Proposed Merger with ESR-REIT

This is a proposed merger of ALOG and ESR-REIT, to be effected through the acquisition of all the units of ALOG, by way of a trust scheme of arrangement.

Each ALOG Unitholder will receive a Scheme Consideration for each ALOG Unit held which shall be satisfied by:

1. payment of S$0.095 in cash; and

2. allotment and issuance of 1.6765 new ESR-REIT Units (Consideration Units) at an issue price of S$0.510 per ESR-REIT Unit

in accordance with the terms and conditions of the Implementation Agreement.

By way of illustration, an ALOG Unitholder will receive S$95 in cash and 1,676 new ESR-REIT Units for every 1,000 ALOG Units held by it as at the Books Closure Date.

ALOG Unitholders shall have the right to receive and retain the ALOG Permitted Distributions in addition to the Scheme Consideration.

The enlarged REIT will be known as ESR-LOGOS REIT or E-LOG.

The Scheme Consideration was determined based on commercial negotiations between the ALOG Manager and the ESR-REIT Manager

Factors taken into account in arriving at the Scheme Consideration by determining the exchange ratio include (without limitation):

• the prevailing and historical relative market prices of the ESR-REIT Units and ALOG Units;

• the resulting pro forma financial impact of the Merger on ESR-REIT and ALOG;

• the NAVs of each of ESR-REIT and ALOG;

• the market value of the respective property portfolios;

• the fair value of the respective investments by ESR-REIT and ALOG in property funds;

• relevant precedent trust scheme transactions in Singapore;

• the prevailing and historical price to NAV per unit of each REIT;

• the prevailing and historical distribution yield of each REIT;

• the market capitalisation and trading liquidity of each REIT;

• the historical highest price of each REIT and the accompanying trading volume; and

• the capital structure, debt financing and access to capital of each REIT.

The Proposed Merger is expected to create a benchmark New Economy S-REIT (amongst the top 10 largest S-REIT by free float market capitalisation), with access to a pipeline of > US$50 billion¹ New Economy Assets from its sponsor, the ESR Group, in a DPU and NAV accretive transaction.

ALOG Unitholders should consider the following benefits before exercising their vote:

1. The Transaction is Value Accretive to ALOG Unitholders

   • DPU accretion of 8.2% and NAV accretion of 2.2% on a pro forma FY2020 basis

2. Leverage on Sponsor’s Fully Integrated Platform and Global Tenant Network

   • ESR-LOGOS REIT will be sponsored by ESR Group, the largest Asia Pacific real estate fund manager with the largest assets under management ("AUM") in Asia Pacific, and leverage on the enlarged ESR Group's fully integrated New Economy focus platform, the largest amongst S-REIT sponsors (by AUM) and reap the following benefits

     • Access to the Sponsor's global tenant network;

     • Expanded operational expertise, scale and network;

     • De-risk new market entry into key Asia Pacific markets such as Southeast Asia, China, Japan, South Korea and India where the Sponsor has market leading presence;

     • Improved deal sourcing network;

     • Explore potential partnership opportunities for new acquisitions; and

     • Leverage on the Sponsor's capital sourcing network and the Sponsor's capital commitment to ESR-LOGOS REIT to fund growth.

3. Enhanced Growth Trajectory with Access to the Largest New Economy AUM in APAC

   • ESR-LOGOS REIT will have access to the largest New Economy pipeline and the largest work-in-progress development pipeline in APAC amongst S-REITs

   • ESR-LOGOS REIT will be able to access to ESR Group's assets of more than US$50 billion¹ in New Economy pipeline in an increasingly scarce environment for quality logistics assets.

   • An initial pipeline of approximately US$2 billion of visible and executable New Economy pipeline in APAC is available from the ESR Group, which will accelerate ESR-LOGOS REIT's growth as a leading future-ready APAC S-REIT.

   • Both the ESR Group and the LOGOS Group have historically demonstrated strong commitment in delivering quality assets to ESR-REIT Unitholders and ALOG Unitholders.

   • Enlarged portfolio also comes with embedded organic growth opportunities such as ongoing asset enhancement initiatives at ESR-REIT and other renewable energy projects.

4. Creating a Top 10 S-REIT by Free Float market cap

   • ESR-LOGOS REIT is expected to become among the top 10 largest REITs in Singapore with a free float market capitalisation of S$2.5 billion² and total assets of S$5.4 billion³, respectively

   • The enlarged scale of the combined portfolio will enhance the Enlarged REIT’s visibility within the S-REIT universe, providing better access to competitive sources of capital and enjoy greater funding flexibility.

