s reit sector 120821 oir

7/30/2019 s Reit Sector 120821 Oir

1/94Please refer to important disclosures at the back of this document. MICA (P) 041/06/2012

SWITCH TO THE RIGHT REITS

As our house advocated an OVERWEIGHT rating on the S-REIT sector throughout FY12, we

saw the FTSE ST REIT index appreciate 22.7% YTD, versus the STIs 15.7% gain, driven

mostly by a flight to safety amidst macro uncertainties and a liquidity driven search for yield.At this juncture when we are seeing prices taking new heights and gaining updated visibility

for subsector outlooks, we ask investors: Are you switching to the right REITs today? We

present three key ideas for investors with REITs portfolios: 1) Move to office REITs from local

retail REITs - prefer CCT [BUY, FV: S$1.53] over CMT [HOLD, FV: S$2.04], 2) Stay in

industrial REITs for yield top pick is CACHE [BUY, FV: S$1.18], 3) Hospitality outlook is

intact but rotate to ART [BUY, FV: S$1.34] from CDLHT [HOLD, FV: S$2.06]. Other BUY

rated REITs include FCT [FV: S$1.89], SGREIT [FV: S$0.79], MLT [FV: S$1.19], FCOT [FV:

S$1.23] and CRCT [BUY, FV: S$1.70].

Asia Pacific Equity Research | Singapore

21 Aug 2012SINGAPORE REITS


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SWITCH TO THE RIGHT REITS Switch to office from local retail

Stay in industrial REITs; top pick is

CACHE

Hospitality outlook intact; rotate to ART

OVERWEIGHT

(maintain)

Analysts

Kevin Tan (Lead) +65 6531 9810

[email protected]

Sarah Ong +65 6531 9678

[email protected]

Eli Lee +65 6531 9112

[email protected]

Andy Wong +65 6531 9817

[email protected]

Relative total return 1m 3m 12m

Sector (%) 3 12 18

STI-adjusted (%) 0 2 7

Price performance chart

498

548

598

648

698

747

Aug-11 Nov-11 Feb-12 M ay-12

2100

2340

2580

2820

3060

3300

FST REI FSST I

Sector Index Level Mar ket Index Level

`

Sources: Bloomberg, OIR

Stock coverage ratings

BBRG Ticker PriceFair

ValueRating

AREIT SP Equity 2.24 2.27 HOLD

ART SP Equity 1.20 1.34 BUY

CACHE SP Equity 1.10 1.18 BUY

CCT SP Equity 1.39 1.53 BUY

CT SP Equity 1.93 2.04 HOLD

CRCT SP Equity 1.47 1.70 BUY

CDREIT SP Equity 1.93 2.06 HOLD

FIRT SP Equity 0.97 0.96 HOLD

FRT SP Equity 5.32 5.33 HOLD

FCT SP Equity 1.76 1.89 BUY

FCOT SP Equity 1.10 1.23 BUY

LMRT SP Equity 0.43 0.45 BUY

MLT SP Equity 1.02 1.19 BUY

SGREIT SP Equity 0.73 0.79 BUY

SUN SP Equity 1.43 1.45 HOLD

Switch to office REITs from local retail REITs prefer CCT over

CMT

Due to limited supply coming online and better than expected demand

in 2Q12, office fundamentals are outstripping market expectations.Meanwhile, office REITs, trading at an attractive average 0.82x PBand forward yield of 6.4%, reported a healthy set of 2Q12 results in-line/surpassing consensus estimates. Upgrade office REITs toOVERWEIGHT. On the other hand, while the outlook for the localretail sector remains stable, we judge that most of the positives arealready priced in at currently rich valuations. Downgrade local retailREITs to NEUTRAL. Our recommendation here: switch to CCT [BUY,FV: S$1.53] from CMT [HOLD, FV: S$2.04]. We also like FCOT[BUY, FV: S$1.23] for its growth potential, strong execution andattractive forward yield of 7.1%.

