increasing. Market growth is project to outpace the loss in market share and retail turnover from the trade area is forecast to increase from S$ 433 million to S$ 497 million. The proportion of sales from tourists is forecast to remain relatively constant at around 40%. On the one hand, the tourism market is expected to grow faster than the domestic market, and Paragon is well placed to enjoy some of this growth, particularly the medical tourism related business. On the other hand, however, more centres within Singapore and in Orchard Road will be fighting for the tourist dollar and placing far more emphasis on tourists. As a consequence, we would expect the overall share of tourist business for Paragon to remain at the same level. In total, retail turnover for Paragon is forecast to increase from its estimated current level of S$ 760 million in FY2013 to S$ 872 million for FY2018, and this equates to average sales growth of 3.0% per annum over this five year period.
Forecast Sales Potential

PARAGON, 2018 (S$ MILLION NOMINAL)
Trade Area Sector Central Region Central Core Central West Central East Total Central Region Outer Singapore Total Trade Area Local Workers* Tourists Staying in Orchard Road Hotel Other Total Tourists Total Retail Market
Source : Urbis
TABLE 2.12
Forecast Market Share (%) 3.1% 1.5% 1.3% 1.5% 0.9% 1.1% 8.8% 7.7% 2.8% 3.1% 1.6% Paragon Retail Sales (S$ Mil.) 70 96 70 218 279 497 26 61 288 349 872
Retail Spending Market (S$ Mil.) 2,222 6,525 5,380 14,127 29,992 44,120 296 788 10,456 11,243 55,363
(%)
8.0% 11.0% 8.0% 25.0% 32.0% 57.0% 3.0% 7.0% 33.0% 40.0% 100.0%
1. Market Shares for trade area residents excludes expenditure from orchard road workers.
2.7.3
FUTURE RENTAL GROWTH
The OCR at Paragon is estimated at 15.7% in FY 2013. This is towards the higher end of the range typically seen for a centre with large anchor tenants. However, centres that trade at strong levels of retail productivity can generally sustain higher OCRs, and we expect that an OCR of 15.7% at Paragon is sustainable over the long term. We have estimated above that the centre should be able to increase its sales by around 3.0% per annum over the 2013-2018 period. It is usually challenging for rental growth to match sales growth and for Paragon we would expect growth in gross rental to average 2.5%-3.0% per annum over 2013-2018. Accordingly, the centres OCR is expected to remain in the 15.7%-16.1% range.
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3.1
Clementi Mall
OVERVIEW OF CENTRE
The Clementi Mall is an enclosed sub-regional shopping centre, servicing the inner western suburbs of Singapore around Clementi. The Clementi Malls major tenant is a FairPrice Finest supermarket and its mini anchors include a small BHG department store, a Popular book store and Best Denki (electronics).
3.1.1
LOCATION
The Clementi Mall is located in the Clementi district on Commonwealth Avenue West, one of the main secondary arterials that connect Queenstown to the east with Jurong in the west. It is located 7 km to the west of Orchard Road in the Clementi Town Centre, connected to the Clementi MRT station and adjacent to the Clementi bus interchange. It is also just a short drive from two major intersections for the Ayer Rajah Expressway, one of the two major arterials connecting western Singapore with the rest of the Island. REGIONAL CONTEXT MAP 3.1
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The centres immediate surrounds are a mix of private and HDB residential areas, as well as industrial estates along the waterfront to the south (refer Maps 3.1 and 3.2). LOCAL CONTEXT MAP 3.2
3.1.2
ACCESSIBILITY
The mall is highly accessibly via car, public transport and pedestrian links: Public Transport. The centre is excellently located immediately adjacent to the Clementi MRT station. A footbridge provides a direct link between the centre and the MRT station. Clementi MRT services the green East West line that links directly through to the centre of Singapore (Raffles Place and City Hall), and then onto Changi Airport/Pasir Ris in Singapores far east. Going in the other direction to the west, the East West Line passes through Jurong East (one stop) and ends up at Joo Koon, as shown in Map 3.3. The centre also contains the Clementi bus interchange which is accommodated on the ground floor of The Clementi Mall. The interchange has 14 bus lines which connect the Town Centre and MRT station with the suburbs. Car. Road access is relatively strong. The centre has frontage onto Commonwealth Ave, a major secondary arterial that traverses western Singapore. It is also only a few minutes drive from the AYE, one of western Singapores primary arterials. Pedestrian. The centre has good pedestrian access, an important feature for a centre that is highly reliant on its walk-up population. The centres location on a secondary arterial supports this accessibility as does its excellent connectivity with the Clementi Town Centre.
In general, the centre is extremely well located for a sub-regional centre. It also has a good walk-up population, who are drawn to the centre regularly due to its co-location with the MRT station and the bus interchange.
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SINGAPORE MRT NETWORK
MAP 3.3
3.1.3
TENANCY COMPOSITION
The Clementi Mall has a total NLA of 192,089 sq ft of lettable area. A total of 155,740 sq ft (or 81%) of the centre is classified as retail area. The remaining space is classified as non-retail and includes such uses as banks, education and a library. The tenancy composition of the centre is summarised in Table 3.1. The centre is anchored by a FairPrice Finest supermarket of around 21,000 sq ft in the basement and is supported by four mini anchors including: BHG Department Store of approximately 11,000 sq ft (Level 3). FoodFare food court of 10,000 sq ft (Level 4) Best Denki electronics of approximately 6,000 sq ft (Level 4). Popular book store of approximately 6,700 sq ft (Level 5).
It also has a 21,000 sq ft National Library on Level 5, which acts as a non-retail anchor. The key points about the current composition of The Clementi Mall include: At 192,089 sq ft, the centre is well sized to play a local convenience-based role in the retail hierarchy, and its tenant composition reflects this. A major component of the convenience focus is the supermarket, which acts as a solid anchor for the basement in particular, and brings in shoppers for the centres as a whole as well. The malls major and mini-major retail tenants make up 28.6% of NLA. These tenants are well distributed through the centre, helping to drive shopper traffic through the centre.
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Of the retail specialty shops, F&B is an important category accounting for 50,704 sq ft or 26.4% of the total NLA. These tenants are distributed relatively evenly throughout the centre. The other major category of retail specialty shops is apparel (including jewellery and fashion accessories). This category occupies 30,070 sq ft, with the main concentration of tenants on Level 3. The centre has a family focussed mid-market positioning, with a diverse tenant mix including: Apparel tenants include Bata, Bossini, Cache Cache, Charles & Keith, Cotton On, G2000 Men and Giordano. F&B tenants included a range of local operators (including the food court), as well as a range of international operators (Subway, McDonalds, KFC, Burger King, Ajisen Ramen, Starbucks and Ootoya Japanese Restaurant). Other better well-known brands include GNC Live Well, The Body Shop, Giordano and Watsons.
The tenant mix supports the malls mid-market position, making it a popular destination for catchment residents for day-to-day shopping, dining and entertainment. The Clementi Malls co-location with the MRT station and bus interchange further strengthen this market positioning these public transport interchanges generate high volumes of local traffic which typically has a need for higher volume, and lower price products and services. This is particularly the case for the large numbers of students who pass through the centre on their way to the various educational institutions in the area.
Tenancy Composition
THE CLEMENTI MALL, AS AT FEBRUARY 2013
NLA Dept Stores & Supermarkets Fashion & Accessories F&B Lifestyle Total Retail Non-Retail Total Centre
Source: The Manager; Urbis.
TABLE 3.1
(sq.ft) 32,927 30,070 50,704 50,177 163,878 28,211 192,089 % 17.1% 15.7% 26.4% 26.1% 85.3% 14.7% 100.0%
The theming of the centre by level, is as follows:

LEVEL Basement 2 Basement 1 Level 1 Level 2 Level 3 Level 4 Level 5 THEME Carpark Convenience, retail services, F&B Shared with the bus interchange Bus interchange Fashion & Accessories, F&B Food Court, sports & lifestyle, entertainment, electronics Library, education, services, childrens clothes and toys BHG, Bossini, G2000, Giordano, Starbucks, The Body Shop FoodFare food court, Baskin Robbins, Challenger, Best Denki Clementi Public Library, Popular Bookstore FairPrice Finest Supermarket, fast food Mix of minor tenants MAJOR TENANTS
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3.1.4
LEASE EXPIRY PROFILE
The Clementi Mall has a fairly concentrated lease expiry profile with 68.1% of NLA up for renewal in FY2014. This provides the centre with the potential to review and improve the tenant mix where necessary. The proportion of leasable space within the retail mall that is coming up for renewal is shown in The proportion of leasable space within the retail mall that is coming up for renewal is shown in Chart 3.1.
Lease Expiry Profile

THE CLEMENTI MALL, NLA SQ FT, FINANCIAL YEARS
80% 70% 60% 50% 40% 30% 20% 10% 0% 2013
CHART 3.1
68.1%
22.1% 6.7%
0.4% 2014
2.7% 2015
2016
2017+
3.1.5
CAR PARKING
The Clementi Mall provides car parking in its Basement 2 level. It contains 169 car spaces and 83 motorbike spaces. 169 car spares represents an average provision of 0.88 spaces per 1,000 sq ft of NLA. Whilst this is not a high provision, such a provision is not uncommon in Singapore, particularly for centres with such strong public transport links.
3.1.6
DESIGN & LAYOUT
The Clementi Mall has a unique design and layout as a result of providing the bus interchange within the centre. However, the benefits of being so well integrated with public transport go a long way to offsetting issues caused by this layout. The physical distribution of retail floorspace is not typical for such a centre. Basement 1, Level 3, Level 4 and Level 5 are all full levels. However Level 1 (at grade) only provides for seven stores, with the remainder of the level taken up by the bus interchange. This level is a walk through from the outside at ground level to the centre proper (Level 3 or Basement). Level 2 is in practical terms non-existent in terms of retail as this entire level is also taken up by the bus interchange. Importantly, Level 3 connects directly via a pedestrian skybridge over Commonwealth Avenue West into the Clementi MRT station thereby making this a very strong retail level even though it is two levels above ground. The distribution of anchors is draws people through the centre. The supermarket in the basement creates a solid base for a strong convenience offer, while each of the upper levels also have a higher order anchor. However, the anchors are not large and therefore the centre is also reliant on having a good suite of specialty shop brands to contribute to its overall attractiveness and ability to draw patronage from throughout the trade area. The layout plans for The Clementi Mall can be found in Appendix C. Overall the centre is of a good quality and appropriate for its market positioning. The dcor is colourful and cheerful. Some photographs of the centre are included in Pictures 15 to 23. And the Level 3 layout is shown in Figure 3.1.
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CENTRE LAYOUT BASEMENT
FIGURE 3.1
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PICTURE 17 FACADE
PICTURE 18 WALKWAY TO MRT
PICTURE 19 INTERNAL MALL (LEVEL 3)
PICTURE 20 LIBRARY
PICTURE 21 ENTRANCE TO BUS INTERCHANGE
PICTURE 22 BUS INTERCHANGE
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PICTURE 23 FOODFARE
PICTURE 24 BASEMENT MALL
PICTURE 25 CLEMENTI TOWN CENTRE
PICTURE 26 INTERNAL MALL (LEVEL 4)
3.1.7
ASSET ENHANCEMENT POTENTIAL
The Clementi Mall has only been open for some 15 months and is still going through its establishment phase. Accordingly, there are a number of areas which we believe present opportunities to enhance the performance of this centre. Suggested enhancements include the following: Continue to optimise the tenant mix, an important process that is required in all centres (particularly new centres). Possibly expand and improve the food court, and improve the overall F&B offering. Try to attract some stronger retail anchors, such as some fast fashion brands. With the introduction of major new competition at Jurong East, consideration should be given to upgrading the presentation of the centre over the next few years to ensure the centre remains updated and relevant to its market. A targeted advertising and promotions (A&P) program to improve the conversion of pedestrian flow to retail sales.
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3.2
TRADING PERFORMANCE METRICS
The following provides a high level summary of the financial performance of The Clementi Mall based on the material Urbis has been provided.
3.2.1
PEDESTRIAN FOOTFALL
In CY 2012, The Clementi Mall had 27.1 million visitors. This is a very high level of visitation for a centre of this size, reflecting the number of people who go through the centre on their way to and from the MRT station or the bus interchange. Average daily visitation is reasonably stable throughout the week as shown in , with only a small difference between the quietest day (Sunday) and the busiest days (Friday and Saturday).
Average Daily Pedestrian Footfall

THE CLEMENTI MALL, CY2012
84,000 83,000 82,000 81,000 80,000 79,000 78,000 77,000 76,000 Monday
CHART 3.2
83,331 14.7% 83,322 14.7%
80,516 14.2% 79,082 14.0%
80,772 14.3%
80,271 14.2% 78,474 13.9%
Tuesday
Wednesday
Thursday
Friday
Saturday
Sunday
3.2.2
HISTORIC SALES & RENTAL PERFORMANCE
The Clementi Mall was opened in two phases. Phase 1 included the Basement, Levels 1 and 2, and was opened in January 2011, while Phase 2 including Levels 3, 4 and 5, opened some two months later on 25 March 2011. Therefore the first full year of trading was 2012, and total centre sales for 2012 amounted to approximately S$ 228 million. This is an impressive performance for a centre of this size, particularly given the fact that it had only opened some 7-9 months earlier. Table 3.2 outlines the forecast sales and rent performance for The Clementi Mall for the 12 months year to August 2013. In relation to the performance of the centre we make the following comments: Urbis estimates total sales for the centre in FY 2013 of approximately S$ 238 million, representing growth of 4.4%. Sales growth at the mall over this period is expected to be higher than average market growth (2.9%), mainly due to the establishment effect that is likely to be continuing as the centre becomes more established in its market. Forecast gross rent of S$ 15.5 per sq ft per month takes into account base rent, estimated turnover rent, service charges and the promotional/advertising levy. This is as provided by the Manager.
It appears from the above that The Clementi Mall is trading at healthy levels. An overall centre average trading level of S$ 121.2 per sq ft per month (excluding non-turnover producing tenants such as the library) is a very impressive outcome. All of this is supported by the rents that are being achieved. Across the centre, an average gross rent of S$ 15.5 per sq ft per month is a good outcome, although this is partly attributable to the limited provision of anchor tenants. The overall centre OCR is 15.0% which, based on our experience with other centres, is sustainable over the medium/long term.
F-71
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Centre Performance by Tenant Category

THE CLEMENTI MALL, FY 2013
NLA (sq ft) 32,927 30,070 50,704 50,177 163,878 28,211 192,089 Sales 1 (S$ m) S$/sq ft 40.5 102.6 50.0 138.5 79.6 130.8 42.2 70.0 238 121.2 26.0 238 103.4 OCR (%) 7% 19% 15% 19% 13.5% 15.0%
1
TABLE 3.2
Gross Rent 2 (S$ m) 2,635,171.1 9,492,414.7 11,937,574.6 8,011,455.9 32,076,616.3 3.5 35.8
Dept Stores & S'markets Fashion & Accessories F&B Lifestyle Total Retail Non-Retail Total Centre
S$/ sq ft 6.7 26.3 19.6 13.3 16.3 .0 15.5
1. Urbis estimates. 2. Gross Rent including base rent, turnover rent and service charges. Source: The Manager; Urbis.
3.2.3
FACTORS INFLUENCING PERFORMANCE TO DATE
To date, the centre has benefited greatly from only having limited competition in the trade area with West Coast Plaza being the only centre of a similar scale. This lack of strong competition has allowed it to establish a firm and dominant position within the catchment. The other major factor supporting The Clementi Malls performance has been its co-location with both The Clementi MRT station and bus interchange. We have noted above the fact that the bus interchange has resulted in a unique layout. However, the bus station coupled with the MRT station, attracts large numbers of people to the centre, making it a highly convenient shopping option for local residents and others passing through on their way to work, school or university.
3.2.4
CENTRE MANAGEMENT & MARKETING
From our inspection, The Clementi Mall presents well as a mass-market, mid-level shopping centre and it also appears well maintained. One of the centres major issues in terms of centre management is the volume of footfall. As already noted, The Clementi Mall is attracting around 27 million visitors a year, a very high number for a centre of this size. This reflects its integration with the public transport hub. While this provides a great opportunity, it also means that the level of wear and tear is likely to be higher. The promotions undertaken by The Clementi Mall for CY2012 included the following:
PROMOTION Chinese New Year Fashion Display March School Holiday Great Singapore Sale National Day Quick Bites Food Promo Mid-Autumn Festival Beauty Promo DATES 6 22 January 10 February 4 March 10 25 March 25 May 22 July 3 12 August 1 31 August 7 30 September 12 28 October TYPE Promotions, Dcor, Performances Promotions, VM Display Promotions, Kids Workshop Promotions Promotions, Performances Promotions Performances Promotions, Beauty Makeover
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PROMOTION Christmas
DATES 16 November 25 December
TYPE Promotions, Dcor
3.2.5
CAPITAL EXPENDITURE
Given that the centre is now only some two years old, there has been little if any capital expenditure required on the centre to date. Typically for a shopping centre of this type a prudent amount for ongoing capital expenditure is around 2.5% of total revenue and we suggest such an allowance should be put in place for this centre.
3.3
CUSTOMER PROFILE
The best way to understand a shopping centres customer profile is via an exit survey of shoppers. As such a survey is not available, we have had to make our own assessment of the customer profile based on discussions with the Managers personnel and our knowledge of the area and our experience with other similar centres in Singapore. In summary, our assessment of the customer profile is as follows: The centre is clearly an important local shopping destination for its immediate catchment, which is made up of mostly HDB housing, some private housing and students from educational institutions in the vicinity. The mall, when coupled with the broader Clementi Town Centre, provides both commercial (e.g. retail) and community (e.g. library) functions for the catchment. Local residents use it for both convenience shopping (supermarket), and some higher order retail. We expect that The Clementi Mall shoppers exhibit a range of incomes. The HDB housing which dominates the local area is likely to have a lower income profile than the private housing that is also in the area. In the relative absence of higher order competition in and around the trade area, we expect that The Clementi Mall is attracting a mixture of residents, including high, medium and low income alike. The centre is located near to a number of educational institutions including Singapore Polytechnic, National University of Singapore, University Town, Ngee Ann Polytechnic, and the Singapore Institute of Management. While Clementi MRT station is not necessarily the nearest station to some of these institutions, many students use the MRT station due, in part, to its co-location with The Clementi Mall and the Clementi Town Centre.
3.4
RETAIL COMPETITION
The Singapore retail market continues to mature, and over the next few years there will be some additions to retail supply that will have a bearing on The Clementi Malls performance. This section examines the existing and forecast future competitive landscape relevant to The Clementi Mall.
3.4.1
EXISTING COMPETITION
The competitive centres in and around The Clementi Mall trade area are displayed in Map 3.4 and detailed in Table 3.3. A brief analysis of the main competitors by trade area sector is now outlined.
PRIMARY TRADE AREA

Limited competition exists in the primary sector, allowing The Clementi Mall to maintain a very dominant position in the immediate retail market. City Vibe, located adjacent to The Clementi Mall, is a very small four-level 26,900 sq ft centre with a focus on food and beverage as well as entertainment. The centre appears to have been significantly impacted by The Clementi Mall and it provides minimal competition.
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Clementi Town Centre is also located adjacent to The Clementi Mall. This is an older style open centre comprising a number of disparate elements with the largest retailer being an older and smaller FairPrice supermarket. Total retail NLA for the Town Centre (excluding The Clementi Mall and City Vibe) is around 43,000 sq ft. The retail within the Town Centre in general complements rather than competes with The Clementi Mall and the degree of integration and connection is excellent. Clementi Shopping Centre is a locally-focused centre located 0.7 km east of The Clementi Mall. The centre comprises around 42,000 sq ft of retail floorspace and is anchored by a small FairPrice supermarket. It does not have the scale or range of retail to compete strongly with The Clementi Mall. It is also at a competitive disadvantage given its distance from the nearest MRT station. Ayer Rajah Food Court, located 0.7 km east of The Clementi Mall, constitutes a mid-market F&B offer, comprising around 32,300 sq ft. The food and beverage offer is only of moderate competitive relevance to The Clementi Mall.
PICTURE 27 CITY VIBE
PICTURE 28 CLEMENTI TOWN CENTRE
SECONDARY SOUTH EAST