   • Greater visibility and scale provides key benefits including:

     1. Higher trading liquidity;

     2. A larger weightage in the FTSE EPRA Nareit Global Developed Index;

     3. Larger institutional investor base;

     4. Increased analyst coverage; and

     5. Potential future index inclusion, which could potentially lead to a positive re-rating of ESR-LOGOS REIT unit price, benefiting all ALOG Unitholders and ESR-REIT Unitholders.

5. The Merger Provides the Enlarged Portfolio with Enhanced Flexibility and Ability to Drive Growth and ESG Offerings which will:

   • Provide capacity to undertake larger transactions, AEIs and development opportunities as well as increased debt headroom and flexibility to perform portfolio re-balancing;

   • Improve ALOG’s offering given multiple asset locations options for 3PLs/e-commerce tenant;

   • Improve tenant diversification with high-quality tenants and reduced concentration risk, with top 10 tenants’ contribution to gross rental income (“GRI”) decreasing to 26.3% and no single tenant accounting for more than 4.6% of ESR-LOGOS REIT's GRI on a pro forma basis; and

   • Enhance ESR-LOGOS REIT’s environment, social and governance offerings with continued commitments towards sustainable operations and responsible investments.

A part-cash-part-units Scheme Consideration allows ALOG Unitholders to:

ESR-REIT is listed on the Main Board of the SGX-ST and the Consideration Units will be listed on the SGX-ST. Accordingly, the Consideration Units are readily tradable and the ALOG Unitholders can exit their investment after the Proposed Merger if they wish to do so.

Both the ALOG Manager and the ESR-REIT Manager believe the Merger will be mutually beneficial to both sets of unitholders with the key objective to reposition two leading REITs to form a leading New Economy and Future-Ready S-REIT with the largest New Economy pipeline in APAC.

At the same time, the conflicts of interests between ALOG and ESR-REIT will be mitigated post-Merger, and provides ESR-LOGOS REIT access to the ESR Group’s assets of more than US$50 billion⁴ in New Economy pipeline in an increasingly scarce environment for quality logistics properties, creating a win-win situation for both sets of unitholders.

Existing borrowings, related interest rate swaps and perpetual securities outstanding are replaced with new banking facilities of approximately S$618.7 million at an effective finance cost of 2.25% per annum and S$251.5 million of new perpetual securities at an illustrative coupon rate of 4.50% per annum.

On a pro forma basis, E-LOG’s weighted average debt expiry is approximately 3.4 years vs ALOG’s current weighted average debt expiry of approximately 3.3 years.

The new banking facilities will also be on an unencumbered basis. On a pro forma basis, 100% of E-LOG’s debt will be unencumbered vs approximately 80% for ALOG currently.

Commercial discussions between the ALOG Manager and the ESR-REIT Manager on the feasibility of the Merger only commenced after the Sponsor’s 4 August 2021 announcement on the Proposed ARA Acquisition. The merits of a merger were analysed and carefully considered by both REIT’s Boards before proposing to both sets of unitholders.

Post-Merger, the pro forma FY2020 gearing of ESR-LOGOS REIT will be 42.1% (as at 31 December 2020).

At the same time, ALOG’s debt headroom⁵ will increase by more than two times from S$396 million to S$815 million post-Merger.

The ALOG Manager has demonstrated a strong track record of managing debt costs while extending debt tenure with a wide range of lending banks, validating its capital management strategy. Post-Merger, the ESR-LOGOS REIT Manager will also review and consider divesting selected non-core assets as part of its ongoing portfolio optimisation strategy to recycle capital and accelerate its pivot into New Economy real estate.

When considering potential expansion overseas, ESR-LOGOS REIT will focus on markets in which the Sponsor has an operating platform, footprint, and network which include Southeast Asia, China, South Korea, Japan, India, and Australia.

This also provides tangible benefits including

1. access to a global tenant network;

2. leverage local presence to de-risk new market entry;

3. improving its deal sourcing network;

4. potential partnership opportunities for new acquisitions; and

5. leveraging ESR Group’s capital sourcing network and its capital commitment to ESR-LOGOS REIT to fund growth.

With the opportunity to access the Sponsor's assets of >US$50 billion⁶ and a work-in-progress development value of >US$10 billion⁷ across 10 markets, ESR-LOGOS REIT has a competitive edge to supercharge its growth in an environment where quality New Economy properties are becoming increasingly scarce.

Please note that the following timeline is indicative only and may be subject to change. Please refer to future SGXNET announcement(s) by the ALOG Manager and/or the ESR-REIT Manager for the exact dates of these events.