Good o industrial REITs - in uncertain times, CACHE is king

We believe growth drivers and financial positions of industrial REITsremain sound. Average current and forward DPU yields of 7.6-7.7%

are still the highest among other REIT subsectors. MaintainOVERWEIGHT on the subsector. Our top pick here is CACHE [BUY,FV: S$1.18] for its sturdy portfolio, healthy financial position andattractive FY12F yield of 7.6%.

Hospitality story intact - rotate to ART from CDLHT

We see overall hotel room demand (6.4% pa) outstripping supplygrowth (3.7% pa) over 2012-15 and supporting RevPAR at currenthigh occupancies of 80%-90%. Maintain OVERWEIGHT on hospitalityREITs. We advocate rotating from CDLHT [HOLD, FV: S$2.06] toART [BUY, FV: S$1.34] which looks overly punished for its Europeanexposure and for its attractive 7.5% forward yield.

Overseas retail REITs can boost returns CRCT is preferred

Maintain OVERWEIGHT on overseas retail REITs. Our previous toppick FRT has appreciated significantly YTD, with its acquisition of twoproperties and good 1H12 results serving as price catalysts. However,based on valuations, we are now switching our preference to CRCT[BUY, FV: S$1.70], which has strong fundamentals and deserves apremium for being the only pure-play mainland China retail REIT.

Healthcare REITs looks expensive avoid for now

While prospects of healthcare REITs remain intact, valuations appear

expensive. Based on consensus estimates, healthcare REITs aretrading at 1.27x P/B and forward yields of 6.3% versus S-REITs average of 0.96x P/B and 6.9%. We see limited upside

ahead; downgrade subsector to NEUTRAL.

SINGAPORE REITS | OVERWEIGHT21 Aug 2012

Sector Update

Asia Pacific Equity ResearchSingapore | REITs

MICA (P) 041/06/2012Please refer to important disclosures at the back of this document.


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OCBC Investment ResearchSingapore Equities

2

Table of contents

Section A. Summary Switch to the right REITs 3

Section B.I. Local Retail REITs: Downgrade toNEUTRAL - looks overvalued

5

Section B.II. Overseas Retail REITs: Still growing well 14

Section C. Industrial REITs: Flexing its muscles ofresilience

19

Section D. Office REITs: Upgrade to OVERWEIGHT oncompelling valuations

32

Section E. Hospitality REITs: ART offers better yieldthan CDLHT

39

Section F. Healthcare REITs: Downgrade to NEUTRAL time for a breather 43

Company reports Ascendas REIT 49

Ascott Residence Trust 52

Cache Logistics Trust 55

CapitaCommercial Trust 58

CapitaMall Trust 61

CapitaRetail China Trust 64

CDL Hospitality Trusts 67

First REIT 70

Fortune REIT 73

Frasers Centrepoint Trust 76

Frasers Commercial Trust 79

Lippo Malls Indonesia Retail REIT 82

Mapletree Logistics Trust 85

Starhill Global REIT 88

Suntec REIT 91


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Section A: Summary Switch to the right REITs

Switch to office REITs from local retail REITs prefer CCT overCMT. Due to limited supply coming online and better than expecteddemand in 2Q12, office fundamentals are outstripping marketexpectations. Meanwhile, office REITs, trading at an attractive average0.82x PB and forward yield of 6.4%, reported a healthy set of 2Q12results in-line/surpassing consensus estimates. We are upgrading officeREITs to OVERWEIGHT. On the other hand, while the outlook for thelocal retail sector remains stable, we judge that most of the positives arealready priced in at currently rich valuations. As such, we downgradelocal retail REITs to NEUTRAL. Our recommendation here: switch to CCT[BUY, FV: S$1.53] from CMT [HOLD, FV: S$2.04]. We also like FCOT[BUY, FV: S$1.23] for its growth potential, strong execution andattractive forward yield of 7.1%.

Good o industrial REITs - in uncertain times, CACHE is king. Webelieve growth drivers and financial positions of industrial REITs remain

sound. Average current and forward DPU yields of 7.6-7.7% are still thehighest among other REIT subsectors. Maintain OVERWEIGHT on thesubsector. Our top pick here is CACHE [BUY, FV: S$1.18] due to itssturdy portfolio, healthy financial position and attractive FY12F yield of7.6%.

