Asset Acquisitions and Disposals::Acquisition and Development of Property located at North Sydney, Australia

(Constituted in the Republic of Singapore pursuant to a trust deed dated 28 November 2005 (as amended))

ACQUISITION AND DEVELOPMENT OF PROPERTY LOCATED AT

INTERSECTION OF BLUE STREET AND WILLIAM STREET, NORTH SYDNEY, AUSTRALIA

Unless otherwise indicated, certain Australian dollar amounts in this announcement have been translated into Singapore dollar based on the exchange rate of A$1.00 = S$0.9833, as at 25 November 2021 for illustrative purpose only.

1. INTRODUCTION

1.1 Acquisition and Development

Keppel REIT Management Limited, in its capacity as manager of Keppel REIT (the "Manager"), is pleased to announce that RBC Investor Services Trust Singapore Limited, in its capacity as trustee of Keppel REIT (the "Trustee"), through The Trust Company (Australia) Limited as trustee of Keppel REIT (Australia) Sub-Trust 7 (the "Keppel Australia Trust"), which is wholly-owned by Keppel REIT, has on 30 November 2021 entered into:

1. a contract of sale (the "Contract of Sale") with vendors1 for the acquisition of the land located at 2-4 Blue Street and 1-5 William Street, North Sydney, Australia (the "Land", and the acquisition of the Land, the "Land Purchase"); and
2. a development agreement (the "Development Agreement") with Lendlease
   Development Pty Limited to develop the Land into a Grade A office building named "Blue & William" (the "Development", and collectively, the Land Purchase and the
   Development, the "Transaction").

The total development consideration (including the consideration for the acquisition of the Land of A$150.0 million (approximately S$147.5 million)) for the Development is A$327.7 million2 (approximately S$322.2 million) (the "Total Development Consideration").

1.2 Information on the Development

The Land is currently being developed into a freehold Grade A office building (the "Property") that will offer a total net lettable area of approximately 14,000 sm. Practical completion of the development is expected in mid-2023.

The Property sits at the prime intersection of 2-4 Blue Street and 1-5 William Street, and is 160m from the North Sydney Train Station. With the upcoming Victoria Cross Metro Station, which will be located about 350m from the Property when completed, commuting time to Barangaroo and Martin Place in the Sydney CBD will be reduced to approximately three

1. The vendors are (i) Pyrmont Union Street Landowner Pty Ltd, (ii) William Street Home Units Pty Limited, (iii) 4 Blue Street Home Units Pty Limited and (iv) Conway Home Units Pty Limited.
2. The Total Development Consideration is subject to further true up adjustments depending on the final surveyed floor area, leasing status and actual rents achieved at the Development.

1

minutes and five minutes respectively.

Designed by leading global architecture firm Woods Bagot, Blue & William will feature outdoor terraces overlooking the Sydney Harbour Bridge, as well as an on-site café and end-of-trip facilities. In line with Keppel REIT's commitment towards sustainability, the Property is designed to achieve the 5 Star Green Star Design and As Built Rating by the Green Building Council of Australia, as well as the 5.5 Stars National Australian Built Environment Rating System (NABERS) Base Building Energy Rating. In addition, it will incorporate smart building technologies such as destination control lifts and motion detection lighting control systems.

2. PRINCIPAL TERMS OF THE LAND PURCHASE AND DEVELOPMENT

1. Consideration and Valuation
   Pursuant to the Contract of Sale, Keppel REIT will purchase the Land for A$150.0 million. This consideration was negotiated on a willing-buyer and willing-seller basis after taking into account the independent valuations as described below.
   CIVAS (NSW) Pty Limited ("Colliers", or the "Independent Valuer") was commissioned by the Trustee to value the Land and the Property. The Independent Valuer had on 23 November 2021 valued (i) the Land (on a standalone land basis) at A$150.0 million (approximately S$147.5 million) and (ii) the Property (on a completed basis) at A$327.8 million3 (approximately S$322.3 million) based on the Capitalisation and Discounted Cashflow approach.
2. Estimated Total Project Cost
   The estimated total cost of the Transaction for Keppel REIT (the "Total Project Cost") is approximately A$342.9 million (approximately S$337.1 million), comprising:
3. 1. the Total Development Consideration of A$327.7 million (approximately S$322.2 million);
   2. the acquisition fee payable to the Manager for the Transaction pursuant to the trust deed of Keppel REIT of approximately A$3.3 million (approximately S$3.2 million); and
   3. transaction costs on the project, including stamp duty and other applicable taxes, estimated professional fees and other fees and expenses of approximately A$11.9 million (approximately S$11.7 million).

3 The valuation without Rental Guarantee is approximately A$315.0 million (approximately S$309.7 million).

2

1. Principal Terms of the Contract of Sale
   Pursuant to the terms of the Contract of Sale, Keppel Australia Trust shall pay an initial amount of A$143.0 million (approximately S$140.6 million) on completion of the Land Purchase with a balance payment of A$7.0 million (or approximately S$6.9 million) on the earlier of the date that is eight business days after the date of practical completion and 30 June 2023.
2. Principal Terms of the Development Agreement Pursuant to the terms of the Development Agreement:
3. 1. the Developer will administer the development of the Property; and
   2. progress payments for the Development shall be paid to the Developer. The Developer shall, pursuant to the Development Agreement, pay Keppel Australia Trust a coupon of 4.5% per annum (computed based on the aggregate amount of progress payments which Keppel Australia Trust has paid the Developer at each coupon date) every six months until the Property achieves practical completion. The coupon payable to Keppel Australia Trust will be applied as a reduction of the progress payments required to be paid to the Developer for the Development.