West Coast Plaza (formerly Ginza Plaza) is a Far East Organisation mall located 1.3 km south of The Clementi Mall. The centre comprises 132,000 sq ft of retail floorspace, and is anchored by a Cold Storage supermarket and a Nike Factory Outlet store. The main competition from West Coast Plaza to The Clementi Mall comes from the Cold Storage supermarket. The degree of competition is again limited due to the weaker accessibility to the centre as a result of being on West Coast Road and some considerable distance from the nearest MRT station.
OUTSIDE THE TRADE AREA

The Star Vista is a recently completed CapitaMalls Asia mall, located next to the Buona Vista MRT station, 2.7 km east of The Clementi Mall. The centre comprises 164,000 sq ft of retail NLA as well as a provision of community and cultural facilities located above the retail mall. The retail offer is mainly focused around F&B and entertainment. The centre is differentiated by its unique design, which allows for natural cooling by optimising wind flow. The scale of this centre and the offer (including Cold Storage, Courts and a Koufu food court) limits The Clementi Malls ability to draw business beyond the eastern extremity of its defined trade area. Rochester Mall is a small centre located close to the Buona Vista MRT, 2.7 km east of The Clementi Mall. The centre has a disjointed layout, offering F&B on Level 1 and services on Level 3, providing a total of 70,000 sq ft NLA. It serves to strengthen the overall offer of the Buona Vista area, but is not of the scale to be of any significant relevance in isolation. Holland Village is an established, popular, and lively retail and F&B precinct, located 3.7 km east of The Clementi Mall. It consists predominantly of separate shop lots. It further strengthens the retail offer at the periphery of the secondary south east sector.
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Fusionopolis, located 3.5 km to the east of The Clementi Mall, comprises 170,000 sq ft retail NLA. The centre is anchored by a Market Place supermarket by Cold Storage. This centres performance appears to have been moderate to date for various reasons and it has experienced a high degree of vacancy. Over time we would expect the performance of this centre to improve gradually but this will only happen as a result of further development in terms of office space and housing in close proximity. IMM Mall is an older regional mall that has been changed a number of times over the years with the latest upgrade and expansion being undertaken in 2007. The centre is large at 408,100 sq ft NLA and it is anchored by a Giant hypermarket, which is one of only two hypermarkets serving western Singapore at the moment. IMMs other key attraction is its generous parking provision of 1,296 spaces. Historically it has drawn well through Jurong East and Jurong West as well as north to Bukit Panjang. More recently its tenant mix has changed and will continue to change as a result of further competition coming from Jem and Westgate. One of IMMs disadvantages is its distance from the nearest MRT station, being Jurong East. Given the change in the competitive environment, the owners of IMM, CapitaLand, are proposing to reposition the mall as primarily an outlet centre with the number of outlets going from its current level of 15 to around 40-50. The revamp is reported to cost in the vicinity of S$ 30 million. The Giant hypermarket is expected to remain in the centre. IMM is and will continue to form part of a very strong retail offer to the west of The Clementi Mall and this, in turn, will limit The Clementi Malls ability to draw business from beyond the western boundary of its trade area. JCube (formerly Jurong Entertainment Centre), located adjacent to Jurong East MRT, has recently undergone a major overhaul. The layout of the centre has been markedly improved, with the retail space now concentrated on the lower levels. The centre has a strong focus on entertainment, including cinemas, an ice-skating rink and karaoke. It has a total NLA of 210,600. 00 sq ft, and is considered of competitive relevance as a component of the expanding retail provision to the west of The Clementi Mall. Bukit Timah Plaza, located 2.9 km north-east of The Clementi Mall, is an older style community-based centre, with limited apparel, F&B and retail services offer with only 37,700 sq ft NLA. The offer is not of the quality or scale necessary to be considered as significant competition. Beauty World Plaza, located 3.2 km north-east of The Clementi Mall, comprises a community-based retail offer largely made up by retail services with only 43,000 sq ft NLA. It does not have the scale of offer nor proximity to be directly competitive with The Clementi Mall, and is considered to be of minor competitive relevance in terms of drawing custom from the secondary north east.
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RETAIL COMPETITION
MAP 3.4
Existing Retail Competition

THE CLEMENTI MALL, MARCH 2013
Distance (km) Primary City Vibe Clementi Town Centre Clementi Shopping Centre Ayer Rajah Foodcourt Secondary South East West Coast Plaza Beyond The Star Vista Rochester Mall Bukit Timah Plaza IMM Mall Beauty World Plaza Fusionopolis JCube Holland Village
Source : Urbis
TABLE 3.3
NLA (sq ft) 26,900 43,000 43,000 32,300 160,000 Cold Storage Major Tenants
0.0 0.0 0.7 0.7 1.3
Party World KTV FairPrice FairPrice -
2.7 2.7 2.9 3.1 3.2 3.5 3.5 3.7
164,000 70,000 37,700 408,100 43,000 170,000 210,600 75,000
Cold Storage; Courts; Koufu Giant; Daiso; Best Denki; Challenger; Popular Cold Storage Cold Storage; Challenger; FrancFranc Cold Storage
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PICTURE 29 WEST COAST PLAZA
PICTURE 30 THE STAR VISTA
PICTURE 31 ROCHESTER MALL
PICTURE 32 IMM MALL
3.4.2
FUTURE PROJECTS OF RELEVANCE
Table 3.4 presents future competition scheduled for Singapores west that is deemed to have competitive relevance for The Clementi Mall.
Proposed Retail Competition

THE CLEMENTI MALL, MARCH 2013
Opening Year Hong Leong Garden Shopping Centre JEM Westgate Jurong Big Box
Source : Urbis
TABLE 3.4
Distance (km) 0.8 3.4 3.4 3.4 NLA (sq ft) 32,300 560,000 420,000 366,000 Major Tenants Cathay Cinama; Robinsons; FairPrice; Marks & Spencer Isetan; Food Republic N.A
2013 2013 2014 2015
WITHIN THE TRADE AREA

Within the primary trade area The Clementi Mall faces limited competition from proposed new centres. These new projects are now discussed: Hong Leong Garden Shopping Centre, located 0.8 km north-west of The Clementi Mall, is currently undergoing redevelopment by Oxley Holdings as part of a 12-storey residential and commercial complex called NeWest. Prior to redevelopment this 32,300 sq ft centre had 66 shops.
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As part of the NeWest redevelopment, retail will be confined to Level 1, and although the offer will be improved in terms of fit-out, the centres do not have the scale or proximity to the MRT station to provide meaningful competition to The Clementi Mall. The redevelopment is scheduled for completion in 2013. The old Empress Theatre site, located 300 metres from The Clementi Mall (within the Clementi Town Centre) is owned by cinema operator, Eng Wah Group. It has been proposed that the site will be redeveloped into a new cinema complex called Empress Square including 1,300 seats and ten screens, as well as a small amount of retail (probably F&B). There has been some doubt as to whether this project would proceed, given the recent downsizing of Eng Wahs cinema interests (it recently announced the closure of its cinemas at West Mall and Suntec City). However, development of the site has begun recently, and we expect it is going ahead according to Eng Wahs most recently announced plans. The development is expected to be completed in 2014. Empress Square will be beneficial for Clementi Town Centre, and The Clementi Mall. The area lacks a higher order entertainment offer, and even though the cinema would be some distance from The Clementi Mall, it is still likely to drive additional visitation. It would curtail the need for trade area residents having to travel to Jurong East to satisfy their cinema needs.
OUTSIDE THE TRADE AREA

The two most important future retail developments to the west of the trade area will be the Lend Leases Jem project and CapitaLands Westgate project, both of which are located at Jurong East. These projects will have direct access to the MRT, and will add a combined 980,000 sq ft of retail floorspace to Jurong Gateway. Jem and Westgate are expected to have strong tenancy mixes and are scheduled to open in 2013 and 2014, respectively. Both centres will be anchored by department stores, and are likely to have strong supermarket/hypermarket offers. Between them they are expected to attract the international fast fashion brands including Uniqlo, Zara, H&M and Top Shop. The Jurong Big Box warehouse retail complex development, located adjacent to the Jem and Westgate sites, was originally to be developed by TT International. However, in 2009, TT International experienced difficulties with creditors, and the project was suspended indefinitely. It was not until January 2012 that TT International announced it had signed an agreement with Lucrum Capital to proceed with the project, although the concept for the development remains unclear. Initially it was expected that only one third of the floorspace was to be used for retail, with the remaining space attributed to warehousing and office. This may still be the case, however at this stage there remains a considerable degree of uncertainty in relation to the composition and the timing of this project. These three projects are set to contribute significantly to strengthen the retail offer at Jurong Gateway, and will further limit The Clementi Malls draw from west of the trade area. This competition is somewhat curtailed by the strong visitorship to Clementi Mall from the immediate surrounds including residents and students from nearby colleges and universities.
3.4.3
SUPPLY FORECASTS
Supply forecasts for Singapore in aggregate and by region were discussed earlier in Section 1. The key points of relevance to The Clementi Mall are now summarised: At the end of 2012, we estimate there was 57.6 million sq ft of retail floorspace across Singapore. Approximately 25.0 million sq ft (43.4%) of this floorspace was shopping centre floorspace. Total retail floorspace is forecast to increase to 62.4 million sq ft by 2016, with the proportion of shopping centre floorspace increasing to 46.6%. The West Region, in which The Clementi Mall is located, is forecast to receive an additional 1.4 million sq ft of shopping centre floorspace from 2013 to 2016, accounting for approximately 26% of the total new shopping centre stock expected across Singapore. The most significant additions are forecast in 2013 and 2014 with the completion of Jem and Westgate. Jem and Westgate are scheduled to be of primary competitive relevance to The Clementi Mall, as will Jurong Big Box in 2015.
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3.4.4
IMPLICATIONS FOR THE CLEMENTI MALL
The main implications for The Clementi Mall are: Situated in Singapores Western Region, The Clementi Mall is located in an area with a significantly lower provision of shopping centre floorspace per capita than most of Singapore (1.7 sq ft per capita compared to Singapore average of 4.3 sq ft per capita). This will change over the next few years, with the completion of several new retail developments in the Jurong Gateway area. The introduction of Jem, Westgate and Jurong Big Box will limit The Clementi Malls ability to draw from the west, and this is expected to impact on The Clementi Malls sales. However, on the basis of currently announced projects, the West Regions supply of shopping centre floorspace (2.5 sq ft per capita) will remain below the Singapore average (4.5 sq ft per capita), and only just above the average for noncentral regions (2.3 sq ft per capita). Within the trade area, the main competitor to The Clementi Mall at present is West Coast Plaza, which is situated in the secondary south eastern sector. This centre is of a similar size to The Clementi Mall but we would not expect it to trade as successfully as The Clementi Mall, and its catchment will be mainly confined to the secondary south east sector. One of the problems West Coast Plaza has is its relatively limited catchment, together with the fact that it is not located close to an MRT station. The area immediately surrounding The Clementi Mall provides a modest level of competition. This competition is also complementary, providing additional critical mass to the broader Clementi Town Centre.
3.5
TRADE AREA ANALYSIS & SPENDING FORECASTS
Without doubt the most relevant market segment for The Clementi Mall, as a suburban shopping centre, is the residential market. There is no significant worker market of any scale at Clementi given that there is not a strong employment centre, nor does it attract tourists. As indicated earlier, it is obviously a very strong transport hub and people therefore pass through this centre, including students enrolled at the nearby universities and schools. For the purposes of our analysis however, we have not made separate calculations for the size of the worker, tourist or student market but rather have collectively included these in our allowance for sales from people residing outside the trade area. This section examines the trade area for The Clementi Mall by first defining the trade area and then outlining population and retail spending forecasts.
3.5.1
RESIDENT TRADE AREA DEFINITION
As indicated earlier in our assessment of the trade area for Paragon, a trade area for any shopping centre is dependent upon a number of factors including: The strength, range and appeal of goods and services offered by the centre. The proximity, composition and strength of competitive centres. The level of accessibility by road and public transport. Physical barriers such as rivers, mountain ranges, freeways and railways which impede direct access to the centre.
In the case of The Clementi Mall we have not had access to any surveys, and therefore we have had to define a trade area based on our experience with other similar centres both in Singapore and elsewhere. The trade area as defined is the trade area that we would see as being applicable for the centre over the next five years taking into account the likely effect of the opening of Jem and Westgate in 2013 and 2014. At present we would expect the centre to draw further to the west than defined in our trade area, and we have deliberately kept the trade area relatively tight and small and largely contained within a 2.5 km radius.
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The trade area as defined is presented in Map 3.5. Our comments on the defined trade area are as follows: The primary trade area is defined largely by geographic features that surround the centre and act as minor barriers to access. The Sungei Ulu Pandan (a river) makes up the primary catchments western and northern border, Clementi Road is the border to the east, and the West Coast Highway is the border to the south. The secondary north east sector extends north beyond the Sungui Ulu Pandan up to the PIE (Pan Island Expressway), then down to Commonwealth Ave. It is largely within 1.82.3 km of The Clementi Mall. The Secondary south east sector extends between 2.33.4 km to the south east of The Clementi Mall, down to the West Coast Highway. THE CLEMENTI MALL RESIDENT TRADE AREA MAP 3.5
It should be noted that the trade area has been defined to specifically exclude two areas, even though they are in close proximity to The Clementi Mall: To the west of the Sungei Ulu Pandan is an area that is predominately of industrial land uses. Its limited population is more aligned with the retail provided at Jurong East. To the south of the West Coast Highway, along the waterfront, is an area that is exclusively industrial with no resident population.
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3.5.2
RESIDENT TRADE AREA POPULATION FORECASTS
Table 3.5 presents our estimates of the current and future trade area resident population. We estimate that in 2012 the trade area contains 183,776 people, including 69,556 in the primary sector. We forecast average trade area population growth through to 2018 at 1.4% per annum or 2,563 people per annum. Within the primary sector, growth is forecast at 1.3% per annum or 994 people per annum.
Trade Area Population

THE CLEMENTI MALL, 2012 - 2018
Average Annual Trade Area Sector Primary Secondary Secondary North East Secondary South East Total Secondary Total Trade Area
Source: Urbis
TABLE 3.5
Growth Rate 2013-2018 (%) No. ('000) 1.3% 0.9 1.0% 1.7% 1.5% 1.4% 0.4 1.3 1.7 2.6
Population ('000) 2012 2013 68 69 40 70 111 178 41 71 112 181
2018 73 43 78 121 194
Although not part of the resident trade area spending forecasts, there is a significant tertiary educationbased floating population within 3-km of The Clementi Mall. According to CBRE, the National University of Singapore and Singapore Institute of Management University contribute 63,000 tertiary students, faculty and staff in 2009. Further, the twin ITE West Campuses at Clementi and Dover, Ngee Ann and Singapore Polytechnic comprise another 38,000 potential shoppers. These floating populations add to The Clementi Malls potential customer base.
3.5.3
RESIDENT TRADE AREA DEMOGRAPHICS
This section presents an analysis of key trade area demographics. Data was sourced from the Singapore Census of Population 2010 and is thus limited to Singapore residents (i.e. citizens and non-residents). Please note that The Clementi Mall trade area contains a significant amount of non-residents, and so it is important to understand that the statistics presented below are indicative of the resident trade area population classified as Singapore residents and does not include non-residents, who may comprise expatriate professionals, students and labourers. Chart 3.3 shows the ethnicity breakdown of the trade area sectors relative to the Singapore average. The vast majority are Chinese, upwards of 70% in every trade area sector. Trade area proportions are broadly consistent with the Singapore average of 74%, except for the secondary north east, which has a significantly higher proportion of Chinese, at 82%.
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Ethnicity Distribution
THE CLEMENTI MALL RESIDENT TRADE AREA, 2010
100% 90% 4% 9% 12%
Others Indians Malays
CHART 3.3
4% 9% 9% 3% 9% 13%
7% 6% 5%
Ethnicity Proportion (%)
80% 70% 60% 50% 40% 30% 20% 10% 0%
75%
Chinese
82%
78%
74%
Primary
Secondary North East
Secondary South East
Singapore
Chart 3.4 shows the distribution by age in each trade area sector relative to the Singapore average. The age distribution is representative of an older resident population compared with the Singapore average, with a significantly lower proportion of residents aged 19 and under, and a higher proportion aged 65 and over. The secondary south east also has an older resident population, while the secondary north east is broadly in line with the Singapore average.
Age Distribution
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Primary
CHART 3.4
15% 22% 9% 20%
12% 22%
65+ 50-64
11% 21%
Age Distribution (%)
24%
35-49 20-34
25%
25% 26% 22%
22% 20%
0-19
19% 23% Secondary North East
22% 16% Secondary South East 24% Singapore
Chart 3.5 shows the average household sizes in the trade area relative to the Singapore average. The average household sizes in the primary and secondary south east are significantly lower compared with the Singapore average, while the secondary north east has a marginally higher average household size.
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Average Household Size

4.0 3.6 3.1 3.0
CHART 3.5
Avg Household Size
3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0
3.5
Primary
Singapore
Chart 3.6 presents the breakdown of males and females within the trade area. The distribution across all trade area sectors is broadly consistent with the Singapore average.
Gender Distribution
100% 90%
Female Male
CHART 3.6
Gender Proportion (%)
80% 70% 60% 50% 40% 30% 20% 10% 0%
52%
53%
52%
51%
48%
47%
48%
49%
Primary
Singapore
3.5.4
TRADE AREA RETAIL SPENDING FORECASTS
The trade areas demographics are favourable for retail expenditure as the population has above average incomes which, in turn, lead to above average levels of per capita retail expenditure as indicated in Table 3.6. For 2013, the average retail spending per capita in Singapore is estimated at S$ 6,567. This figure is derived by taking the total value of retail sales in Singapore, subtracting an allowance for spending by tourists and business, and dividing by the total population. The figure is benchmarked against the household expenditure survey (HES), the latest available being in 2007/08. The forecast growth in average retail spend per capita is determined by the outlook for the economy as discussed in Section 1. In particular, the forecasts for PCE, inflation, population, tourism and the historic relationship with retail sales growth are used in estimating future growth in spending. Official statistics allow us to determine retail spending levels at the trade area sector level. The 2010 Census of Population reported household incomes by URA Planning Zone across Singapore. Using these income variations, we then use international benchmarks to estimate the variation in retail spend by capita per URA planning area.
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The estimated 2013 retail spending per capita in the trade area is estimated at S$ 7,257, around 10.5% above the Singapore average (refer Table 3.6). The highest spending sector is the secondary north east which has an estimated retail spending per capita some 28.1% above the Singapore average. The lowest in the region is the secondary south east, which has a retail spending per capita 2.8% above the Singapore average. By 2018 the average retail spending per capita for the trade area is expected to grow to S$ 8,374 at an average growth rate of 2.9%. This figure is nominal, which means the growth rate includes retail inflation (assumed at 1.3% per annum) and assumed real growth in retail spending per capita (1.2% per annum).
Trade Area Retail Spend Per Capita (Nominal)1