Hospitality story intact - rotate to ART from CDLHT. We see overallhotel room demand (6.4% p.a.) outstripping supply growth (3.7% p.a.)over 2012-15 and supporting RevPAR at current high occupancies of80%-90%. Maintain OVERWEIGHT on hospitality REITs. We advocaterotating from CDLHT [HOLD, FV: S$2.06] to ART [BUY, FV: S$1.34]which looks overly punished for its European exposure and for itsattractive 7.5% forward yield.

Overseas retail REITs can boost returns CRCT is preferred.Maintain OVERWEIGHT on overseas retail REITs. Our previous top pickFRT has appreciated significantly YTD, with its acquisition of twoproperties and good 1H12 results serving as price catalysts. However,based on valuations, we are now switching our preference to CRCT [BUY,FV: S$1.70], which has strong fundamentals and deserves a premium forbeing the only pure-play mainland China retail REIT.

Healthcare REITs looks expensive avoid for now. While prospectsof healthcare REITs remain intact, valuations appear expensive. Basedon consensus estimates, healthcare REITs are trading at 1.27x P/B andforward yields of 6.3% versus S-REITs average of 0.96x P/B and 6.9%.We see limited upside ahead; downgrade subsector to NEUTRAL.


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Exhibit A-1: S-REITs under coverage

BBRG Ticker Price Fair Value Rating Analyst

Ascendas REIT AREIT SP SGD 2.24 2.27 HOLD Kevin

Ascott Residence Trust ART SP SGD 1.195 1.34 BUY Sarah

Cache Logistics Trust CACHE SP SGD 1.1 1.18 BUY Kevin

CapitaCommercial Trust CCT SP SGD 1.385 1.53 BUY Eli

CapitaMall Trust CT SP SGD 1.93 2.04 HOLD Kevin

CapitaRetail China Trust CRCT SP SGD 1.47 1.7 BUY Sarah

CDL Hospitality Trusts CDREIT SP SGD 1.93 2.06 HOLD Sarah

First REIT FIRT SP SGD 0.97 0.96 HOLD Andy

Fortune REIT FRT SP HKD 5.32 5.33 HOLD Sarah

Frasers Centrepoint Trust FCT SP SGD 1.76 1.89 BUY Kevin

Frasers Commercial Trust FCOT SP SGD 1.1 1.23 BUY Kevin

Lippo Malls Indo Retail REIT LMRT SP SGD 0.43 0.45 BUY Sarah

Mapletree Logistics Trust MLT SP SGD 1.02 1.19 BUY Kevin

Starhill Global REIT SGREIT SP SGD 0.73 0.79 BUY Kevin

Suntec REIT SUN SP SGD 1.425 1.45 HOLD Kevin

Source: Bloomberg, OIR estimates

Exhibit A-2: Peer comparisonPrice Mkt Cap Float FYE DPU Curr Yield Fwd Yield YTD Return D/A P/B

($) ($ m) (%) (mth) (freq) (%) (%) (%) (%) (x)

OFFICE (4)

CapitaCommercial Trust SGD 1.385 3,934.5 67.4 Dec Semi-Anl 5.6 5.6 31.3 30.1 0.9

Frasers Commercial Trust SGD 1.100 708.1 73.0 Sep Semi-Anl 6.2 7.1 48.6 39.5 0.8

K-REIT Asia SGD 1.135 2,979.8 24.5 Dec Semi-Anl 6.7 6.6 36.7 43.9 0.9

Suntec REIT SGD 1.425 3,196.1 89.8 Dec Quarter 6.5 6.4 32.6 39.3 0.7

Total: 10,818.6 Average: 6.3 6.4 37.3 38.2 0.8

RETAIL (7)

CapitaMall Trust SGD 1.930 6,428.3 61.1 Dec Quarter 5.1 5.5 13.5 37.5 1.2

CapitaRetail China Trust SGD 1.470 1,015.0 60.4 Dec Semi-Anl 6.4 6.7 27.8 28.1 1.1