The Developer has, pursuant to the terms of Development Agreement, provided a rental guarantee for any vacant space based on the target rental rate during the rental guarantee period (being the period from the date of practical completion until the earlier of 100% of the available areas having been let or three years after the date of practical completion) (the "Rental Guarantee"). The Independent Valuer has assessed that the target rental rate on which the Rental Guarantee is calculated on is in line with market rents and therefore the Rental Guarantee is on normal commercial terms and in line with market transactions. Taking into account the Independent Valuer's assessment, the board of directors of the Manager is of the view that the Rental Guarantee is on normal commercial terms and is not prejudicial to the interests of Keppel REIT and its minority Unitholders.

3. RATIONALE FOR THE DEVELOPMENT

The Manager believes that the Development will bring, inter alia, the following key benefits to unitholders of Keppel REIT ("Unitholders"):

3.1 Distribution per Unit ("DPU") - accretive with regular coupon throughout the development phase

Apart from deepening Keppel REIT's Australian footprint, the acquisition is expected to be DPU-accretive with regular coupon throughout the development phase. Please refer to paragraph 4.2 below for the pro forma financial effects of the Transaction on Keppel REIT's DPU for the financial year ended 31 December 2020 ("FY2020").

3

1. Continuing portfolio optimisation that further strengthens and diversifies portfolio
   In line with the Manager's active portfolio optimisation strategy, this DPU-accretive investment brings an initial net property income yield of 4.5%4, which will enhance Keppel
   REIT's overall portfolio returns. At the same time, regular coupon will be received from the Developer throughout the development phase, providing robust risk-adjusted returns.
   Blue & William will be a strong addition to Keppel REIT's portfolio. Designed with tenant experience and wellness as a priority, Blue & William will include advanced green features and smart building technologies, as well as offer panoramic views of the Sydney Harbour Bridge.
   The investment will reduce Keppel REIT's exposure to any single asset and further diversify its income streams. Post practical completion of the Property expected in mid-2023, Keppel REIT's portfolio will grow to S$9.0 billion5 with Grade A commercial assets in key business districts of Singapore, Australia and South Korea.
2. Strategic expansion into North Sydney with positive leasing dynamics

The investment will also see Keppel REIT expand strategically into North Sydney, a major commercial district with positive leasing dynamics. North Sydney is New South Wales' second largest office market6 after the Sydney CBD, and is a location of choice for diverse industry sectors including technology, media and telecommunication, as well as the professional services and insurance sectors7.

Notwithstanding the pandemic, North Sydney recorded its third consecutive quarter of positive leasing demand in 3Q 2021, with new and refurbished buildings continuing to be drivers of leasing activity8. With no new significant supply anticipated for North Sydney until 2024, the market is well placed to absorb the current availability of stock and drive vacancy down9. The completion of the new Victoria Cross Metro Station in 2024 will also enhance connectivity to North Sydney and support future demand in the market10.

3.4 Well-located in major commercial district with excellent connectivity

The Property sits at the prime intersection of 2-4 Blue Street and 1-5 William Street, and is 160m from the North Sydney Train Station. With the upcoming Victoria Cross Metro Station, which will be located about 350m from the Property when completed, commuting time to Barangaroo and Martin Place in the Sydney CBD will be reduced to approximately three minutes and five minutes respectively.

1. Based on the estimated net property income for the first operational year after practical completion and taking into account the Rental Guarantee.
2. Pro forma as at 30 September 2021, assuming that practical completion was achieved on 30 September 2021.
3. Property Council of Australia, Office Market Report July 2021.
4. Knight Frank, North Shore Office Market Report September 2021.
5. JLL Research, 3Q 2021.
6. Knight Frank, North Shore Office Market Report, September 2021.
7. JLL Research, February 2021.

4

4. METHOD OF FINANCING AND FINANCIAL EFFECTS

1. Method of Financing
   The Manager intends to fully finance the Total Development Consideration with Australian dollar denominated loans for natural hedge. Progressive payments will be made based on construction milestones.
2. Pro Forma Financial Effects
   FOR ILLUSTRATIVE PURPOSES ONLY: The pro forma financial effects of the Transaction presented below are strictly for illustration purposes only, and do not reflect the actual financial position of Keppel REIT following the completion of the Transaction11.
   The pro forma financial effects of the Transaction on the DPU and the net asset value ("NAV") per unit in Keppel REIT ("Unit") presented below were prepared based on the audited financial statements of Keppel REIT for the financial year ended 31 December 2020, taking into account the Total Project Cost as well as the assumption that (i) the Property had achieved practical completion on 1 January 2020; and (ii) the Rental Guarantee in respect of the Property is in place on 1 January 2020.
   4.2.1 Pro Forma DPU12 of the Transaction
   FOR ILLUSTRATIVE PURPOSES ONLY: The pro forma financial effects of the
   Transaction on Keppel REIT's DPU for the financial year ended 31 December 2020, as if Keppel REIT had completed the Transaction on 1 January 2020, are as follows:

4.2.2 Pro Forma NAV of the Transaction

FOR ILLUSTRATIVE PURPOSES ONLY: The pro forma financial effects of the Transaction on the NAV per Unit as at 31 December 2020, as if the Transaction was completed on 31 December 2020, are as follows:

1. As the Property is expected to be completed in mid-2023, the Transaction is not expected to have a significant effect on the financial performance and position of Keppel REIT immediately following completion of the Transaction.
2. Rule 1010(9) of the Listing Manual requires that the issuer disclose the effect of the Transaction on the earnings per share of the issuer for the most recently completed financial year, assuming that the Transaction had been effected at the beginning of that financial year. The effect of the Transaction on the distribution per Unit of the issuer is disclosed instead as it is a more appropriate measure for a real estate investment trust.

5

This is an excerpt of the original content. To continue reading it, access the original document here.