Trade Area Sector Primary Secondary Secondary North East Secondary South East Total Secondary Total Trade Area Variation from Singapore Average 2013 (%) 8.0% 28.1% 2.8% 12.0% 10.5% Per Capita Retail Spending (S$) 2012 2013 2018 7,046 8,360 6,704 7,309 7,209 7,094 8,416 6,749 7,357 7,257 8,194 9,722 7,796 8,482 8,374
TABLE 3.6
Average Annual Growth Rate(%) 2013-2018 2.9% 2.9% 2.9% 2.9% 2.9%
1 . Includes assumed average Retail P rice Inflatio n o f 1 .3% p.a. between 201 2 and 201 8 So urce: Ho useho ld Inco me & Expenditure Survey 2007/08; Singstat; Urbis
Table 3.7 calculates our forecasts for the total size of the available retail market by multiplying the spend per capita estimated in Table 3.6 with the population forecast outlined in Table 3.5.
Trade Area Retail Spending Forecasts (Nominal)1

Trade Area Sector Primary Secondary Secondary North East Secondary South East Total Secondary Total Trade Area Total Market Retail Spending (S$ Mill.) 2012 2013 476 486 338 471 809 1,285 345 482 827 1,314
TABLE 3.7
Average Annual Growth Rate(%) 2013-2018 4.3% 4.0% 4.7% 4.4% 4.4%
2018 600 419 607 1,026 1,627
1. Includes assumed average Retail Price Inflation of 1.3% p.a. between 2012 and 2018 Source: Household Income & Expenditure Survey 2007/08; Singstat; Urbis
Over the 2013-2018 period, the size of the retail market for the total trade area is forecast to grow on average at 4.4% per annum.
3.5.5
EXISTING MARKET SHARES
As indicated earlier for FY2013 The Clementi Mall is forecast by Urbis to generate S$ 238 million in sales. Market shares for a shopping centre are ideally estimated using an exit survey of shoppers to assist in understanding where the business comes from. In the case of The Clementi Mall, an exit survey is not available so we have had to make assumptions as to the distribution of sales and therefore indirectly, the market shares. The estimated market shares are detailed in Table 3.8.
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Our market share estimates and distribution estimates are calculated on the basis of an iterative process in which we balance a likely distribution of sales by trade area sector with probable market shares given the level of sales being achieved. As a starting point, we have an expectation as to the likely distribution of centre sales based on our experience with other similar centres: Primary: 35%-45% Secondary: 25% - 35% Beyond the Trade Area: 25% - 35%
Urbis estimates that The Clementi Mall is currently achieving market shares within its primary sector equal to around 18.1% for food and 20.2% for non-food. Secondary sector shares are considerably lower and are estimated at 7.1% for food and 11.9% for non-food.
Estimated Market Shares

THE CLEMENTI MALL, FY2013
Trade Area Sector Primary Secondary Secondary North East Secondary South East Total Secondary Retail Spending (SGD Mill.) Food Non-Food Total 292 207 289 496 195 138 193 331 526 486 345 482 827 1,314 Market Shares Food Non-Food Total 18.1% 5.5% 8.3% 7.1% 11.2% 30% 20.2% 11.4% 12.2% 11.9% 15.0% 30% 19.0% 7.8% 9.9% 9.0% 12.7% 30%
TABLE 3.8
Est. TO (S$ Mill.) Food Non-Food Total 53 11 24 35 88 38 126 39 16 24 39 79 34 113 92 27 48 75 167 71 238
Total Trade Area 788 Beyond Trade Area (% of Sales) Total Centre Retail Turnover
So urce: Urbis
Not surprisingly, the estimated food market shares for The Clementi Mall are relatively high. This is due to the relatively small size of the primary trade area, together with only limited supermarket and F&B competition from other competitive centres located within the sector. Conversely, the non-food shares are around the average for suburban centres in Singapore. Non-food market shares are constrained by the lack of higher order retailers in The Clementi Mall, as well as certain anchors such as entertainment options. This results in a high level of leakage from the trade area for this type of retail spending. In calculating the market shares for The Clementi Mall it has been assessed that 30% of the centre sales are attributable to people residing outside the trade area. This is a reasonable assumption in our opinion and based on our experience with other Singapore centres.
3.6
SWOT ANALYSIS
The key strengths, weaknesses, opportunities and threats associated with The Clementi Mall are now summarised below.
3.6.1
STRENGTHS
The centres good accessibility, and being co-located with the MRT station and bus interchange is a big advantage, enabling it to achieve higher levels of visitation than are typical for centres of this size (~27 million people per annum). The centre has a solid and captive trade area with limited higher order competition. There is a significant walk-up population residing close to the centre.
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The centre has one of the better tenant mixes in western Singapore, particularly for fashion tenants. It is well integrated with the surrounding Clementi Town Centre. Trade area income levels are higher than the Singapore average. A current low shopping centre floorspace per capita in the western area of Singapore at 1.7 sq ft per capita, lower than the Singapore average (4.3 sq ft per capita), and lower than the average for noncentral parts of Singapore (2.0 sq ft per capita).
3.6.2

WEAKNESSES
The layout is impeded by having accommodated the bus interchange within the centre on Levels 1 and 2, which are typically the strongest retail levels in Singapore shopping centres. Sight lines throughout the centre are only fair, particularly between levels. The centre lacks entertainment tenants, meaning that local residents are more likely to travel further afield for higher order shopping/leisure trips. The anchor tenants are relatively small, particularly the FoodFare food court and the BHG department store.
3.6.3

OPPORTUNITIES
Improve the entertainment offer on the upper levels. This will help draw shoppers up through the centre, and significantly improve local residents view of the centre as a higher order centre. Upgrade the BHG department store. The department store is small, and could be expanded and upgraded. Again, this would help support the centres higher order image. Similarly, the F&B offer could be upgraded. In particular, the food court would benefit from an upgrade and possible expansion. With annual visitation to The Clementi Mall of around 27 million people per year, the average spend per visit is only around S$ 8.50. This is relatively low, reflecting the number of people visiting the centre in transit. This is representative of a good opportunity to improve the dwell times of these transit visitors, and to increase the overall spend per visitor.
3.6.4
THREATS
The ongoing development of Jurong East will represent a significant change to the competitive environment. Lend Leases Jem and CapitaLands Westgate developments will create a very strong retail precinct around 3.5 km from The Clementi Mall. Singapores integration with the global economy means that it is high reliant on global economic stability and growth. Any deterioration in the global economy is likely to negatively impact Singapore and potentially its residents spending power.
3.7
3.7.1
FUTURE SALES & RENTAL GROWTH

FUTURE OUTLOOK
The Clementi Mall has quickly established itself as a popular destination for residents within its catchment. We would expect that it currently draws well from beyond its trade area, and achieves strong market shares within its trade area.
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The local retail market is forecast to continue growing, due to solid population growth and continued growth in incomes (and therefore retail expenditure). We estimate that the market should grow by an average of around 4.4% per annum over the next five years, and The Clementi Mall is in a good position to benefit from this growth. However, the competitive environment is set to become more difficult over the next few years, and The Clementi Mall has benefited from a lack of higher order retail competition in western Singapore. With the opening of Lend Leases The Jem and CapitaLands Westgate in Jurong East, The Clementi Mall is likely to see its growth in sales negatively impacted, particularly in FY2014 and to a lesser extent FY2015.
3.7.2
RETAIL SALES POTENTIAL FY2018
The retail sales potential for The Clementi Mall in 2018 has been estimated using a market share approach, as shown in Table 3.9 below. As the table shows, we expect the market shares across the trade area to decline somewhat from their 2013 levels due to changes in the competitive landscape. Chief amongst these changes will be the major developments occurring in Jurong East (Jem and Westgate). The proportion of sales from beyond the trade area is also expected to decline slightly as well. Clementi will however remain an important hub for students and this will help to keep the proportion of turnover from beyond the trade area reasonably high. However, a large proportion of The Clementi Malls turnover from beyond the trade area is currently expected to be coming from the west (around Jurong East). Therefore, the opening of Jem and Westgate is expected to have a negative impact on this source of sales. Overall, we expect that retail turnover can increase to S$ 276 million by 2018. This represents a growth rate of 3.0% per annum, compared to a trade area market growth of 4.4% per annum. This difference between sales growth and market growth is due to the increase in competition that will occur in Jurong East and is likely to have an impact on The Clementi Malls sales growth, in 2014 and 2015.
Forecast Sales Potential

THE CLEMENTI MALL, FY2018
Trade Area Sector Retail Spending (S$ Mill.) Food Non-Food Total 360 240 600 168 243 411 651 419 607 1,026 1,627 Food 17.6% 5.4% 8.2% 7.0% 10.9% 29.0% Market Shares Non-Food Total 18.8% 18.1% 11.1% 12.0% 11.7% 14.3% 26.0% 7.7% 9.7% 8.9% 12.3% 27.6%
TABLE 3.9
Est. TO (S$ Mill.) Food Non-Food Total 63 45 109 14 30 43 107 44 150 19 29 48 93 33 126 32 59 91 200 76 276
Primary Secondary 251 Secondary North East 364 Secondary South East 616 Total Secondary 976 Total Trade Area Beyond Trade Area (% of Sales) Total Centre Retail Turnover
Source: Urbis
3.7.3
FUTURE RENTAL GROWTH
The OCR at The Clementi Mall appears to be at a sustainable level at around 15%. With sales growth forecast at 3.0% per annum we would expect rental growth of between 2.5% and 3.0% given the young age of the centre and the potential to improve the tenant mix of the centre over the next few years.
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Paragon Medical Market Review
Earlier in Section 2 of this IMR the retail component of Paragon was reviewed and an assessment was made on the future outlook for this component. Included in this review was reference to the fact that Paragon as a property, comprised not only a retail mall but also a provision of medical suites and offices. The medical suite/office space provision at Paragon is located in three separate locations: Level 6 of the retail mall in Podium 1. Levels 7-9 of Podium 2. In the tower building (Paragon Tower) on Levels 7-20 above Podium 1.
The small amount of medical suite space on Level 6 in Podium 1 has been included in our analysis of the retail mall in Section 2. In this section when referring to the medical suite/office space, we refer to Levels 7-9 of Podium 2 and the Paragon Tower as Paragon Medical. Whilst the tower originally started with approximately half of its space dedicated to medical suites and half to office tenants, this has changed over time, resulting in a higher proportion of medical suite space driven by strong demand for such space. Encouraged by healthy tourist demand for medical suite space, additional space of 29,000 sq ft was built in 2008/09 above Podium 2 to accommodate additional medical tenants as well as the Fitness First gymnasium. Paragon Tower hosts over 60 medical and dental specialist clinics and offices. These specialists provide medical services ranging from cardiology, orthopaedics, urology, dermatology, obstetrics, gynaecology, oncology, paediatrics, dental specialists clinics and anti-ageing to traditional Chinese medicine. This section of the report provides a review of the overall healthcare services (HCS) market in Singapore together with a review of the medical offering provided at Paragon and its potential for future rental growth.
4.1
OVERVIEW OF HCS IN SINGAPORE
HCS in Singapore is made up of a combination of government funded and private providers, with a real focus on user pays. A fundamental premise behind healthcare policy in Singapore is that residents should look after their own health. This is not to say there is no safety net Singapore provides a number of safety-net options. But it does try to ensure that incentives are appropriately balanced between the sick and the healthy, the rich and the poor, and Government and private sector to achieve economic efficiency.
4.1.1
HCS MODEL & FUNDING
The public health system in Singapore is managed by the Ministry of Health (MOH). The objectives of MOH are stated as: Ensuring quality and affordable basic medical services for all. Promoting healthy living and preventive health programmes as well as maintains high standards of living, clean water and hygiene to achieve better health for all.
Medical services are subsidised, although users of the system are also required to take some responsibility for the cost of healthcare. All residents can access basic medical services at public health providers (polyclinics and hospitals), where rates are regulated and subsidised. The requirement for residents to pay part of their healthcare costs is dependent on the level of service required.
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All healthcare practitioners are regulated by the MOH under a wide range of legislative instruments. Private healthcare providers however, while regulated, are not limited in what they can charge clients. Singapore has developed an efficient and widely covered health care system. It has produced a high quality healthcare system that is seen as both efficient and effective. In terms of efficiency, provides evidence as to how the Singapore health system operates. Singapores health expenditure as a proportion of GDP is lower than all developed nations listed, and lower than many underdeveloped countries such as China and India. The Governments contribution to this is also low, with the Government contributing less than 40% of total health expenditure, compared to more than 60% for most developed countries.
Health Expenditure
SINGAPORE COMPARED TO VARIOUS COUNTRIES, 2010 CHART 4.1
Health Expenditure as % of GDP

USA France Germany Canada UK Italy Japan Japan Brazil Sth Africa Australia Sth Korea Russia China Malaysia India Singapore Thailand Indonesia UK Japan Japan France Italy Germany Thailand Canada Australia Russia Sth Korea Malaysia China USA Indonesia Brazil Sth Africa Singapore India
Government Health Expenditure as % of Total Health Expenditure
0%
5%
10%
15%
20%
0%
20%
40%
60%
80%
100%
Source: World Health Organisation
However, the lower cost of health in Singapore has not resulted in poorer outcomes. In the now outdated World Health Organisation ranking of world health systems (2000)6, Singapore was ranked 6th while expenditure per capita was 37th. The currency of this study aside, Singapore remains well known as a highly efficient system that has produced very good health outcomes.
Tandon, Ajay, C Murray, J Lauer and D Evans, Measuring Overall Health System Performance for 191 Countries, 2000. http://www.who.int/healthinfo/paper30.pdf
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Health Outcomes
SINGAPORE COMPARED TO VARIOUS COUNTRIES, 2010
WHO Ranking of Health System (2000)
CHART 4.2
Physicians Per 1000 People 2010
France Italy Singapore Japan UK Germany Canada Australia USA Thailand Malaysia Sth Korea Indonesia India Brazil Russia China Sth Africa
France Italy Singapore Japan UK Germany Canada Australia USA Thailand Malaysia Sth Korea Indonesia India Brazil Russia China Sth Africa
100
200
100
200
Source: World Health Organisation; Urbis.
The success of the Singapore health system has been the product of a reasonably successful integration between private and public funding. The Government subsidises many treatments and procedures at all levels of healthcare. To augment this, the Government also operates a range of compulsory savings and insurance schemes to ensure a share of the expense is carried by healthcare service users. These Government sanctioned savings/insurance schemes include: Medisave: a national compulsory savings scheme, through which residents pay between 7.09.5% of their average income into a savings account that can only be withdrawn for the purposes of paying for medical expenses. MediShield is a base level medical insurance scheme designed to cover more major hospital costs that are not adequately covered by Medisave. ElderShield is an affordable major disability insurance that provides insurance for residents who need long term care, especially the elderly. Payouts are fixed at set monthly amounts (S$300 or S$400), as are the time which you can receive payments (6075 months). Medifund is an endowment fund set up for lower income Singaporeans whose Medisave and MediShield coverage is inadequate to cover medical expenses. The endowment is increased in times of Government budget surplus.
In addition to the public funding mechanisms listed above, there are also a number of avenues for private financing. Indeed, residents are expected to cover part of their healthcare expenses, which can be offset by the purchasing of private health insurance.
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4.1.2
SUPPLY DYNAMICS & COMPETITION
Singapores supply of physicians remain relatively low. Chart 4.2 shows the number of physicians per 1,000 people in a range of countries, both developed and developing. The average provision of these countries is 69.4, compared to Singapores average provision of 58.4. If only the developed countries are included (USA, Australia, Canada, Germany, UK, Japan, Italy and France), the average is 123.1, well above Singapores provision. Singapores density of population should allow a lower and more efficiently distributed provision of doctors. Demand for health services are expected to continue to increase, as they are throughout the world, for a number of key reasons: Singapores population is growing and ageing, two factors that should result in solid underlying growth in demand for medical services. Coupled with this is the fact that Singapores household incomes remain in a relatively high growth phase. As incomes rise, demands for health services increase, particularly for less standard procedures including cosmetic surgery. The quality and offering of medical services continues to advance rapidly. As greater medical options are made available to residents, typically demand for medical services increases. The number of demand from tourists for medical services is expected to continue to grow.
The major driver of increased demand for healthcare is likely to be from the ageing of the population. In a recent White Paper, the Singapore Government outlined the need for additional in-migration to offset the ageing of the population, and the potential for the population to actually decline. Chart 4.3 shows how the population will age in the absence of migration at the current birth rate. This shows clearly the inversion of the age pyramid. According to the white paper, under this scenario the ratio of working age citizens to overall citizens will decrease from 5.9 to 2.1. Chart 4.3 also shows a dramatic increase in the absolute number of aged citizens the number of citizens aged 65+ will triple by 2030. Regardless of the Governments policy response to this, this is going to create a significant increase in demand for healthcare services. And with potentially less workers to support the aged, this will put more pressure on Government finances, which will then (more than likely) rely more heavily on private health providers.
Singapore Age Cohort Population Forecasts, 2012 and 2050

CHART 4.3
Footnote: Assumes current birth rate and no immigration Source: A Sustainable Population For A Dynamic Singapore, January 2013, Singapore Government White Paper, January 2013.
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Overall, it is our view that the over the medium to long term, demand for medical services is likely to grow substantially, and the Government has begun to respond. In mid-March 2013, the Government announced (or re-announced) that, in addition to more hospitals and hospital beds, the Government would open a new polyclinic in Punggol by 2017, with two additional polyclinics to be opened in Jurong West. Four more polyclinics will be required by 2020, and another 6-8 by 2030. Government is expecting that its share of health funding is likely to increase over time to above 40% over the next decade (from around 1/3 currently). These changes could represent a fundamental shift for the Singapore healthcare system. The Government is sounding much more willing to satisfy the healthcare needs of its residents directly, rather than rely on private providers. We expect that the end result will be a marked increase in the amount of healthcare provided by the Government system (in line with the increasing demands on the system), although the Government will still remain highly reliant on the private system that has supported the system so well. We expect that the private healthcare system will remain of upmost importance of the system, and this should support growth in this component of the market. From a supply perspective, the provision of both private and public professionals is concentrated in clusters located around Singapore. One of the most prominent of these is Orchard Road, which provides a range of services clustered around Mount Elizabeth Hospital as well as throughout the various other commercial/retail buildings. Other clusters including the Tanglin cluster (around 1.1 km to the north west of Paragon) and Novena (2.0 km to the north of Paragon).
4.2
MEDICAL TRAVEL IN SINGAPORE
Singapore has developed into a medical hub with a reputation for high quality hospitals and HCS at competitive costs. The country is a favoured HCS destination amongst medical tourists from Indonesia (54.0% by medical services expenditure), Malaysia (7.0%), other Southeast Asia (12.0%) and others. The healthcare sector benefits from strong government support, a prime example is Singapore Medicine (a multi-agency government-industry partnership that includes the Singapore Ministry of Health, the Economic Development Board and International Enterprise Singapore) which works with industry providers to strengthen the countrys position as a leading medical hub in Asia through publicity and branding of the healthcare industrys quality and standards. Fundamental drivers for continued growth of Singapores HCS market include: Population growth; Rising household income; Strong government support; Expanding medical services offering; Rising affluence of the growing middle class in Asia; Overall aging population in Asia; and A lack of quality HCS regionally.
4.2.1
MARKET SIZE
In 2011, it is estimated by the Singapore Tourism Board that S$ 980 million was spent in Singapore by foreigners on medical goods and services. It should be noted that this expenditure includes visitors who are coming to Singapore for reasons other than medical, but who spend money on medical services while in the city. The market was significantly impacted by the global financial crisis that continues to influence the global economy. Medical expenditure fell from S$ 1.3 billion in 2007 to a low of S$ 777 million in 2009. Since then it has rebounded, reaching S$ 980 million in 2011 (refer Chart 4.4), a solid 12% growth per annum.
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We expect the Singapore medical tourism market to grow positively from an annual spend of S$ 980 million in 2011 to S$ 1.71 billion in 2018, representing an average annual growth rate of 8.3%. Singapores position vis--vis its neighbours in terms of the quality of healthcare it can provide is unlikely to change over the medium term, and Singapores Government continues to support this market as part of its tourism policy. Singapores hospitals are also very aware of the potential of this market some are establishing international marketing networks to increase their penetration into markets. The major source of demand for the Singapore HCS market is Indonesia, with Indonesian tourists generating 17% of all tourist expenditure in Singapore, and 54% of tourist expenditure on medical goods and services (Chart 4.5). This makes them an extremely important part of this market. As a share of total healthcare expenditure, the tourist market is reasonably important. Annually, Singapore spends around S$ 13-S$ 14 billion on healthcare, suggesting less than 8% of the market is generated by tourists, including expenditure on pharmaceuticals through retail channels. While this might be somewhat overstated (often the case with tourism expenditure statistics), it does indicate the significance of tourists in this regard. The outlook for the medical tourism market is, in our view, positive. The fundamental drivers of its success remain in place: Strong government support. Rapid growth in proximate emerging economies (especially Indonesia), with a growing upper/middle class. A lack of development of competing health systems.
We believe that, in the absence of any unforeseen shocks (economic or tourism related), we expect that the medical tourism market can continue to grow at healthy levels over the medium term (Chart 4.4). Indeed, the success of this market in Singapore would appear to be largely in Singapores hands its capacity to remain ahead of the curve and continue to provide a level of healthcare that is unattainable in many other countries, coupled with its willingness and capacity to market such service adequately to potential patients is likely to play a major role in this market continuing to expand.
Singapore Medical Tourism Receipts