Frasers Centrepoint Trust SGD 1.760 1,448.8 59.1 Sep Quarter 5.5 5.9 22.2 31.7 1.2Fortune REIT HKD 5.320 9,019.2 65.7 Dec Semi-Anl 5.9 6.4 41.5 24.5 0.6

Lippo Malls Indo Retail REIT SGD 0.430 939.0 55.5 Dec Quarter 7.7 7.9 22.9 9.3 0.8

Mapletree Commercial Trust SGD 1.070 2,000.5 57.3 Mar Quarter 5.7 6.0 25.9 37.6 1.1

Starhill Global REIT SGD 0.730 1,418.4 70.5 Dec Quarter 5.9 6.3 29.2 30.5 0.8

Total: 14,699.4 Average: 6.0 6.4 26.1 28.5 1.0

INDUSTRIAL (7)

AIMS AMP Capital Ind REIT SGD 1.280 570.8 92.4 Mar Quarter 8.6 9.0 35.4 29.7 0.9

Ascendas REIT SGD 2.240 5,012.1 77.2 Mar Quarter 6.2 6.3 22.4 32.7 1.2

Cache Logistics Trust SGD 1.100 771.6 85.9 Dec Quarter 7.6 7.8 15.8 27.5 1.2

Cambridge Industrial Trust SGD 0.600 719.4 94.7 Dec Quarter 8.0 8.3 26.3 35.8 1.0

Mapletree Industrial Trust SGD 1.290 2,102.3 69.4 Mar Quarter 6.8 6.9 20.0 37.7 1.3

Mapletree Logistics Trust SGD 1.020 2,474.8 58.8 Mar Quarter 6.8 6.9 20.7 37.0 1.1

Sabana REIT SGD 1.035 661.9 88.1 Dec Quarter 9.0 9.0 18.3 34.1 1.0

Total: 12,313.1 Average: 7.6 7.7 22.7 33.5 1.1

HOSPITALITY (2)

Ascott Residence Trust SGD 1.195 1,358.7 50.7 Dec Semi-Anl 7.2 7.5 20.7 39.7 0.8

CDL Hospitality Trusts SGD 1.930 1,867.3 67.5 Dec Semi-Anl 6.2 6.4 24.9 25.2 1.2

Total: 3,226.1 Average: 6.7 7.0 22.8 32.5 1.0

HEALTHCARE (2)

ParkwayLife REIT SGD 1.965 1,188.8 57.3 Dec Quarter 5.0 5.4 9.8 36.4 1.3First REIT SGD 0.970 612.6 60.2 Dec Quarter 7.4 7.1 27.6 15.9 1.2

Total: 1,801.4 Average: 6.2 6.3 18.7 26.2 1.3

RESIDENTIAL (1)

Saizen REIT SGD 0.158 225.1 89.1 Jun Semi-Anl 6.0 7.0 12.9 31.6 0.5

Total: 225.1 Average: 6.0 7.0 12.9 31.6 0.5

23 S-REITS GRAND TOTAL: 43,083.6 AVERAGE: 6.6 6.9 25.5 32.0 1.0

Source: Companies, Bloomberg, Yahoo Finance, OIR estimates

NOTES:

1) SGD/JPY = 0.0159; SGD/USD = 1.2465; SGD/HKD = 0.1607; USD/HKD = 0.1289

2) Curr DPU and yield refer to the respective Bloomberg consensus distribution and yield forecasts for current financial year

3) Fwd DPU and yield refer to the respective Bloomberg consensus distribution and yield f orecasts for next financial year

4) D/A (Debt-to-Asset) and P/B (Price-to-Book) are based on figures reported in last available financial results


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Section B: Retail REITs Prefer overseas retail exposure