ANNUAL SPEND (2007 2018), NOMINAL S$ MILLION CHART 4.4
1,800 1,600 1,400 1,200 1,000 800 600 400 200 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Forecasts
1,710 1,597 1,287 1,165 980 777 856 1,178 1,069 1,391 1,490
1,283
2017
2018
Source: Singapore Tourism Board; Urbis
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Singapore Medical Tourism Receipts

SOURCE OF EXPENDITURE (2011)
Malaysia 7%
CHART 4.5
Other 19%
North Asia 1% South Asia 7%
Other SE Asia 12%
Indonesia 54%
Source: Singapore Tourism Board; Urbis.
4.2.2
1.
DRIVERS OF DEMAND
Price: A significant amount of medical tourism is driven by the need to seek out lower price alternatives. Malaysia is a key example of this it supports a healthy medical tourism market, with a large amount of its demand coming from Indonesia. Quality: This is Singapores strength. It has been able to attract medical tourism even though its procedures are, on average, more expensive than in Malaysia. Patients understand the quality of healthcare services that are available in Singapore and many place significant value on this. This is particularly attractive for those who can afford it.
There are two major drivers of demand for medical tourism:
2.
4.2.3
INDUSTRY OUTLOOK
The HCS market is set to continue to expand over the next decade or more. Solid demand drivers (e.g. growing and ageing population) should result in increasing demand for medical services. The Government has recognised this in its 2012 budget, the Finance Minister indicated that they believed that healthcare spending will be the biggest driver in the growth in Government expenditure over the next decade. As a share of GDP, he believed that by 2030, Government health expenditure could more than double. A major area for growth in Singapores HCS market is the medical tourism market. This market is currently in a growth stage following being hit by the GFC. While the tourist market only makes up a reasonably small share of the overall healthcare market, it represents a niche market that is expected to achieve solid growth into the future.
4.3
OVERVIEW OF PARAGON MEDICAL
When considering the retail mall in Section 2 reference was made to some medical suite space on Level 6 which totals approximately 5,000 sq ft. For the purposes of this report, we have included this 5,000 sq ft in our assessment of the retail mall, and it does not form part of the space allocated to medical suites and offices associated with Levels 7, 8 and 9 in Podium 2 and on Levels 7 through 20 for Paragon Tower. In this section when referring to office and medical space we are referring only to the space associated with Paragon Tower and Podium 2.
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4.3.1
LOCATION & ACCESSIBILITY
Paragon Tower is located in a tower building above Paragon Mall at the rear of the mall and above the Metro department store. Whilst it is possible to access the medical lobby via a corridor off the mall on Levels 1 and 2, the main access is off Mount Elizabeth Road at the rear with there being a separate dedicated vehicular drop-off point and medical lobby on Level 2. This, in turn, is directly opposite the Mount Elizabeth Hospital and Mount Elizabeth Medical Centre and as such is very well located. For the medical space and gymnasium on Levels 7, 8 and 9 of Podium 2 the principal access is off Orchard Road through the Podium 2 atrium to a set of elevators that serve not only Levels 1-5 of the mall but also Levels 7-9 above. In general terms, Paragons location is excellent for medical suites for several reasons, including: 1. 2. 3. Strategically located on Orchard Road, Singapores main shopping and tourism district. Paragon is located in the Mount Elizabeth medical cluster beside Mount Elizabeth Hospital and Mount Elizabeth Medical Centre. There are some advantages being associated with a retail mall, which provides an overall general amenity and more relaxed atmosphere for visitors rather than the traditional hospital/medical clinical setting. The mall also provides a diversion for family members of patients who are obtaining treatment nearby. For medical tourism, it is well located due to its close proximity to many of Singapores leading hotels.
4.
For further discussion on the accessibility of Paragon Tower, please see Section 2.3.1.
4.3.2
SIZE AND QUALITY OF FACILITY
In total, excluding Level 6 of Podium 1, the amount of NLA dedicated to offices and medical suites is 223,000 sq ft with the split between the Paragon Tower and Podium 2 as follows: Paragon Tower (Levels 7-20) Podium 2 (Levels 7-9) Total 181,000 sq ft 32,000 sq ft 223,000 sq ft
Whilst originally the medical tower was split 50/50 between offices and medical suites, over time the space has being gradually taken up by medical tenants. Currently medical related tenants account for some 90% of Paragon Towers NLA.
4.3.3
MEDICAL SERVICES OFFERED
Paragon Medical provides a very wide range of medical services including GPs, general health screening, diagnostic imaging, cardiac imaging, reconstructive micro-surgery, pathology, orthopaedics, physiotherapy, dentistry, and psychiatry. In total there are some 60 different medical practices within Paragon.
4.3.4
MARKET POSITIONING
Paragon Tower is marketed using the slogan Exclusivity and Convenience, a theme that marries the requirement for medical services to be provided in a convenient manner with the luxurious nature of Paragon Mall and the type of customers that it attracts. It has a focus on targeting foreign tourists, but also the higher end of the local market. Its service offering goes well beyond basic healthcare and includes more optional services such as anti-ageing and cosmetic surgery.
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4.3.5
CURRENT OFFICE MARKET RENTS & OCCUPANCY
Paragon Tower essentially takes up floorspace that could otherwise be used as traditional office space. Therefore, it is relevant to understand the market dynamics the office market in Orchard Road and beyond. Orchard Road is one of the more popular locations for office space in Singapore, attracting some of the higher rents. However, there has not been a great deal of new office development on Orchard Road in recent years, with most of the new prime office space being built elsewhere in the financial district and in the New Downtown area. As a consequence, some of the existing Orchard Road office space is starting to age, resulting in a range of rents between different buildings. According to Colliers7, Orchard Road commands Grade A rents of S$ 8.58 per sq ft per month (Chart 4.6). This compares favourably with all sub-markets except the more traditional CBD Raffles Place/New Downtown, and Marina/City Hall, which contains the majority of new high quality stock. Orchard Roads Grade B stock generates rents averaging S$ 7.00 per sq ft per month, according to Colliers. Chart 4.7 presents indicative asking (effective) rents for a range of buildings that were leasing space in late 2012, as collected by Corporate Locations8. It shows the wide range of rents being sought on the basis of the age and quality of building, and the quality of space within each building. Asking rents can be as low as S$ 5.0 per sq ft, and as high as S$ 13 per sq ft.
Singapore Office Rents

AVERAGE RENT PER SQ FT (PER ANNUM) BY OFFICE DISTRICT, Q4 2012
10 9 8 7 6 5 4 3 2 1 Raffles Place/ Shenton Way/ Marina/ City Hall Orchard Road New Downtown Tanjon Pagar
Source: Colliers International
CHART 4.6
Grade A Grade B
Rent Per Sq.ft (SGD)
Beach Road
City Fringe
Suburban
7 8
Colliers 2012, Singapore Real Estate Market, Research & Forecast Report. Corporate Locations 2012, The Office: A review of the Singapore office market.
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Orchard Road Rents

INDICATIVE ASKING RENTS, BY BUILDING, OCTOBER 2012
14 12
CHART 4.7
Asking Rent SGD Per Sq.ft
10 8 6 4 2 -
Source: Corporate Locations
Occupancy rates throughout Singapore remain at relatively healthy levels, ranging from 90% on Orchard Road to over 98% at Marina/City Hall and on the City Fringe. The overall trend for vacancy in Singapore appears to be improving. Most recent data indicates that occupancy is on the rise in most sub-markets (Chart 4.8), and on average across the market even as rents remain relatively stable (Chart 4.9).
Office Vacancy Rate

BY OFFICE DISTRICT, DECEMBER 2012
100% 98% 96% 94% 92% 90% 88% 86% 84% 82% 80%
CHART 4.8
Q4, 2012 Q3 2012
Raffles Place/ Shenton Way/ Marina/ City Hall Orchard Road New Downtown Tanjon Pagar
Source: Colliers International
Beach Road
City Fringe
Suburban
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Trend Office Market Performance, 2008-2012

AVERAGE RENT (RHS) & VACANCY (LHS), MAIN SINGAPORE OFFICE MARKETS
25%
CHART 4.9
14 10 8 6
Vacancy Rate (%)
20% 15% 10% Vacancy Rate (LHS) 5% 0% Average Rents (RHS)
4 2 -
Source: URA Singapore
4.3.6
OFFICE MARKET OUTLOOK
Office rentals in Singapore peaked around 2007 and then with the combination of the GFC and reasonably high new supply levels, rentals dropped quite sharply and it was not until the latter half of 2010 that they started to increase slightly. Overall, there has been very little movement in average office rentals over the past two years. Looking out over the next few years, there is expected to be a significant amount of new office space coming onto the market, particularly in the Marina Bay area. As a consequence there is expected to be very little rental growth and it will not be until another three years time before office rentals start to increase more significantly.
4.4
SWOT
The following provides a review of the strengths, weaknesses, opportunities and threats to Paragon Medical.
4.4.1

STRENGTHS
Strategic location on Orchard Road, making it highly accessible for both local residents and tourists. Co-location with the Mount Elizabeth medical cluster anchored by one a well renowned healthcare establishment in Asia, Mount Elizabeth Hospital and Mount Elizabeth Medical Centre. A wide range of health and allied health tenants, providing Paragon with diversity of tenant. Co-location with Paragon Mall provides an activity for people accompanying patients at Paragon Medical. The Singapore healthcare system is mature, efficient and well run. Private operators are an important part of the overall system and are expected to remain so. While the health system is regulated, the provision of private services is largely left to market forces, allowing practitioners to set charges and fees. Close proximity to a wide range of hotel accommodation. This is a real advantage for foreign medical tourists.
88
F-98
Rent Per Sq.ft (SGD)

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12
4.4.2
WEAKNESSES
Services and facilities could be more up-to-date reflecting the age of the facility relative to newer entrants such as John Hopkins International Medical Centre and Mount Elizabeth Novena, the latter of which has implemented a fully electronic, paperless documentation system.
4.4.3
OPPORTUNITIES
Demand for medical services by local residents is expected to grow significantly over the next decade as the population ages. The Government is already starting to put in place policies to ensure that the healthcare system can cope with this additional demand, with private providers expected to remain a key component. Paragon is very well positioned and located to take advantage of expected solid growth in the medical tourism market.
4.4.4
THREATS
There is always a risk that new and better facilities are brought into the market, creating additional competition for Paragon Tower. For example, we understand that some of the Mount Elizabeth Medical Centre units are not fully occupied (part time practitioners) replacing these with full time practitioners could have an impact on Paragon Towers tenants. Healthcare services is a part of the economy in which the Government plays a large role. A change in Government policy or even a change in Government could result in a change in how healthcare services are provided. This could have an impact on Paragon Medicals tenants. The medical tourism market is highly integrated with the health of the global tourism market. In periods of regional or global economic downturn (similar to 2009), demand for medical tourism can fall. Singapore is not the only country to be chasing the medical tourism dollar. For example, Malaysia has a focus on this area and over time could erode Singapores competitive advantages.
4.5
4.5.1
PARAGON TOWER MARKET OUTLOOK

CURRENT & FUTURE COMPETITION
The leading private healthcare providers are Raffles Medical Group and Parkway Health. Both of these have facilities located throughout Singapore. The major private healthcare clusters which are of most relevance to Paragon Tower include: Mount Elizabeth, which includes Paragon Medical, Mount Elizabeth Medical Centre, and Mount Elizabeth Hospital. Tanglin, which includes the Gleneagles Medical Centre, Gleneagles Hospital and Tanglin Medical Clinic. This cluster is located just 600 metres to the north west of Orchard, and therefore only 1 km from Paragon Medical. Novena, which is located around 2.53 km to the north of Paragon Medical, is a cluster that includes Ren Ci Community Hospital, Mount Elizabeth Novena Hospital, Tan Tock Seng Hospital, as well as other allied facilities.
URBIS SPH REIT IMR
89
F-99
Orchard Road itself has become somewhat of a cluster in itself. Along Orchard Road are medical facilities of varying size and quality. These are largely small scale, focussing on a single discipline (e.g. plastic surgery). While these clusters are clearly very important providers of healthcare services, there remains a wide distribution of healthcare services throughout Singapore (Map 4.1). These are predominantly more localised in their catchments, but play an important role in providing convenient healthcare to residents. Map 4.1 presents a range of polyclinics that are located throughout Singapore. While this list is not exhaustive (healthcare is provided by many more providers than presented here), it is clear that there exists a comprehensive network of healthcare providers all of which compete with Paragon Medical to a degree. MAJOR MEDICAL PRECINCTS IN SINGAPORE
MAP 4.1
Whilst we are not aware of there being any purpose built medical centre proposed for Orchard Road and which would directly compete with Paragon Tower, it is nevertheless likely over the next few years that some of the office space along Orchard Road will be leased to medical related tenants. To a certain extent however, the Paragon Medical is less vulnerable to future competition given the size of the facility and its high standard together with its excellent location opposite the Mount Elizabeth Hospital and Mount Elizabeth Medical Centre.
90
URBIS SPH REIT IMR
F-100
4.5.2
FUTURE DEMAND OUTLOOK
4.5.2.1 LOCAL
We have outlined above our positive view of the outlook for demand for healthcare in Singapore, and our expectation that even if Government decides to take a larger share of the burden over time, the private sector will remain an important component of the overall provision of services. The outlook for demand for healthcare services (including those provided by practitioners at Paragon Medical) is very healthy. The key risk is that supply of service providers is expanded beyond what is required, however history suggests that Government will be very aware of this and will work to avoid such a situation.
4.5.2.2 MEDICAL TOURISM

The outlook for medical tourism is also positive. Singapore has established itself as a medical hub, having a high quality healthcare system that is welcoming of foreigners. Singapore is already attracting a growing number of Indonesians and Malaysians medical tourists. Over time, healthcare systems in other South East Asian countries will improve as their economies grow. However, in countries such as Indonesia the healthcare systems remain a long way behind Singapore, even while demand for more complicated and expensive procedures grows. Demand for such procedures should continue to grow, and Singapore is well placed to play a major role in satisfying this demand.
4.5.3
RENTAL GROWTH OUTLOOK
At present the average base rental for the medical suite/office space at Paragon is S$ 9.70 per sq ft per month, as referred to earlier in Table 2.4. This is slightly above the Grade A average rental for Orchard Road, according to Colliers, which was S$ 8.4 per sq ft per month for Q4 2012. The higher rent, in our view, is justifiable and reasonable for two reasons, namely: 1. 2. The small size of most of the medical tenants. The continuing high demand for medical suites at the Paragon Medical.
If we look across the broader office market, the outlook for rental growth remains reasonably subdued over the short to medium term. There remains a significant amount of new stock to be absorbed, particularly in Marina Bay and Shenton Way as outlined earlier. The suburban market also has a considerable amount of new stock under construction, which will soak up some of the demand. Given the level of new office supply coming into the market, we think it is unlikely that we will see any rental growth over the next 1218 months, particularly in the upper end of the market. Any improvement in the market is likely to be seen through lower vacancy rates as it should remain a lessees market. Looking beyond FY2014, we would expect to see office rents grow at between 23% on average in the Orchard area, picking up from the current weakness in the market. More specifically to Paragon Tower, we expect that that the positive drivers of the HCS market should allow medical rents to outperform standard office rents to a small degree. We expect therefore that between FY2013 and FY2018, rents are likely to increase at the upper end of the 23% range.
URBIS SPH REIT IMR
91
F-101
Appendix A
Paragon Floor Plans
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APPENDICES
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PARAGON RETAIL MALL FLOORPLANS
APPENDIX A1
PARAGON, BASEMENT
PARAGON, LEVEL 1
F-103
PARAGON, LEVEL 3
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PARAGON, LEVEL 2
APPENDICES
PARAGON RETAIL MALL FLOORPLANS (CONT)
APPENDIX A2
PARAGON, LEVEL 4
PARAGON, LEVEL 5
F-104
APPENDICES
PARAGON, LEVEL 6
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Appendix B
Competition
APPENDICES
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Existing Retail Competition1

PARAGON MALL, MARCH 2013
Trade Area Sector Central Core - Orchard Road Ngee Ann City Knightsbridge Lucky Plaza Wisma Atria Mandarin Gallery Cathay Cineleisure Orchard Tang Plaza 313@Somerset Far East Plaza Midpoint Orchard Scotts Square ION Orchard The Centrepoint Orchard Central Shaw House Wheelock Place Far East Shopping Centre Palais Renaissance Forum The Shopping Mall Delfi Orchard Plaza Singapura Tanglin Mall Park Mall Central Core - Other Funan Digitalife Mall Bugis Junction Raffles City Suntec City Marina Square Millenia Walk Marina Bay Shoppes Central West Great World City Tiong Bahru Plaza Harbourfront Centre Vivo City The Star Vista Central East City Square Junction 8 Parkway Parade Outer West IMM Mall JCube Jurong Point 10.4 11.2 15.0 408,000 210,600 677,700 Giant; Daiso; Best Denki Cold Storage; Challenger; FrancFranc NTUC Supermarket; Harvey Norman; John Little; Cineplex 2.3 5.5 7.4 479,800 246,600 575,700 Metro NTUC; Supermarket; Best Denki BHG; NTUC Supermarket Isetan; Giant; Cold Storage; Best Denki 1.9 2.1 4.2 4.7 5.1 387,400 180,800 200,100 1,000,000 164,000 Cold Storage; Best Denki; Golden Village NTUC Supermarket; Golden Village Cold Storage; Food Junction Marks & Spencer; Sqarovski; Golden Village Cineplex Cold Storage 2.0 2.2 2.2 2.6 2.6 2.7 3.2 297,300 421,400 403,100 808,700 669,800 279,800 588,800 Harvey Norman; Courts BHG; Cold Storage; Food Junction; Shaw Cineplex Robinsons; Jasons Marketplace Carrefour; Toys 'R' Us ; Harvey Normal; Eng Wah Cinemans John Little; Golden Village Cinemas Harvey Norman; Parco Louis Vuitton; Cartier; Hermes; Burberry 0.0 0.0 0.1 0.1 0.1 0.2 0.2 0.3 0.3 0.3 0.3 0.4 0.4 0.4 0.4 0.5 0.6 0.7 0.8 0.8 1.0 1.0 1.1 710,200 83,000 320,000 228,100 130,000 184,000 104,900 293,900 236,700 107,600 80,000 635,800 386,700 249,900 180,000 182,900 80,700 103,300 179,700 66,100 498,500 122,700 130,100 Hermes CK Calvin Klein; Emporio Armani Marks & Spencer; Gap; Best Denki Isetan; Shaw Theatres Lido Nike Hermes; Fairprice Finest Louis Vuitton; Chanel; Zara; Uniqlo Robisnons; Marks & Spencer; Cold Storage Adidas; Cathay Cineplex Cold Storage; Food Republic; ZARA Takashimaya; Cold Storage; Kinokuniya; Best Denki Abercrombie & Fitch; Tommy Hilfiger; Brooks Brothers Giordano Isetan; Food Republic Distance (km) NLA (sq ft) Major Tenants
APPENDIX B1
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APPENDICES
F-106
Existing Retail Competition1

Outer North Causeway Point Outer North-East Nex AMK Hub Compass Point Outer East Tampines Retail Park Tampines Mall Tampines One Century Square Islands & Others
1
APPENDIX B1 (CONT)
418,400 617,800 349,900 265,800 376,900 327,500 259,900 204,400 279,900 Metro; Cold Storage; Johnn Little; Cathay Cineplex Isetan; Hypermarket; Cineplex NTUC Hypermarket; Cathay Cineplex Metro; Cold Storage Giant; IKEA; Courts Isetan; NTUC Supermarket Cold Storage Metro; Shop N Save -
16.0 7.0 7.7 12.5 12.9 13.3 13.6 13.3 6.3
RW Sentosa (Festive Walk)
Centres beyond Orchard Road have been limited to those greater than 150,000 sq.ft Source : Urbis
APPENDICES
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F-107
Proposed Retail Competition1

Trade Area Sector Central Core - Orchard Road Scotts Square
C
APPENDIX B2
Opening Year 2012 2013 2014 2014 2012 Distance (km) 0.3 0.2 0.1 0.4 3.2 4.1 3.4 2.6 2.0 3.2 3.1 2.4 3.2 5.1 4.3 6.8 7.1 2.8 10.8 10.8 ` 8.7 10.8 10.9 NLA (sq ft) 80,000 165,100 95,900 143,900 110,000 103,300 82,200 187,000 200,000 148,000 27,000 83,400 150,000 164,000 250,000 210,000 210,000 60,000 210,600 560,000 55,000 420,000 366,000
The Heeren Refurbishment 268 Orchard Road Orchard Gateway (Hotel Phoenix) Central Core - Other 100AM
C C C
Gardens by the Bay
2012 2012 2013 2014 2014 2014 2015 2016 2012 2014 2014 2014 2014 2012 2013 2014 2014 2015
Marina Bay Link Mall Retail at Capitol Site
Suntec City Mall Expansion 6 Shenton Way Retail Asia Square Tower 2 South Beach Tanjong Pagar Site Central West The Star Vista Central East Sports Hub Lion City Redevelopment One KM Wyndhan Hotel Outer West JCube Jem HilV2 Westgate Jurong Big Box Outer North-East Seletar Mall Waterway Point, Punggol Outer East UE BizHub Bedok Interchange
refers to projects completed in 2012 Source : Urbis
C
2014 2015
10.7 13.4
192,000 365,000
2012 2014
14.6 10.6
100,000 220,000
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APPENDICES
F-108
Appendix C
The Clementi Mall
APPENDICES
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THE CLEMENTI MALL FLOOR PLANS
APPENDIX C1
THE CLEMENTI MALL, BASEMENT
THE CLEMENTI MALL, LEVEL 1
F-110
APPENDICES
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THE CLEMENTI MALL FLOOR PLANS (CONT)
APPENDIX C2
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SPH REIT IMR
APPENDICES
xoffice locationsx
Sydney Tower 2, Level 23, Darling Park 201 Sussex Street Sydney, NSW 2000 t +02 8233 9900 f +02 8233 9966 Melbourne Level 12, 120 Collins Street Melbourne, VIC 3000 t +03 8663 4888 f +03 8663 4999
Brisbane Level 7, 123 Albert Street Brisbane, QLD 4000 t +07 3007 3800 f +07 3007 3811 Perth Level 1, 55 St Georges Terrace Perth, WA 6000 t +08 9346 0500 f +08 9221 1779
Australia Asia Middle East w urbis.com.au e info@urbis.com.au
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APPENDIX G
TERMS, CONDITIONS AND PROCEDURES FOR APPLICATION FOR AND ACCEPTANCE OF THE UNITS IN SINGAPORE
Applications are invited for the subscription of the Units at the Offering Price on the terms and conditions set out below and in the printed application forms to be used for the purpose of the Offering and which forms part of this Prospectus (the Application Forms ) or, as the case may be, the Electronic Applications (as defined below). Investors applying for the Units in the Offering by way of Application Forms or Electronic Applications are required to pay in Singapore dollars, the Offering Price, subject to a refund of the full amount or, as the case may be, the balance of the applications monies (in each case without interest or any share of revenue or other benefit arising therefrom) where (i) an application is rejected or accepted in part only, or (ii) if the Offering does not proceed for any reason. (1) Your application must be made in lots of 1,000 Units or integral multiples thereof. Your application for any other number of Units will be rejected. You may apply for the Units only during the period commencing at on 2013 and expiring at on 2013. The Offering period may be extended or shortened to such date and/or time as the Manager may agree with the Joint Bookrunners, subject to all applicable laws and regulations and the rules of the SGX-ST. (a) Your application for the Units offered in the Public Offer (the Public Offer Units ) may be made by way of the printed WHITE Public Offer Units Application Forms or by way of Automated Teller Machines ( ATM ) belonging to the Participating Banks ( ATM Electronic Applications ) or the Internet Banking ( IB ) website of the relevant Participating Banks ( Internet Electronic Applications ) or the DBS Bank Ltd. ( DBS Bank ) mobile banking interface ( mBanking Applications which, together with ATM Electronic Applications and Internet Electronic Applications, shall be referred to as Electronic Applications ). Your application for the Units offered in the Placement Tranche (the Placement Units ) may be made by way of the printed BLUE Placement Units Application Forms (or in such other manner as the Joint Bookrunners may in their absolute discretion deem appropriate).
(2)
(3)
(b)
(4)
You may use up to 35.0 per cent. of your CPF Investible Savings (CPF Funds) to apply for the Units under the Public Offer. Approval has been obtained from the Central Provident Fund Board ( CPF Board ) for the use of such CPF Funds pursuant to the Central Provident Fund (Investment Schemes) Regulations, as may be amended from time to time, for the subscription of the Units. You may also use up to 35.0 per cent. of your CPF Funds for the purchase of the Units in the secondary market. If you are using CPF Funds to apply for the Units, you must have a CPF Investment Account maintained with a CPF agent bank (i.e. DBS Bank, Oversea-Chinese Banking Corporation Limited or United Overseas Bank Limited) (the CPF Agent Banks ). You do not need to instruct the CPF Board to transfer CPF Funds from your CPF Ordinary Account to your CPF Investment Account. The use of CPF Funds to apply for the Units is further subject to the terms and conditions set out in the section on Terms and Conditions for Use of CPF Funds on page G-24 of this Prospectus.
(5)
G-1
(6)
Only one application may be made for the benefit of one person for the Public Offer Units in his own name. Multiple applications for the Public Offer Units will be rejected, except in the case of applications by approved nominee companies where each application is made on behalf of a different beneficiary. You may not submit multiple applications for the Public Offer Units via the Public Offer Units Application Forms, or Electronic Applications. A person who is submitting an application for the Public Offer Units by way of the Public Offer Units Application Form may not submit another application for the Public Offer Units by way of Electronic Applications and vice versa. A person, other than an approved nominee company, who is submitting an application for the Public Offer Units in his own name should not submit any other applications for the Public Offer Units, whether on a printed Application Form or by way of Electronic Application, for any other person. Such separate applications will be deemed to be multiple applications and shall be rejected. Joint or multiple applications for the Public Offer Units shall be rejected. Persons submitting or procuring submissions of multiple applications for the Public Offer Units may be deemed to have committed an offence under the Penal Code, Chapter 224 of Singapore and the Securities and Futures Act, and such applications may be referred to the relevant authorities for investigation. Multiple applications or those appearing to be or suspected of being multiple applications (other than as provided herein) will be liable to be rejected at our discretion.
(7)
Multiple applications may be made in the case of applications by any person for (i) the Placement Units only (via Placement Units Application Forms or such other form of application as the Joint Bookrunners may in their absolute discretion deem appropriate) or (ii) the Placement Units together with a single application for the Public Offer Units. Applications from any person under the age of 18 years, undischarged bankrupts, sole proprietorships, partnerships, chops or non-corporate bodies and joint Securities Account holders of CDP will be rejected. Applications from any person whose addresses (furnished in their printed Application Forms or, in the case of Electronic Applications, contained in the records of the relevant Participating Bank, as the case may be) bear post office box numbers will be rejected. No person acting or purporting to act on behalf of a deceased person is allowed to apply under the Securities Account with CDP in the deceaseds name at the time of the application.
(8)
(9)
(10) The existence of a trust will not be recognised. Any application by a trustee or trustees must be made in his/her or their own name(s) and without qualification or, where the application is made by way of a printed Application Form by a nominee, in the name(s) of an approved nominee company or approved nominee companies after complying with paragraph 11 below. (11) Nominee applications may only be made by approved nominee companies. Approved nominee companies are defined as banks, merchant banks, finance companies, insurance companies, licensed securities dealers in Singapore and nominee companies controlled by them. Applications made by nominees other than approved nominee companies will be rejected.
G-2
(12) If you are not an approved nominee company, you must maintain a Securities Account with CDP in your own name at the time of your application. If you do not have an existing Securities Account with the CDP in your own name at the time of application, your application will be rejected (if you apply by way of an Application Form) or you will not be able to complete your application (if you apply by way of an Electronic Application). If you have an existing Securities Account with CDP but fail to provide your CDP Securities Account number or provide an incorrect CDP Securities Account number in your Application Form or in your Electronic Application, as the case may be, your application is liable to be rejected. (13) Subject to paragraphs 16 and 17 below, your application is liable to be rejected if your particulars such as name, National Registration Identity Card ( NRIC ) or passport number or company registration number, nationality and permanent residence status, and CDP Securities Account number provided in your Application Form, or in the case of an Electronic Application, contained in the records of the relevant Participating Bank at the time of your Electronic Application, as the case may be, differ from those particulars in your Securities Account as maintained by CDP. If you have more than one individual direct Securities Account with the CDP, your application shall be rejected. (14) If your address as stated in the Application Form or, in the case of an Electronic Application, contained in the records of the relevant Participating Bank, as the case may be, is different from the address registered with CDP, you must inform CDP of your updated address promptly, failing which the notification letter on successful allocation from CDP will be sent to your address last registered with CDP. (15) This Prospectus and its accompanying documents (including the Application Forms) have not been registered in any jurisdiction other than in Singapore. The distribution of this Prospectus and its accompanying documents (including the Application Forms) may be prohibited or restricted (either absolutely or unless various securities requirements, whether legal or administrative, are complied with) in certain jurisdictions under the relevant securities laws of those jurisdictions. Without limiting the generality of the foregoing, neither this Prospectus and its accompanying documents (including the Application Forms) nor any copy thereof may be taken, transmitted, published or distributed, whether directly or indirectly, in whole or in part in or into the United States or any other jurisdiction (other than Singapore) and they do not constitute an offer of securities for sale into the United States or any jurisdiction in which such offer is not authorised or to any person to whom it is unlawful to make such an offer. The Units have not been, and will not be, registered under the Securities Act or the securities laws of any state of the United States and may not be offered or sold within the United States (as defined in Regulation S) except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state laws. The Units are being offered and sold outside the United States (including institutional and other investors in Singapore) in offshore transactions as defined in, and in reliance on, Regulation S. There will be no public offer of Units in the United States. Any failure to comply with this restriction may constitute a violation of securities laws in the United States and in other jurisdictions. The Manager reserves the right to reject any application for Units where the Manager believes or has reason to believe that such applications may violate the securities laws or any applicable legal or regulatory requirements of any jurisdiction. No person in any jurisdiction outside Singapore receiving this Prospectus or its accompanying documents (including the Application Form) may treat the same as an offer or invitation to subscribe for any Units unless such an offer or invitation could lawfully be made without compliance with any regulatory or legal requirements in those jurisdictions.
G-3
(16) The Manager reserves the right to reject any application which does not conform strictly to the instructions or with the terms and conditions set out in this Prospectus (including the instructions set out in the accompanying Application Forms, in the ATMs and IB websites of the relevant Participating Banks and the mobile banking interface ( mBanking Interface ) of DBS Bank) or, in the case of an application by way of an Application Form, the contents of which is illegible, incomplete, incorrectly completed or which is accompanied by an improperly drawn up or improper form of remittance. (17) The Manager further reserves the right to treat as valid any applications not completed or submitted or effected in all respects in accordance with the instructions and terms and conditions set out in this Prospectus (including the instructions set out in the accompanying Application Forms and in the ATMs and IB websites of the relevant Participating Banks and the mBanking Interface of DBS Bank), and also to present for payment or other processes all remittances at any time after receipt and to have full access to all information relating to, or deriving from, such remittances or the processing thereof. Without prejudice to the rights of the Manager, each of the Joint Bookrunners as agents of the Manager, has been authorised to accept, for and on behalf of the Manager, such other forms of application as the Joint Bookrunners may, in consultation with the Manager, deem appropriate. (18) The Manager reserves the right to reject or to accept, in whole or in part, or to scale down or to ballot, any application, without assigning any reason therefor, and none of the Manager and/or the Joint Bookrunners will entertain any enquiry and/or correspondence on the decision of the Manager. This right applies to applications made by way of Application Forms and by way of Electronic Applications and by such other forms of application as the Joint Bookrunners may, in consultation with the Manager, deem appropriate. In deciding the basis of allocation, the Manager, in consultation with the Joint Bookrunners, will give due consideration to the desirability of allocating the Units to a reasonable number of applicants with a view to establishing an adequate market for the Units. (19) In the event that the Manager lodges a supplementary or replacement prospectus ( Relevant Document ) pursuant to the Securities and Futures Act or any applicable legislation in force from time to time prior to the close of the Offering, and the Units have not been issued, the Manager will (as required by law) at the Managers sole and absolute discretion either: (a) within two days (excluding any Saturday, Sunday or public holiday) from the date of the lodgement of the Relevant Document, give you notice in writing of how to obtain, or arrange to receive, a copy of the same and provide you with an option to withdraw your application and take all reasonable steps to make available within a reasonable period the Relevant Document to you if you have indicated that you wish to obtain, or have arranged to receive, a copy of the Relevant Document; or within seven days of the lodgement of the Relevant Document, give you a copy of the Relevant Document and provide you with an option to withdraw your application; or deem your application as withdrawn and cancelled and refund your application monies (without interest or any share of revenue or other benefit arising therefrom) to you within seven days from the lodgement of the Relevant Document.
(b)
(c)
Any applicant who wishes to exercise his option under paragraphs 19(a) and (b) above to withdraw his application shall, within 14 days from the date of lodgement of the Relevant Document, notify the Manager whereupon the Manager shall, within seven days from the receipt of such notification, return all monies in respect of such application (without interest or any share of revenue or other benefit arising therefrom).
G-4
In the event that the Units have already been issued at the time of the lodgement of the Relevant Document but trading has not commenced, the Manager will (as required by law) either: (i) within two days (excluding any Saturday, Sunday or public holiday) from the date of the lodgement of the Relevant Document, give you notice in writing of how to obtain, or arrange to receive, a copy of the same and provide you with an option to return to the Manager the Units which you do not wish to retain title in and take all reasonable steps to make available within a reasonable period the Relevant Document to you if you have indicated that you wish to obtain, or have arranged to receive, a copy of the Relevant Document; or within seven days from the lodgement of the Relevant Document, give you a copy of the Relevant Document and provide you with an option to return the Units which you do not wish to retain title in; or
(ii)
(iii) deem the issue as void and refund your payment for the Units (without interest or any share of revenue or other benefit arising therefrom) within seven days from the lodgement of the Relevant Document. Any applicant who wishes to exercise his option under paragraphs 19(i) and (ii) above to return the Units issued to him shall, within 14 days from the date of lodgement of the Relevant Document, notify the Manager of this and return all documents, if any, purporting to be evidence of title of those Units, whereupon the Manager shall, within seven days from the receipt of such notification and documents, pay to him all monies paid by him for the Units without interest or any share of revenue or other benefit arising therefrom and at his own risk, and the Units issued to him shall be deemed to be void. Additional terms and instructions applicable upon the lodgement of the Relevant Document, including instructions on how you can exercise the option to withdraw, may be found in such Relevant Document. (20) The Units may be reallocated between the Placement Tranche and the Public Offer for any reason, including in the event of excess applications in one and a deficit of applications in the other at the discretion of the Joint Bookrunners, in consultation with the Manager, subject to any applicable laws. (21) There will not be any physical security certificates representing the Units. It is expected that CDP will send to you, at your own risk, within 15 Market Days after the close of the Offering, and subject to the submission of valid applications and payment for the Units, a statement of account stating that your Securities Account has been credited with the number of Units allocated to you. This will be the only acknowledgement of application monies received and is not an acknowledgement by the Manager. You irrevocably authorise CDP to complete and sign on your behalf as transferee or renouncee any instrument of transfer and/or other documents required for the issue or transfer of the Units allocated to you. This authorisation applies to applications made both by way of Application Forms and by way of Electronic Applications. (22) You irrevocably authorise CDP to disclose the outcome of your application, including the number of Units allocated to you pursuant to your application, to the Manager, the Joint Bookrunners and any other parties so authorised by CDP, the Manager and/or the Joint Bookrunners.
G-5
(23) Any reference to you or the Applicant in this section shall include an individual, a corporation, an approved nominee company and trustee applying for the Units by way of an Application Form or by way of Electronic Application or by such other manner as the Joint Bookrunners may, in their absolute discretion, deem appropriate. (24) By completing and delivering an Application Form and, in the case of: (i) an ATM Electronic Application, by pressing the Enter or OK or Confirm or Yes key or any other relevant key on the ATM, or (ii) in the case of an Internet Electronic Application or mBanking Application, by clicking Submit or Continue or Yes or Confirm or any other button on the IB website screen or the mBanking Interface in accordance with the provisions herein, you: (a) irrevocably agree and undertake to purchase the number of Units specified in your application (or such smaller number for which the application is accepted) at the Offering Price and agree that you will accept such number of Units as may be allocated to you, in each case on the terms of, and subject to the conditions set out in, this Prospectus and its accompanying documents (including the Application Forms) and the Trust Deed; agree that, in the event of any inconsistency between the terms and conditions for application set out in this Prospectus and its accompanying documents (including the Application Form) and those set out in the IB websites, mBanking Interface or ATMs of the Participating Banks, the terms and conditions set out in this Prospectus and its accompanying documents (including the Application Forms) shall prevail; in the case of an application by way of a Public Offer Units Application Form or an Electronic Application, agree that the Offering Price for the Public Offer Units applied for is due and payable to the Manager upon application; in the case of an application by way of a Placement Units Application Form or such other forms of application as the Joint Bookrunners may in their absolute discretion deem appropriate, agree that the Offering Price for the Placement Units applied for is due and payable to the Manager upon application; warrant the truth and accuracy of the information contained, and representations and declarations made, in your application, and acknowledge and agree that such information, representations and declarations will be relied on by the Manager in determining whether to accept your application and/or whether to allocate any Units to you; agree and warrant that, if the laws of any jurisdictions outside Singapore are applicable to your application, you have complied with all such laws and none of the Manager nor any of the Joint Bookrunners will infringe any such laws as a result of the acceptance of your application; agree and confirm that you are outside the United States; and understand that the Units have not been and will not be registered under the Securities Act or the securities laws of any state of the United States and may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws. There will be no public offer of the Units in the United States. Any failure to comply with this restriction may constitute a violation of the United States securities laws.
(b)
(c)
(d)
(e)
(f)
(g) (h)
G-6
(25) Acceptance of applications will be conditional upon, among others , the Manager being satisfied that: (a) permission has been granted by the SGX-ST to deal in and for the quotation of all of the (i) Units comprised in the Offering, (ii) Consideration Units, (iii) Cornerstone Units, (iv) Units which will be issued to the Manager from time to time in full or part payment of the Managers fees and (v) Units which may be issued to the Property Manager from time to time in full or part payment of the Property Managers fees on the Main Board of the SGX-ST; the Underwriting Agreement, referred to in the section on Plan of Distribution in this Prospectus, has become unconditional and has not been terminated; and the Authority has not served a stop order which directs that no or no further Units to which this Prospectus relates be allotted or issued ( Stop Order ). The Securities and Futures Act provides that the Authority shall not serve a Stop Order if all the Units have been issued, sold, and listed for quotation on the SGX-ST and trading in them has commenced.
(b)
(c)
(26) In the event that a Stop Order in respect of the Units is served by the Authority or other competent authority, and: (a) the Units have not been issued (as required by law), all applications shall be deemed to be withdrawn and cancelled and the Manager shall refund the application monies (without interest or any share of revenue or other benefit arising therefrom) to you within 14 days of the date of the Stop Order; or if the Units have already been issued but trading has not commenced, the issue will (as required by law) be deemed void and the Manager shall refund your payment for the Units (without interest or any share of revenue or other benefit arising therefrom) to you within 14 days from the date of the Stop Order.
(b)
This shall not apply where only an interim Stop Order has been served. (27) In the event that an interim Stop Order in respect of the Units is served by the Authority or other competent authority, no Units shall be issued to you until the Authority revokes the interim Stop Order. The Authority is not able to serve a Stop Order in respect of the Units if the Units have been issued and listed on the SGX-ST and trading in them has commenced. (28) Additional terms and conditions for applications by way of Application Forms are set out in the section entitled Additional Terms and Conditions for Applications using Printed Application Forms on pages G-8 to G-12 of this Prospectus. (29) Additional terms and conditions for applications by way of Electronic Applications are set out in the section entitled Additional Terms and Conditions for Electronic Applications on pages G-12 to G-23 of this Prospectus. (30) All payments in respect of any application for Public Offer Units, and all refunds where (a) an application is rejected or accepted in part only, or (b) the Offering does not proceed for any reason, shall be made in Singapore dollars. (31) All payments in respect of any application for Placement Units, and all refunds where (a) an application is rejected or accepted in part only, or (b) the Offering does not proceed for any reason, shall be made in Singapore dollars.
G-7