I. Local Retail REITs: Downgrade to NEUTRAL - looksovervalued

Good set of 2Q12 results. Local retail REITs have turned in good setsof results for 2Q12. Contributions from AEIs and positive rentalreversions were the main key drivers among all the local retail landlords,while CapitaMall Trust (CMT) and Frasers Centrepoint Trust (FCT) alsogained from contribution from acquisitions over the past year. FCT stoodout as the star performer once again, with a 33.3% YoY increase in DPUas it continued to enjoy strong rental uplift from Causeway Point andincremental income from Bedok Point (acquired in Sep 2011). The 61.3%YoY surge in distributable income by Mapletree Commercial Trust (MCT)was due to shorter reporting period in 2Q11 (MCT was listed only 27 Apr2011). On a pro-forma basis, however, it still represents a strong 15.6%YoY rise, thanks to robust operational performance and contribution from

Alexandra Retail Centre (ARC).

Exhibit B-1: YoY performance by local retail REITs

(S$ m) NPI % Chg Distri income % Chg DPU (S cents) % Chg

2Q12 2Q11 2Q12 2Q11 2Q12 2Q11

CapitaMall Trust 112.0 106.4 5.2% 79.6 75.5 5.5% 2.38 2.36 0.8%

Frasers Centrepoint Trust 24.6 18.7 32.1% 20.2 14.8 37.1% 2.60 1.95 33.3%

Mapletree Comm Trust 35.8 22.7 57.7% 28.7 17.8 61.3% 1.54 0.96 60.7%

Starhill Global REIT 37.1 35.6 4.4% 23.3 22.8 2.0% 1.08 1.04 3.8%

Source: Companies

Exhibit B-2: QoQ performance by local retail REITs


2Q12 1Q12 2Q12 1Q12 2Q12 1Q12

CapitaMall Trust 112.0 108.3 3.3% 79.6 82.0 -3.0% 2.38 2.30 3.5%

Frasers Centrepoint Trust 24.6 26.2 -5.9% 20.2 21.3 -4.8% 2.60 2.50 4.0%

Mapletree Comm Trust 35.8 35.8 0.1% 28.7 29.0 -1.0% 1.54 1.55 -1.1%

Starhill Global REIT 37.1 37.3 -0.5% 23.3 23.3 -0.1% 1.08 1.07 0.9%

Source: Companies

Strong operational performance. Local retail REITs have been veryengaged in their lease management activities. While occupancy rateswere temporarily affected by asset enhancement works in most of theREITs portfolios, there have been improvements across the board overthe past quarter as more and more refurbishment works areprogressively done and as REITs continue to fill in more tenants.Consequently, the subsector weighted average lease to expiry (WALE)stayed relatively constant over the last four quarters. In Jun, we notethat the WALE was boosted by Starhill Global REIT (SGREIT), as itsmaster tenant Toshin Development Singapore Pte Ltd has exercised itsoption to renew the lease for retail areas at Ngee Ann City for another 12years.


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Exhibit B-3: Portfolio occupancy and lease duration trend

Occupancy rate (%) WALE (years)

Jun2012

Mar2012

Dec2011

Sep2011

Jun 2012 Mar 2012 Dec 2011 Sep 2011

CapitaMall Trust 98.6 96.4 94.8 96.0 N.D. N.D. N.D. N.D.

Frasers Centrepoint Trust 93.7 93.5 97.5 95.1 1.9 2.0 1.9 1.8

Mapletree Comm Trust 96.1 94.6 94.7 98.1 2.6 2.6 2.7 2.8

Starhill Global REIT 99.5 99.0 98.7 98.0 6.0 3.8 3.8 3.9

AVERAGE: 97.0 95.9 96.4 96.8 3.5 2.8 2.8 2.8

Source: Companies, OIR

NOTE: N.D. - Not disclosed

Exhibit B-4: Debt level and duration

Aggregate leverage (%) Debt duration (years)