(32) No application will be held in reserve. (33) This Prospectus is dated 2013. No Units shall be allotted or allocated on the basis of this Prospectus later than 12 months after the date of this Prospectus. Additional Terms and Conditions for Applications using Printed Application Forms Applications by way of an Application Form shall be made on, and subject to the terms and conditions of this Prospectus, including but not limited to the terms and conditions set out below, as well as those set out under the section entitled Terms, Conditions and Procedures for Application for and Acceptance of the Units in Singapore on pages G-1 and G-24 of this Prospectus and the Trust Deed. (1) Applications for the Public Offer Units must be made using the printed WHITE Public Offer Units Application Forms and printed WHITE official envelopes A and B , accompanying and forming part of this Prospectus. Applications for the Placement Units must be made using the printed BLUE Placement Units Application Forms (or in such manner as the Joint Bookrunners may in their absolute discretion deem appropriate), accompanying and forming part of this Prospectus. Without prejudice to the rights of the Manager and the Joint Bookrunners, the Joint Bookrunners, as agents of the Manager, have been authorised to accept, for and on behalf of the Manager, such other forms of application, as the Joint Bookrunners may (in consultation with the Manager) deem appropriate. Your attention is drawn to the detailed instructions contained in the Application Forms and this Prospectus for the completion of the Application Forms, which must be carefully followed. The Manager reserves the right to reject applications which do not conform strictly to the instructions set out in the Application Forms and this Prospectus (or, in the case of applications for the Placement Units, followed) which are illegible, incomplete, incorrectly completed or which are accompanied by improperly drawn remittances or improper form of remittances. (2) You must complete your Application Forms in English. Please type or write clearly in ink using BLOCK LETTERS . You must complete all spaces in your Application Forms except those under the heading FOR OFFICIAL USE ONLY and you must write the words NOT APPLICABLE or N.A. in any space that is not applicable. Individuals, corporations, approved nominee companies and trustees must give their names in full. If you are an individual, you must make your application using your full name as it appears on your NRIC (if you have such an identification document) or in your passport and, in the case of a corporation, in your full name as registered with a competent authority. If you are not an individual, you must complete the Application Form under the hand of an official who must state the name and capacity in which he signs the Application Form. If you are a corporation completing the Application Form, you are required to affix your common seal (if any) in accordance with your Memorandum and Articles of Association or equivalent constitutive documents of the corporation. If you are a corporate applicant and your application is successful, a copy of your Memorandum and Articles of Association or equivalent constitutive documents must be lodged with SPH REITs Unit Registrar. The Manager reserves the right to require you to produce documentary proof of identification for verification purposes.
(3)
(4)
G-8
(5)
(a) (b)
You must complete Sections A and B and sign page 1 of the Application Form. You are required to delete either paragraph or on page 1 of the Application Form. Where paragraph is deleted, you must also complete Section C of the Application Form with particulars of the beneficial owner(s). If you fail to make the required declaration in paragraph or , as the case may be, on page 1 of the Application Form, your application is liable to be rejected.
(c)
(6)
You (whether an individual or corporate applicant, whether incorporated or unincorporated and wherever incorporated or constituted) will be required to declare whether you are a citizen or permanent resident of Singapore or a corporation in which citizens or permanent residents of Singapore or any body corporate constituted under any statute of Singapore have an interest in the aggregate of more than 50 per cent. of the issued share capital of or interests in such corporation. If you are an approved nominee company, you are required to declare whether the beneficial owner of the Units is a citizen or permanent resident of Singapore or a corporation, whether incorporated or unincorporated and wherever incorporated or constituted, in which citizens or permanent residents of Singapore or any body corporate incorporated or constituted under any statute of Singapore have an interest in the aggregate of more than 50 per cent. of the issued share capital of or interests in such corporation. You may apply and make payment for your application for the Units in Singapore currency in the following manner: (a) Cash only You may apply for the Units using only cash. Each application must be accompanied by a cash remittance in Singapore currency for the full amount payable in Singapore dollars of the Offering Price, in respect of the number of Units applied for. The remittance must in the form of a BANKERS DRAFT or CASHIERS ORDER drawn on a bank in Singapore, made out in favour of SPH REIT UNIT ISSUE ACCOUNT crossed A/C PAYEE ONLY with your name, CDP Securities Account number and address written clearly on the reverse side. Applications not accompanied by any payment or accompanied by any other form of payment will not be accepted. No combined Bankers Draft or Cashiers Order for different CDP Securities Accounts shall be accepted. Remittances bearing NOT TRANSFERABLE or NON-TRANSFERABLE crossings will be rejected. CPF Funds only You may apply for the Units using only CPF Funds. Each application must be accompanied by a remittance in Singapore currency for the full amount payable at the Offering Price, in respect of the number of Units applied for. The remittance must be in the form of a CPF CASHIERS ORDER (available for purchase at the CPF approved bank with which the applicant maintains his CPF Investment Account), made out in favour of SPH REIT UNIT ISSUE ACCOUNT with your name, Securities Account number and address written clearly on the reverse side. Applications not accompanied by any payment or accompanied by any other form of payment will not be accepted. For additional terms and conditions governing the use of CPF Funds, please refer to page G-24 of this Prospectus. Cash and CPF Funds You may apply for the Units using a combination of cash and CPF Funds, PROVIDED THAT the number of Units applied for under each payment method is in lots of 1,000 Units or integral multiples thereof. Such applications must comply with the requirements for applications by cash and by CPF Funds as set out in the preceding paragraphs. In the event that applications for Offer Units are accepted in part only, the cash portion of the application monies will be used in respect of such applications before the CPF Funds are used. G-9
(7)
(b)
(c)
An applicant applying for 1,000 Units must use either cash only or CPF Funds only. No acknowledgement of receipt will be issued for applications and application monies received. (8) Monies paid in respect of unsuccessful applications are expected to be returned (without interest or any share of revenue or other benefit arising therefrom) to you by ordinary post, in the event of oversubscription for the Units, within 24 hours of the balloting (or such shorter period as the SGX-ST may require), at your own risk. Where your application is rejected or accepted or in part only, the full amount or the balance of the application monies, as the case may be, will be refunded (without interest or any share of revenue or other benefit arising therefrom) to you by ordinary post at your own risk within 14 Market Days after the close of the Offering, PROVIDED THAT the remittance accompanying such application which has been presented for payment or other processes has been honoured and the application monies received in the designated unit issue account. If the Offering does not proceed for any reason, the full amount of application monies (without interest or any share of revenue or other benefit arising therefrom) will be returned to you within three Market Days after the Offering is discontinued. Capitalised terms used in the Application Forms and defined in this Prospectus shall bear the meanings assigned to them in this Prospectus.
(9)
(10) By completing and delivering the Application Forms, you agree that: (a) in consideration of the Manager having distributed the Application Form to you and by completing and delivering the Application Form before the close of the Offering: (i) (ii) your application is irrevocable; your remittance will be honoured on first presentation and that any monies returnable may be held pending clearance of your payment without interest or any share of revenue or other benefit arising therefrom; and
(iii) you represent and agree that you are located outside the United States (within the meaning of Regulation S); (b) all applications, acceptances or contracts resulting therefrom under the Offering shall be governed by and construed in accordance with the laws of Singapore and that you irrevocably submit to the non-exclusive jurisdiction of the Singapore courts; in respect of the Units for which your application has been received and not rejected, acceptance of your application shall be constituted by written notification by or on behalf of the Manager and not otherwise, notwithstanding any remittance being presented for payment by or on behalf of the Manager; you will not be entitled to exercise any remedy of rescission for misrepresentation at any time after acceptance of your application; reliance is placed solely on information contained in this Prospectus and that none of the Manager, the Sponsor, the Global Coordinator, Joint Bookrunners or any other person involved in the Offering shall have any liability for any information not contained therein;
(c)
(d)
(e)
G-10
(f)
you consent to the disclosure of your name, NRIC/passport number or company registration number, address, nationality, permanent resident status, Securities Account number, and Unit application amount to the Unit Registrar, CDP, CPF Board, Securities Clearing Computer Services (Pte) Ltd ( SCCS ), SGX-ST, the Manager, the Global Coordinator and the Joint Bookrunners (the Relevant Parties ); and you irrevocably agree and undertake to purchase the number of Units applied for as stated in the Application Form or any smaller number of such Units that may be allocated to you in respect of your application. In the event that the Manager decides to allocate any smaller number of Units or not to allocate any Units to you, you agree to accept such decision as final.
(g)
Procedures Relating to Applications for the Public Offer Units by Way of Printed Application Forms (1) Your application for the Public Offer Units by way of printed Application Forms must be made using the WHITE Public Offer Units Application Forms and WHITE official envelopes A and B . You must: (a) enclose the WHITE Public Offer Units Application Form, duly completed and signed, together with correct remittance for the full amount payable at the Offering Price in Singapore currency in accordance with the terms and conditions of this Prospectus and its accompanying documents, in the WHITE official envelope A provided; in appropriate spaces on the WHITE official envelope A : (i) (ii) write your name and address; state the number of Public Offer Units applied for; and
(2)
(b)
(iii) tick the relevant box to indicate form of payment; (c) (d) SEAL THE WHITE OFFICIAL ENVELOPE A ; write, in the special box provided on the larger WHITE official envelope B addressed to Boardroom Corporate & Advisory Services Pte. Ltd., 50 Raffles Place, #32-01 Singapore Land Tower, Singapore 048623, the number of Public Offer Units you have applied for; insert the WHITE official envelope A into the WHITE official envelope B and seal the WHITE OFFICIAL ENVELOPE B ; and affix adequate Singapore postage on the WHITE official envelope B (if dispatching by ordinary post) and thereafter DESPATCH BY ORDINARY POST OR DELIVER BY HAND the documents at your own risk to Boardroom Corporate & Advisory Services Pte. Ltd., 50 Raffles Place, #32-01 Singapore Land Tower, Singapore 048623, so as to arrive by on 2013 or such other date(s) and time(s) as the Manager may agree with the Joint Bookrunners. Courier services or Registered Post must NOT be used.
(e)
(f)
(3)
Applications that are illegible, incomplete or incorrectly completed or accompanied by improperly drawn remittances or which are not honoured upon their first presentation are
G-11
liable to be rejected. Except for application for the Placement Units where remittance is permitted to be submitted separately, applications for the Public Offer Units not accompanied by any payment or any other form of payment will not be accepted. (4) ONLY ONE APPLICATION should be enclosed in each envelope. No acknowledgement of receipt will be issued for any application or remittance received.
Procedures Relating to Applications for the Placement Units by Way of Printed Application Forms (1) Your application for the Placement Units by way of printed Application Forms must be made using the BLUE Placement Units Application Forms. The completed and signed BLUE Placement Units Application Form and your remittance, in accordance with the terms and conditions of this Prospectus, for the full amount payable at the Offering Price, as the case may be, for each Unit in respect of the number of Placement Units applied for, with your name, Securities Account number and address clearly written on the reverse side, must be enclosed and sealed in an envelope to be provided by you. Your application for Placement Units must be delivered to Boardroom Corporate & Advisory Services Pte. Ltd., 50 Raffles Place, #32-01 Singapore Land Tower, Singapore 048623, to arrive by on 2013 or such other date(s) and time(s) as the Manager may agree with the Joint Bookrunners. Courier services or Registered Post must NOT be used. Applications that are illegible, incomplete, incorrectly completed or accompanied by improperly drawn remittances or which are not honoured upon their first presentation are liable to be rejected. ONLY ONE APPLICATION should be enclosed in each envelope. No acknowledgement of receipt will be issued for any application or remittance received.
(2)
(3)
(4)
Additional Terms and Conditions for Electronic Applications Electronic Applications shall be made on and subject to the terms and conditions of this Prospectus, including but not limited to the terms and conditions set out below and those under the section Terms, Conditions and Procedures for Application for and Acceptance of the Units in Singapore on pages G-1 to G-24 of this Prospectus, as well as the Trust Deed. (1) The procedures for Electronic Applications are set out on the ATM screens of the relevant Participating Banks (in the case of ATM Electronic Applications), the IB website screens of the relevant Participating Banks (in the case of Internet Electronic Applications) and the mBanking Interface of DBS Bank (in the case of mBanking Applications). DBS Bank is the only Participating Bank through which mBanking Applications may be made. For illustration purposes, the procedures for Electronic Applications for Public Offer Units through ATMs, the IB website and the mBanking Interface of DBS Bank (together the Steps ) are set out in pages G-12 to G-24 of this Prospectus. The Steps set out the actions that you must take at ATMs, the IB website or the mBanking Interface of DBS Bank to complete an Electronic Application. The actions that you must take at the ATMs or the IB websites of the other Participating Banks are set out on the ATM screens or the IB website screens of the respective Participating Banks. Please read carefully the terms and conditions of this Prospectus and its accompanying documents (including the Application Form), the Steps and the terms and conditions for Electronic Applications set out below before making an Electronic Application.
(2)
G-12
(3)
Any reference to you or the Applicant in these Additional Terms and Conditions for Electronic Applications and the Steps shall refer to you making an application for Public Offer Units through an ATM of one of the relevant Participating Banks or the IB website of a relevant Participating Bank or the mBanking Interface of DBS Bank. If you are making an ATM Electronic Application: (a) You must have an existing bank account with and be an ATM cardholder of one of the Participating Banks. An ATM card issued by one Participating Bank cannot be used to apply for Public Offer Units at an ATM belonging to other Participating Banks. You must ensure that you enter your own Securities Account number when using the ATM card issued to you in your own name. If you fail to use your own ATM card or do not key in your own Securities Account number, your application will be rejected. If you operate a joint bank account with any of the Participating Banks, you must ensure that you enter your own Securities Account number when using the ATM card issued to you in your own name. Using your own Securities Account number with an ATM card which is not issued to you in your own name will render your Electronic Application liable to be rejected. Upon the completion of your ATM Electronic Application, you will receive an ATM transaction slip ( Transaction Record ), confirming the details of your ATM Electronic Application. The Transaction Record is for your retention and should not be submitted with any printed Application Form.
(4)
(b)
(c)
(5)
If you are making an Internet Electronic Application or an mBanking Application: (a) You must have an existing bank account with, and a User Identification ( User ID ) as well as a Personal Identification Number ( PIN ) given by, the relevant Participating Bank. You must ensure that the mailing address of your account selected for the application is in Singapore and you must declare that the application is being made in Singapore. Otherwise, your application is liable to be rejected. In connection with this, you will be asked to declare that you are in Singapore at the time you make the application. Upon the completion of your Internet Electronic Application through the IB website of the relevant Participating Bank or the mBanking Interface of DBS Bank, there will be an on-screen confirmation ( Confirmation Screen ) of the application which can be printed out or screen captured by you for your record. This printed record or screen capture of the Confirmation Screen is for your retention and should not be submitted with any printed Application Form.
(b)
(c)
(6)
In connection with your Electronic Application for Public Offer Units, you are required to confirm statements to the following effect in the course of activating the Electronic Application: (a) that you have received a copy of this Prospectus (in the case of ATM Electronic Applications) and have read, understood and agreed to all the terms and conditions of application for the Public Offer Units and this Prospectus prior to effecting the Electronic Application and agree to be bound by the same; that you consent to the disclosure of your name, NRIC/passport number, address, nationality, permanent resident status, CDP Securities Account number, CPF
(b)
G-13
Investment Account number (if applicable) and Public Offer Unit application amount (the Relevant Particulars ) from your account with the relevant Participating Bank to the Relevant Parties; and (c) where you are applying for the Public Offer Units, that this is your only application for the Public Offer Units and it is made in your name and at your own risk.
Your application will not be successfully completed and cannot be recorded as a completed transaction unless you press the Enter or OK or Confirm or Yes or any other relevant key in the ATM or click Confirm or OK or Submit or Continue or Yes or any other relevant button on the website screen or the mBanking Interface. By doing so, you shall be treated as signifying your confirmation of each of the three statements above. In respect of statement 6(b) above, your confirmation, by pressing the Enter or OK or Confirm or Yes or any other relevant key in the ATM or clicking Confirm or OK or Submit or Continue or Yes or any other relevant button, shall signify and shall be treated as your written permission, given in accordance with the relevant laws of Singapore, including Section 47(2) of the Banking Act, Chapter 19 of Singapore, to the disclosure by that Participating Bank of the Relevant Particulars of your account(s) with that Participating Bank to the Relevant Parties. By making an Electronic Application you confirm that you are not applying for the Public Offer Units as a nominee of any other person and that any Electronic Application that you make is the only application made by you as the beneficial owner. You shall make only one Electronic Application for the Public Offer Units and shall not make any other application for the Public Offer Units whether at the ATMs of any Participating Bank, the IB websites of the relevant Participating Banks or the mBanking Interface of DBS Bank or on the Application Forms. Where you have made an application for the Public Offer Units on an Application Form, you shall not make an Electronic Application for the Public Offer Units and vice versa. (7) You must have sufficient funds in your bank account and/or your CPF Investment Account with your Participating Bank and/or CPF Agent Bank at the time you make your ATM Electronic Application, Internet Electronic Application or mBanking Application, failing which such Electronic Application will not be completed. Any Electronic Application which does not conform strictly to the instructions set out in this Prospectus or on the screens of the ATMs or on the IB website of the relevant Participating Bank or the mBanking Interface of DBS Bank, as the case may be, through which your Electronic Application is being made shall be rejected. You may apply and make payment for your application for the Public Offer Units in Singapore currency in the following manner: (a) Cash only You may apply for the Public Offer Units through any ATM or IB website of your Participating Bank or the mBanking Interface of DBS Bank (as the case may be) by authorising your Participating Bank to deduct the full amount payable from your bank account(s) with such Participating Bank. CPF Funds only You may apply for the Public Offer Units through any ATM or IB website of your Participating Bank or the mBanking Interface of DBS Bank (as the case may be) using only CPF Funds by authorising your CPF Agent Bank to deduct the full amount payable from your CPF Investment Account with the respective CPF Agent Bank. For additional terms and conditions governing the use of CPF Funds, please refer to page G-24 of this Prospectus. Cash and CPF Funds You may apply for the Public Offer Units through any ATM or IB website of your Participating Bank and/or CPF Agent Bank or the mBanking Interface G-14
(8)
(b)
(c)
of DBS Bank (as the case may be) using a combination of cash and CPF Funds, PROVIDED THAT the number of Offer Units applied for under each payment method is in lots of 1,000 Units or integral multiples thereof. Such applications must comply with the requirements for applications by cash and by CPF Funds as set out in the preceding paragraphs. In the event that such applications are accepted in part only, the cash portion of the application monies will be used in respect of such applications before the CPF Funds are used. An applicant applying for 1,000 Offer Units must use either cash only or CPF Funds only. (9) You irrevocably agree and undertake to subscribe for and to accept the number of Public Offer Units applied for as stated on the Transaction Record or the Confirmation Screen or any lesser number of such Public Offer Units that may be allocated to you in respect of your Electronic Application. In the event that the Manager decides to allocate any lesser number of such Public Offer Units or not to allocate any Public Offer Units to you, you agree to accept such decision as final. If your Electronic Application is successful, your confirmation (by your action of pressing the Enter or OK or Confirm or Yes or any other relevant key in the ATM or clicking Confirm or OK or Submit or Continue or Yes or any other relevant button on the IB website of your Participating Bank or the mBanking Interface of DBS Bank) of the number of Public Offer Units applied for shall signify and shall be treated as your acceptance of the number of Public Offer Units that may be allocated to you and your agreement to be bound by the Trust Deed.
(10) The Manager will not keep any application in reserve. Where your Electronic Application is unsuccessful, the full amount of the application monies will be returned (without interest or any share of revenue or other benefit arising therefrom) to you by being automatically credited to your account with your Participating Bank or CPF Agent Bank, within 24 hours of the balloting (or such shorter period as the SGX-ST may require) provided that the remittance in respect of such application which has been presented for payment or other processes has been honoured and the application monies received in the designated unit issue account. Where your Electronic Application is accepted or rejected in full or in part only, the balance of the application monies, as the case may be, will be returned (without interest or any share of revenue or other benefit arising therefrom) to you by being automatically credited to your account with your Participating Bank or CPF Agent Bank, within 14 Market Days after the close of the Offering provided that the remittance in respect of such application which has been presented for payment or other processes has been honoured and the application monies received in the designated unit issue account. If the Offering does not proceed for any reason, the full amount of application monies (without interest or any share of revenue or other benefit arising therefrom) will be returned to you within three Market Days after the Offering is discontinued. Responsibility for timely refund of application monies (whether from unsuccessful or partially successful Electronic Applications or otherwise) lies solely with the respective Participating Banks and/or CPF Agent Banks. Therefore, you are strongly advised to consult your Participating Bank and/or CPF Agent Bank as to the status of your Electronic Application and/or the refund of any money to you from an unsuccessful or partially successful Electronic Application, to determine the exact number of Public Offer Units, if any, allocated to you before trading the Units on the SGX-ST. None of the SGX-ST, CDP, CPF Board, SCCS, the Participating Banks, the CPF Agent Banks, the Manager, the Global Coordinator or the Joint Bookrunners assume any responsibility for any loss that may be incurred as a result of you having to cover any net sell positions or from buy-in procedures activated by the SGX-ST. G-15
(11) If your Electronic Application is unsuccessful, no notification will be sent by the relevant Participating Bank. (12) Applicants who make ATM Electronic Applications through the ATMs of the following Participating Banks may check the provisional results of their ATM Electronic Applications as follows:
Operating Hours 24 hours a day Service expected from Evening of the balloting day
Bank DBS Bank Ltd. (including POSB) (DBS Bank)
Telephone 1800 339 6666 (for POSB account holders) 1800 111 1111 (for DBS account holders) IB
Other Channels
http://www.dbs.com (1)
Oversea-Chinese Banking Corporation Limited (OCBC) United Overseas Bank Limited and its subsidiary, Far Eastern Bank Limited (UOB Group) Notes: (1)
1800 363 3333
Phone Banking/ATM/IB http://www.ocbc.com(2)
24 hours a day
Evening of the balloting day Evening of the balloting day
1800 222 2121
ATM (Other Transactions IPO Enquiry)/IB http://www.uobgroup.com(3)
24 hours a day
Applicants who have made Internet Electronic Applications through the IB websites of DBS Bank or mBanking Applications through the mBanking Interface of DBS Bank may also check the results of their applications through the same channels listed in the table above in relation to ATM Electronic Applications made at the ATMs of DBS Bank. Applicants who have made Electronic Application through the ATMs of OCBC may check the results of their applications through OCBC Personal Internet Banking, OCBC ATMs or OCBC Phone Banking services. Applicants who have made Electronic Application through the ATMs or the IB website of the UOB Group may check the results of their applications through UOB Personal Internet Banking, UOB ATMs or UOB Phone Banking services.
(2) (3)
(13) ATM Electronic Applications shall close at on 2013 or such other date(s) and time(s) as the Manager may agree with the Joint Bookrunners. All Internet Electronic Applications and mBanking Applications must be received by on 2013, or such other date(s) and time(s) as the Manager may agree with the Joint Bookrunners. Internet Electronic Applications and mBanking Applications are deemed to be received when they enter the designated information system of the relevant Participating Bank. (14) You are deemed to have irrevocably requested and authorised the Manager to: (a) register the Public Offer Units allocated to you in the name of CDP for deposit into your Securities Account or a nominee of CDP for deposit in the special CPF securities sub-account of the nominee company of the CPF Agent Bank; return or refund (without interest or any share of revenue earned or other benefit arising therefrom) the application monies, should your Electronic Application be rejected or if the Offering does not proceed for any reason, by automatically crediting your bank account with your Participating Bank or CPF Agent Bank, with the relevant amount within 24 hours after balloting (or such shorter period as the SGX-ST may require), or within three Market Days if the Offering does not proceed for any reason, after the close G-16
(b)
or discontinuation (as the case may be) of the Offering, PROVIDED THAT the remittance in respect of such application which has been presented for payment or such other processes has been honoured and application monies received in the designated unit issue account; and (c) return or refund (without interest or any share of revenue or other benefit arising therefrom) the balance of the application monies, should your Electronic Application be rejected or accepted in part only, by automatically crediting your bank account with your Participating Bank or CPF Agent Bank, at your risk, with the relevant amount within 14 Market Days after the close of the Offering, PROVIDED THAT the remittance in respect of such application which has been presented for payment or such other processes has been honoured and application monies received in the designated unit issue account.
(15) You irrevocably agree and acknowledge that your Electronic Application is subject to risks of electrical, electronic, technical and computer-related faults and breakdown, fires, acts of God and other events beyond the control of the Participating Banks, the Manager, the Global Coordinator, the Joint Bookrunners, and if, in any such event the Manager, the Global Coordinator, the Joint Bookrunners, and/or the relevant Participating Bank do not receive your Electronic Application, or any data relating to your Electronic Application or the tape or any other devices containing such data is lost, corrupted or not otherwise accessible, whether wholly or partially for whatever reason, you shall be deemed not to have made an Electronic Application and you shall have no claim whatsoever against the Manager, the Global Coordinator, the Joint Bookrunners and/or the relevant Participating Bank for any Public Offer Units applied for or for any compensation, loss or damage. (16) The existence of a trust will not be recognised. Any Electronic Application by a trustee must be made in his own name and without qualification. The Manager shall reject any application by any person acting as nominee (other than approved nominee companies). (17) All your particulars in the records of your Participating Bank at the time you make your Electronic Application shall be deemed to be true and correct and your Participating Bank and the Relevant Parties shall be entitled to rely on the accuracy thereof. If there has been any change in your particulars after making your Electronic Application, you must promptly notify your Participating Bank. (18) You should ensure that your personal particulars as recorded by both CDP and the relevant Participating Bank are correct and identical, otherwise, your Electronic Application is liable to be rejected. You should promptly inform CDP of any change in address, failing which the notification letter on successful allocation will be sent to your address last registered with CDP. (19) By making and completing an Electronic Application, you are deemed to have agreed that: (a) in consideration of the Manager making available the Electronic Application facility, through the Participating Banks acting as agents of the Manager, at the ATMs and IB websites of the relevant Participating Banks and the mBanking Interface of DBS Bank: (i) (ii) your Electronic Application is irrevocable; your Electronic Application, the acceptance by the Manager and the contract resulting therefrom under the Public Offer shall be governed by and construed in accordance with the laws of Singapore and you irrevocably submit to the non-exclusive jurisdiction of the Singapore courts; and
G-17
(iii) you represent and agree that you are not located in the United States (within the meaning of Regulations S); (b) none of CDP, the Manager, the Global Coordinator, the Joint Bookrunners, the Participating Banks and the CPF Board shall be liable for any delays, failures or inaccuracies in the recording, storage or in the transmission or delivery of data relating to your Electronic Application to the Manager, or CDP or the SGX-ST due to breakdowns or failure of transmission, delivery or communication facilities or any risks referred to in paragraph 15 above or to any cause beyond their respective controls; in respect of the Public Offer Units for which your Electronic Application has been successfully completed and not rejected, acceptance of your Electronic Application shall be constituted by written notification by or on behalf of the Manager and not otherwise, notwithstanding any payment received by or on behalf of the Manager; you will not be entitled to exercise any remedy of rescission for misrepresentation at any time after acceptance of your application; reliance is placed solely on information contained in this Prospectus and that none of the Manager, the Sponsor, the Global Coordinator, the Joint Bookrunners or any other person involved in the Offering shall have any liability for any information not contained therein; and you irrevocably agree and undertake to subscribe for the number of Public Offer Units applied for as stated in your Electronic Application or any smaller number of such Public Offer Units that may be allocated to you in respect of your Electronic Application. In the event the Manager decides to allocate any smaller number of such Public Offer Units or not to allocate any Public Offer Units to you, you agree to accept such decision as final.
(c)
(d)
(e)
(f)
G-18
Steps for ATM Electronic Applications for Public Offer Units through ATMs of DBS Bank (including POSB ATMs) Instructions for ATM Electronic Applications will appear on the ATM screens of the respective Participating Bank. For illustration purposes, the steps for making an ATM Electronic Application through a DBS Bank or POSB ATM are shown below. Certain words appearing on the screen are in abbreviated form (A/C, amt, appln, &, I/C, No., SGX and Max refer to Account, amount, application, and, NRIC, Number, SGX-ST and Maximum, respectively). Instructions for ATM Electronic Applications on the ATM screens of Participating Banks (other than DBS Bank (including POSB)), may differ slightly from those represented below. Step 1 : 2: 3: 4: 5: 6: 7: Insert your personal DBS Bank or POSB ATM Card. Enter your Personal Identification Number. Select MORE SERVICES. Select language (for customers using multi-language card). Select ESA-IPO SHARE/INVESTMENTS. Select ELECTRONIC SECURITY APPLN (IPOS/BOND/ST-NOTES/SECURITIES). Read and understand the following statements which will appear on the screen: THE OFFER OF SECURITIES (OR UNITS OF SECURITIES) WILL BE MADE IN, OR ACCOMPANIED BY, A COPY OF THE PROSPECTUS/DOCUMENT OR PROFILE STATEMENT (AND IF APPLICABLE, A COPY OF THE REPLACEMENT OR SUPPLEMENTARY PROSPECTUS/DOCUMENT OR PROFILE STATEMENT) WHICH CAN BE OBTAINED FROM ANY DBS/POSB BRANCH IN SINGAPORE AND, WHERE APPLICABLE, THE VARIOUS PARTICIPATING BANKS DURING BANKING HOURS, SUBJECT TO AVAILABILITY. (IN THE CASE OF SECURITIES OFFERING THAT IS SUBJECT TO A PROSPECTUS/OFFER INFORMATION/DOCUMENT REGISTERED WITH THE MONETARY AUTHORITY OF SINGAPORE) ANYONE WISHING TO ACQUIRE THESE SECURITIES (OR UNITS OF SECURITIES) SHOULD READ THE PROSPECTUS/DOCUMENT OR PROFILE STATEMENT (AS SUPPLEMENTED OR REPLACED, IF APPLICABLE) BEFORE SUBMITTING HIS APPLICATION WHICH WILL NEED TO BE MADE IN THE MANNER SET OUT IN THE PROSPECTUS/DOCUMENT OR PROFILE STATEMENT (AS SUPPLEMENTED OR REPLACED, IF APPLICABLE). A COPY OF THE PROSPECTUS/DOCUMENT OR PROFILE STATEMENT, AND IF APPLICABLE, A COPY OF THE REPLACEMENT OR SUPPLEMENTARY PROSPECTUS/DOCUMENT OR PROFILE STATEMENT HAS BEEN LODGED WITH AND REGISTERED BY THE MONETARY AUTHORITY OF SINGAPORE WHO ASSUMES NO RESPONSIBILITY FOR ITS OR THEIR CONTENTS. (IN THE CASE OF SECURITIES OFFERING THAT DOES NOT REQUIRE A PROSPECTUS TO BE REGISTERED WITH THE MONETARY AUTHORITY OF SINGAPORE) THE OFFER OF SECURITIES (OR UNITS OF SECURITIES) MAY BE MADE IN A NOTICE PUBLISHED IN A NEWSPAPER AND/OR A CIRCULAR/DOCUMENT DISTRIBUTED TO SECURITY HOLDERS. ANYONE WISHING TO ACQUIRE SUCH SECURITIES (OR UNITS OF SECURITIES) G-19
SHOULD READ THE NOTICE/CIRCULAR/DOCUMENT BEFORE SUBMITTING THIS APPLICATION, WHICH WILL NEED TO BE MADE IN THE MANNER SET OUT IN THE NOTICE/CIRCULAR/DOCUMENT. PRESS THE ENTER KEY TO CONFIRM THAT YOU HAVE READ AND UNDERSTOOD. 8: 9: Select [SPH REIT] to display details. Press the ENTER key to acknowledge: YOU HAVE READ, UNDERSTOOD AND AGREED TO ALL TERMS OF THE APPLICATION AND (WHERE APPLICABLE) THE PROSPECTUS, OFFER INFORMATION STATEMENT, DOCUMENT, PROFILE STATEMENT, REPLACEMENT OR SUPPLEMENTARY PROSPECTUS/DOCUMENT/PROFILE STATEMENT NOTICE AND/OR CIRCULAR. YOU CONSENT TO DISCLOSE YOUR NAME, NRIC/PASSPORT NO., ADDRESS, NATIONALITY, CDP SECURITIES A/C NO., CPF INVESTMENT A/C NO. AND SECURITY APPLN AMOUNT FROM YOUR BANK A/C(S) TO UNIT REGISTRARS, SGX, SCCS, CDP, CPF AND THE ISSUER/VENDOR(S). FOR FIXED AND MAX PRICE SECURITIES APPLICATION, THIS IS YOUR ONLY APPLICATION AND IT IS MADE IN YOUR OWN NAME AND AT YOUR OWN RISK. THE MAXIMUM PRICE FOR EACH SECURITY IS PAYABLE IN FULL ON APPLICATION AND SUBJECT TO REFUND IF THE FINAL PRICE IS LOWER. FOR TENDER SECURITIES APPLICATION, THIS IS YOUR ONLY APPLICATION AT THE SELECTED TENDER PRICE AND IT IS MADE IN YOUR OWN NAME AND AT YOUR OWN RISK. YOU ARE NOT A US PERSON AS REFERRED TO IN (WHERE APPLICABLE) THE PROSPECTUS, OFFER INFORMATION STATEMENT, DOCUMENT, PROFILE STATEMENT, REPLACEMENT OR SUPPLEMENTARY PROSPECTUS/DOCUMENT/PROFILE STATEMENT, NOTICE AND/OR CIRCULAR. THERE MAY BE A LIMIT ON THE MAXIMUM NUMBER OF SECURITIES THAT YOU CAN APPLY FOR SUBJECT TO AVAILABILITY. YOU MAY BE ALLOCATED A SMALLER NUMBER OF SECURITIES THAN YOU APPLIED FOR OR (IN THE CASE OF AN EARLIER CLOSURE UPON FULL SUBSCRIPTION) YOUR APPLICATION MAY BE REJECTED IF ALL THE AVAILABLE SECURITIES HAVE BEEN FULLY ALLOCATED TO EARLIER APPLICANTS.
10 : Select your nationality. 11 : Select the DBS Bank account (Autosave/Current/Savings/Savings Plus) or the POSB account (Current/Savings) from which to debit your application monies. 12 : Enter the number of securities you wish to apply for using cash.
G-20
13 : Enter or confirm (if your CDP Securities Account number has already been stored in DBSs records) your own 12-digit CDP Securities Account number (Note: This step will be omitted automatically if your Securities Account Number has already been stored in DBSs records). 14 : Check the details of your securities application, your CDP Securities Account number, number of securities and application amount on the screen and press the ENTER key to confirm your application. 15 : Remove the Transaction Record for your reference and retention only. Steps for Internet Electronic Application for Public Offer Units through the IB Website of DBS Bank For illustrative purposes, the steps for making an Internet Electronic Application through the DBS IB website are shown below. Certain words appearing on the screen are in abbreviated form (A/C, &, amt, I/C and No. refer to Account, and, Amount, NRIC and Number, respectively). Step 1 : 2: 3: 4: 5: 6: Click on DBS website (www.dbs.com) Login to Internet banking. Enter your User ID and PIN. Enter your DBS iB Secure PIN Select Electronic Security Application (ESA). Click Yes to proceed and to warrant, among others, that you are currently in Singapore, you have observed and complied with all applicable laws and regulations and that your mailing address for DBS Internet Banking is in Singapore and that you are not a U.S. person (as such term is defined in Regulation S under the United States Securities Act of 1933, amended). Select your country of residence and click I confirm. Click on [SPH REIT] and click Submit. Click on I Confirm to confirm, among others: You have read, understood and agreed to all terms of this application and the Prospectus/Document or Profile Statement and if applicable, the Supplementary or Replacement Prospectus/Document or Profile Statement. You consent to disclose your name, I/C or Passport No., address, nationality, CDP Securities A/c No., CPF Investment A/c No. (if applicable) and securities application amount from your DBS/POSB Account(s) to registrars of securities, SGX, SCCS, CDP, CPF Board and issuer/vendor(s). You are not a U.S. Person (as such term is defined in Regulation S under the United States Securities Act of 1933, as amended).
7: 8: 9:
G-21
You understand that the securities mentioned herein have not been and will not be registered under the United States Securities Act of 1933, as amended (the US Securities Act) or the securities laws of any state of the United States and may not be offered or sold in the United States or to, or for the account or benefit of any US person (as defined in Regulation S under the US Securities Act) except pursuant to an exemption from or in a transaction not subject to, the registration requirements of the US Securities Act and applicable state securities laws. There will be no public offer of the securities mentioned herein in the United States. Any failure to comply with this restriction may constitute a violation of the United States securities laws. This application is made in your own name and at your own risk. For FIXED/MAX price securities application, this is your only application. For TENDER price securities application, this is your only application at the selected tender price. For FOREIGN CURRENCY securities, subject to the terms of the issue, please note the following: the application monies will be debited from your bank account in S$, based on the Banks prevailing board rates at the time of application. Any refund monies will be credited in S$ based on the Banks prevailing board rates at the time of refund. The different prevailing board rates at the time of application and the time of refund of application monies may result in either a foreign exchange profit or loss or application monies may be debited and refund credited in S$ at the same exchange rate. For 1ST-COME-1ST-SERVE securities, the number of securities applied for may be reduced, subject to availability at the point of application.
10 : Fill in details for securities application and click Submit. 11 : Check the details of your securities application, your CDP Securities A/C No. and click Confirm to confirm your application. 12 : Print the Confirmation Screen (optional) for your reference and retention only. Steps for mBanking Applications for Public Offer Units through the mBanking Interface of DBS Bank For illustrative purposes, the steps for making an mBanking Application are shown below. Certain words appearing on the screen are in abbreviated from (A/C, &, amt, I/C, SGX and No. refer to Account, and, Amount, NRIC, SGX-ST and Number, respectively). Step 1 : 2: 3: 4: Click on DBS Bank mBanking application using your User ID and PIN. Select Investment Services. Select Electronic Securities Application. Select Yes to proceed and to warrant, among others, that you are currently in Singapore, you have observed and complied with all applicable laws and regulations and that your mailing address for DBS Internet Banking is in Singapore and that you are not a U.S. Person (as such term is defined in Regulation S under the United States Securities Act of 1933 as amended).
G-22
5: 6: 7:
Select your country of residence. Select [SPH REIT]. Select Yes to confirm, among others: You have read, understood and agreed to all terms of this application and the Prospectus/Document or Profile Statement and if applicable, the Supplementary or Replacement Prospectus/Document or Profile Statement. You consent to disclose your name, I/C or Passport No., address, nationality, CDP Securities A/c No. and securities application amount from your DBS/POSB Account(s) to registrars of securities, SGX, SCCS, CDP and issuer/vendor(s). You are not a U.S. Person (as such term is defined in Regulation S under the United States Securities Act of 1933, as amended). You understand that the securities mentioned herein have not been and will not be registered under the United States Securities Act of 1933, as amended (the US Securities Act) or the securities laws of any state of the United States and may not be offered or sold in the United States or to, or for the account or benefit of any US person (as defined in Regulation S under the US Securities Act) except pursuant to an exemption from or in a transaction subject to, the registration requirements of the US Securities Act and applicable state securities laws. There will be no public offer of the securities mentioned herein in the United States. Any failure to comply with this restriction may constitute a violation of the United States securities laws. This application is made in your own name and at your own risk. For FIXED/MAX price securities application, this is your only application. For TENDER price securities application, this is your only application at the selected tender price. FOR FOREIGN CURRENCY Securities, subject to the terms of the issue, please note the following: the application monies will be debited from your bank account in S$, based on the Banks prevailing board rates at the time of application. Any refund monies will be credited in S$ based on the Banks prevailing board rates at the time of refund. The different prevailing board rates at the time of application and the time of refund of application monies may result in either a foreign exchange profit or loss or application monies may be debited and refund credited in S$ at the same exchange rate. FOR 1ST-COME-1ST-SERVE securities, the number of securities applied for may be reduced, subject to availability at the point of application.
8: 9:
Fill in details for securities application and click Submit. Check the details of your securities application, your CDP Securities A/C No. and click Confirm to confirm your application.
10 : Where applicable, capture Confirmation Screen (optional) for your reference and retention only.
G-23
Terms and Conditions for Use of CPF Funds (1) If you are using CPF Funds to subscribe for the Units, you must have a CPF Investment Account maintained with a CPF Agent Bank at the time of your application. If you are applying for the Units through an ATM Electronic Application, you must have an ATM card with that CPF Agent Bank at the time of your application before you can use the ATMs of that CPF Agent Bank to apply for the Units. For an Internet Electronic Application or mBanking Application, you must have an existing bank account with, and a User Identification ( User ID ) as well as a Personal Identification Number ( PIN ) given by, the CPF Agent Bank. Upon the completion of your Internet Electronic Application through the IB website of the CPF Agent Bank or mBanking Application through the mBanking Interface of DBS Bank, there will be a Transaction Completed Screen of the application which can be printed out or screen captured by you for your record. This printed record or screen capture of the Transaction Completed Screen is for your retention and should not be submitted with any printed Application Form. The CPF Investment Account is governed by the Central Provident Fund (Investment Schemes) Regulations, as amended. CPF Funds may only be withdrawn for applications for the Units in lots of 1,000 Units or integral multiples thereof. If you are applying for the Units using a printed Application Form and you are using CPF Funds to apply for the Units, you must submit a CPF Cashiers Order for the total amount payable for the number of Units applied for using CPF Funds. Before you apply for the Units using your CPF Funds, you must first make sure that you have sufficient funds in your CPF Investment Account to pay for the Units. You need not instruct the CPF Board to transfer your CPF Funds from your CPF Ordinary Account to your CPF Investment Account. If the balance in your CPF Investment Account is insufficient and you have sufficient investible CPF Funds in your CPF Ordinary Account, the CPF Agent Bank with which you maintain your CPF Investment Account will automatically transfer the balance of the required amount from your CPF Ordinary Account to your CPF Investment Account immediately for you to use these funds to buy a CPF Cashiers Order from your CPF Agent Bank in the case of an application by way of a printed Application Form or submit your application in the case of an application by way of an Electronic Application. The automatic transfer facility is available until the close of the Public Offer, and the operating hours of the facility are between 8.00 a.m. and 10.00 p.m. from Mondays to Saturdays, and between 8.00 a.m. and 5.00 p.m. on Sundays and public holidays. The special CPF securities sub-account of the nominee company of the CPF Agent Bank (with whom you maintain a CPF Investment Account) maintained with CDP will be credited with the principal amount of the Units you subscribed for, or such number of Units allocated to you, with CPF Funds. Where you are using CPF Funds, you cannot apply for the Units as nominee for any other person. All instructions or authorisations given by you in a printed Application Form or through an Electronic Application are irrevocable. CPF Investment Accounts may be opened with any branch of the CPF Agent Banks. All information furnished by the CPF Board and the CPF Agent Banks on your authorisation will be relied on as being true and correct.
(2)
(3)
(4)
(5)
(6)
(7)
(8) (9)
G-24
APPENDIX H
LIST OF PRESENT AND PAST PRINCIPAL DIRECTORSHIPS OF DIRECTORS AND EXECUTIVE OFFICERS
The principal directorships, other than those held in the Manager, and the principal past directorships in the last five years of each of the directors and executive officers (named in The Manager and Corporate Governance) of the Manager are as follows: (A) Directors of the Manager (1) Mr Leong Horn Kee Past Directorships (for a period of five years preceding the Latest Practicable Date) Advantage Health Benefits Pte. Ltd. Buildfolio.com Inc Seksun Corporation Limited (now known as Enporis Greenz Limited) VGS Technology Pte Ltd
Current Directorships
3dsense Media School Pte. Ltd. Amtek Engineering Ltd Austin International Management School Pte. Ltd. CapitalCorp Assets Private Limited CapitalCorp Consulting Group Private Limited CapitalCorp Partners Private Limited China Energy Limited ECS Holdings Limited HLU Holdings Pte Ltd Linair Technologies Limited Orita Sinclair School of Design, New Media & the Arts Pte. Ltd. PeopleWorldwide Academy Private Limited PeopleWorldwide Consulting Private Limited Tat Hong Holdings Ltd Wilmar International Limited (2) Mr Soon Tit Koon
Past Directorships (for a period of five years preceding the Latest Practicable Date) Bank of Singapore Limited Fraser & Neave Limited Great Eastern Life Assurance Company Ltd Lion Global Investors Limited OCBC Al-Amin Bank Berhad OCBC Bank (China) Limited OCBC Bank (Malaysia) Berhad OCBC Investment Research Pte Ltd OCBC Overseas Investments Pte. Ltd. OCBC Securities Private Limited OCBC Sigma Investment Private Limited Singapore Island Bank Limited Vietnam Prosperity Joint Stock Commercial Bank
AVIC Trust Co., Ltd Bank of Ningbo Co., Ltd Wah Hin and Company Private Limited WBL Corporation Limited
H-1
(3)
Mr David Chia Chay Poh Past Directorships (for a period of five years preceding the Latest Practicable Date) Nil
Associated Property Consultants Pte. Ltd. (4) Mr Chan Heng Loon Alan
Past Directorships (for a period of five years preceding the Latest Practicable Date) Casino Regulatory Authority of Singapore Corporate Governance Council TOM Outdoor Media Group Limited Urban Redevelopment Authority Insead France
Blu Inc Holdings Malaysia Sdn Bhd Blu Inc Media Sdn Bhd Business China Federation Internationale of Periodics Publishers GMM Times Company Limited Lee Kuan Yew Fund for Bilingualism Lianhe Investments Pte. Ltd. Magazines World Sdn Bhd MediaCorp Press Ltd MediaCorp TV Holdings Pte. Ltd. OpenNet Pte. Ltd. Orchard 290 Ltd PowerGas Limited Public Services Commission Singapore-China Foundation Ltd. Singapore News and Publications Limited Singapore Newspaper Services Private Limited Singapore Power Limited Singapore Press Holdings Foundation Limited Singapore Press Holdings Limited Singapore Symphony Orchestra (SSO) Council SP PowerAssets Limited SPH Magazines Pte. Ltd. SPH Retail Property Management Services Pte. Ltd. Times Properties Private Limited The Straits Times Press (1975) Limited TP Ventures Pte. Ltd. World Association of Newspaper IFRA
H-2
(5)
Mr Anthony Mallek Past Directorships (for a period of five years preceding the Latest Practicable Date) TOM Outdoor Media Group Limited Vickers Ballas Philippines Fund Ltd
Times Properties Private Limited Orchard 290 Ltd SPH Retail Property Management Services Pte. Ltd. SG Domain Pte. Ltd. CM Domain Pte. Ltd. Times Property Management Pte. Ltd. Moon Holdings Pte. Ltd. The Seletar Mall Pte. Ltd. SPH AlphaOne Pte. Ltd. Singapore Newspaper Services Private Limited SPH Data Services Pte Ltd SPH Interactive Pte. Ltd. SPH Interactive International Pte. Ltd. 701Search Pte. Ltd. (Alternate Director) SPH Magazines Pte. Ltd. SPH MultiMedia Private Limited SPH MediaBoxOffice Pte. Ltd. Shareinvestor.com Holdings Pte Ltd Shareinvestor Pte. Ltd. Lianhe Investments Pte. Ltd. SPH Net Pte. Ltd. CT Point Investments Pte. Ltd. PE One Pte. Ltd. (6) Ms Ginney Lim May Ling
Past Directorships (for a period of five years preceding the Latest Practicable Date) Nil
701Panduan Sdn Bhd MediaCorp Press Ltd. (Alternate Director) Orchard 290 Ltd. SPH Retail Property Management Services Pte. Ltd. Times Development Pte. Ltd.
H-3
(B) Executive Officers of the Manager (1) Ms Susan Leng Mee Yin Past Directorships (for a period of five years preceding the Latest Practicable Date) Nil Ms Sharon Low Wan Kein Past Directorships (for a period of five years preceding the Latest Practicable Date) Blu Inc Media Pte. Ltd. Blu Inc Media Singapore Pte. Ltd. Blu Inc Singapore Pte. Ltd. Blu Inc Ventures Pte. Ltd. Hardware Zone Pte Ltd Blu Inc Media China Limited Ms Zheng Qinyin Past Directorships (for a period of five years preceding the Latest Practicable Date) Nil Mr Teo Soon Piang Lincoln Past Directorships (for a period of five years preceding the Latest Practicable Date) Nil
Nil (2)
Nil
(3)
Nil (4)
Nil
H-4
SPH REIT
MANAGER SPH REIT Management Pte. Ltd. 1000 Toa Payoh North, News Centre Singapore 318994
SPONSOR Singapore Press Holdings Limited 1000 Toa Payoh North, News Centre Singapore 318994
SOLE GLOBAL COORDINATOR AND ISSUE MANAGER Credit Suisse (Singapore) Limited One Raffles Link #03/#04-01 South Lobby Singapore 039393 JOINT BOOKRUNNERS AND UNDERWRITERS Credit Suisse (Singapore) Limited One Raffles Link #03/#04-01 South Lobby Singapore 039393 DBS Bank Ltd. 12 Marina Boulevard Level 46 DBS Asia Central @Marina Bay Financial Centre Tower 3 Singapore 018982 Oversea-Chinese Banking Corporation Limited 65 Chulia Street #09-00 OCBC Centre Singapore 049513
CO-LEAD MANAGERS AND SUB-UNDERWRITERS CIMB Securities (Singapore) Pte. Ltd. 50 Raffles Place #19-00 Singapore Land Tower Singapore 048623 Nomura Singapore Limited 10 Marina Boulevard #36-01 Marina Bay Financial Centre Tower 2 Singapore 018983
TRUSTEE DBS Trustee Limited 12 Marina Boulevard Marina Bay Financial Centre Tower 3 Singapore 018982
LEGAL ADVISERS Legal Adviser to the Offering, and to the Manager and the Sponsor Allen & Gledhill LLP One Marina Boulevard #28-00 Singapore 018989
Legal Adviser to the Sole Global Coordinator and Issue Manager and Joint Bookrunners as to Singapore Law WongPartnership LLP 12 Marina Boulevard Level 28 Marina Bay Financial Centre Tower 3 Singapore 018982
Legal Adviser to the Sole Global Coordinator and Issue Manager and Joint Bookrunners as to United States Federal Securities Law Sidley Austin LLP 6 Battery Road Suite 40-01 Singapore 049909
Legal Adviser to the Trustee
Shook Lin & Bok LLP 1 Robinson Road #18-00 AIA Tower Singapore 048542
REPORTING AUDITORS KPMG LLP 16 Raffles Quay #22-00 Hong Leong Building Singapore 048581
INDEPENDENT TAX ADVISER Ernst & Young Solutions LLP One Raffles Quay North Tower, Level 18 Singapore 048583
UNIT REGISTRAR AND UNIT TRANSFER OFFICE Boardroom Corporate & Advisory Services Pte. Ltd. 50 Raffles Place #32-01 Singapore Land Tower Singapore 048623
INDEPENDENT VALUERS CBRE Pte. Ltd. 6 Battery Road #32-01 Singapore 049909 DTZ Debenham Tie Leung (SEA) Pte Ltd 100 Beach Road #35-00 Shaw Tower Singapore 189702
INDEPENDENT MARKET RESEARCH CONSULTANT Urbis Pty Ltd Level 12 120 Collins Street Melbourne Victoria 3000 Australia
TOPPAN VITE PTE. LTD. SIP1306004

SPH REIT Preliminary Prospectus (9 July 2013) PDF

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THIS IS A PRELIMINARY PROSPECTUS AND IS SUBJECT TO FURTHER AMENDMENTS AND COMPLETION IN THIS PROSPECTUS TO BE REGISTERED BY THE MONETARY AUTHORITY

Sole Global Coordinator and Issue Manager

Joint Bookrunners and Underwriters

B-1 C-1 D-1 E-1

APPENDIX C APPENDIX D APPENDIX E APPENDIX F

CERTAIN DEFINED TERMS AND CONVENTIONS

MARKET AND INDUSTRY INFORMATION

This page has been intentionally left blank.

(3) (4) (5) (6) (7)

Source: Appendix F, Independent Retail Property Market Research Report.

Selected specialty stores

Source: Appendix F, Independent Retail Property Market Research Report.

Source: Appendix F, Independent Retail Property Market Research Report.

Source: Appendix F, Independent Retail Property Market Research Report.

Real Retail Sales Growth

Nominal Retail Sales Growth

Source: Appendix F, Independent Retail Property Market Research Report.

Source: Appendix F, Independent Retail Property Market Research Report.

2010 2011 2012 2013 2014 2015 2016 2017 2018

2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: Appendix F, Independent Retail Property Market Research Report.

2010 2011 2012 2013 2014 2015 2016 2017 2018

2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: Appendix F, Independent Retail Property Market Research Report.

Forecast 1,391 1,490 1,597 1,710

1,165 777 856

Source: STB1: Appendix F, Independent Retail Property Market Research Report.

18 10 8 Night Safari 6 Singapore Zoological Gardens

Source: Appendix F, Independent Retail Property Market Research Report.

1,129 1,057 952

Causeway Bay (HK)

Pitt Street Mall (Syd)

5th Avenue (NYC)

New Bond Street (Lon)

Via Montenapoleone (Mil)

Source: Appendix F, Independent Retail Property Market Research Report.

Iguatemi Shopping (Sao P.)

Paragon Mall rent index Global financial crisis

Orchard Road rent index

Key asset enhancement initiatives to remain market relevant...

Lease Expiry Schedule of Initial Portfolio by NLA

Clementi Mall Retail

GFA (sq ft)

2,500.0 (2) 2,500.0 (2)

571.0 (3) 556.0

2,500.0 1.6 1.6 17.9 285

570.5 1.9 1.4 15.8 146

3,070.5 1.7 1.6 17.5 431

DBS Trustee Limited Trustee

Property Management Fees

Property Management Services

SPH Retail Property Management Services Pte. Ltd. Property Manager

Payable by SPH REIT

Payable by SPH REIT

Payable by SPH REIT (ii) Divestment fee

Payable by SPH REIT

Payable by SPH REIT

The Manager . . . . . . . . . . . . . . . The Sponsor . . . . . . . . . . . . . . . The Trustee . . . . . . . . . . . . . . . . The Offering . . . . . . . . . . . . . . .

The Placement Tranche . . . . . .

Subscription by the Cornerstone Investors . . . . . . .

Subscription for Units in the Public Offer . . . . . . . . . . . . . . . .

Unit Lender . . . . . . . . . . . . . . . . Over-Allotment Option . . . . . . .

Listing and Trading . . . . . . . . .