Jun2012

Mar2012

Dec 2011 Sep 2011 Jun 2012 Mar 2012 Dec 2011 Sep 2011

CapitaMall Trust 37.5 38.3 38.4 38.4 2.9 2.9 2.7 2.8




AVERAGE: 34.3 34.3 34.4 34.6 2.5 2.6 2.7 2.8

Source: Companies, OIR estimates

NOTE: Some REITs refinanced their debts after close of 2Q12 results

Steady fundamentals. The financial health of local retail REITs is alsovery healthy in our view. The subsector aggregate leverage has been

hovering around 34% since Sep 2011, whereas the weighted averagedebt to maturity has remained comfortable at 2.5 years as at 30 Jun.While CMTs gearing ratio was relatively high at 37.5%, its corporatefamily rating of A2 (stable outlook) by Moodys remains the highestrating ever assigned to a Singapore REIT on SGX. In the case of MCT, wenote that its funding costs of 2.0% and interest coverage of 5.7x are thestrongest among the REITs despite having a higher-than-average debtlevel of 37.6%. Furthermore, both REITs have also been active in theircapital management, as evidenced by the recent issuance of S$150mfixed rate notes by CMT and the establishment of a S$1b multi-currencyMedium Term Note (MTN) programme by MCT. Hence, we do not foreseeany major refinancing risks within the local retail subsector.

Exhibit B-5: Debt burden

All-in funding costs (%) Interest Coverage (x)

2Q12 1Q12 4Q11 3Q11 2Q12 1Q12 4Q11 3Q11

CapitaMall Trust 3.3 3.3 3.5 3.6 3.3 3.4 3.3 3.4




AVERAGE: 2.8 2.9 2.9 3.0 4.8 4.8 4.6 4.3



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Exhibit B-6: Credit rating by rating agencies

Rating and Outlook

CapitaMall Trust A2 corporate rating with stable outlook by Moody's

Frasers Centrepoint Trust BBB+/Stable by S&P; Baa1/Stable by Moodys

Mapletree Comm Trust Baa2 corporate rating with stable outlook by Moody's

Starhill Global REIT BBB corporate rating with stable outlook by S&P

Source: Companies

Exhibit B-7: Debt maturity profile

2012 2013 2014 2015 2016 and later

CapitaMall Trust 783 580 500 800 1550

Frasers Centrepoint Trust 0 55 60 95 364

Mapletree Comm Trust 0 282 339 339 169

Starhill Global REIT 1 576 1 256 26

TOTAL: 784 1493 900 1489 2109

% OF TOTAL DEBT 11.6% 22.0% 13.3% 22.0% 31.1%


Exhibit B-8: Local retail REIT subsector debt maturity profile



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Local retail REITs actively involved in AEIs. Acquisition activity bylocal retail REITs was muted year-to-date, but the REIT managers arevery much involved in AEIs, repositioning and development of malls. Anumber of such AEIs, we note, are slated to complete in 2H12, thus weexpect occupancy rates to improve and rental upside to flow inprogressively over 2H12 and 2013.

Exhibit B-9: Corporate actions by local retail REITs

Acquisition Divestment AEI/ Development

CapitaMall Trust 1Q Nil Nil - AEI on Bugis+ (completion byJul) and Atrium @ Orchard(completion in 4Q12).- Developing Westgate project(completion in 4Q13).

2Q Nil - Completed divestment ofHougang Plaza for S$119.1m.

- Completed AEI and openedJCube in Apr.- Completed Phase 1 ofBugis+'s AEI in Jun and

commenced Phase 2 of AEI(completion by end Jul).- Developing Westgate project.- AEI on Atrium @ Orchardand Blocks C and E of ClarkeQuay (completion by 3Q12).- Commenced AEI on IMMBuilding in May.

Frasers Centrepoint Trust 1Q Nil Nil - AEI on levels 5 and 7 ofCauseway Point (completionexpected in Dec).

2Q Nil Nil - AEI on levels 5 and 7 ofCauseway Point (completionexpected in Dec).

Mapletree Comm Trust 1Q Nil Nil Nil

2Q Nil Nil Nil

Starhill Global REIT 1Q Nil Nil - AEI on Wisma Atria(completion in 3Q12).- Tenant remix and renovationsat Renhe Spring ZongbeiProperty in Chengdu, China.

2Q Nil Nil - AEI on Wisma Atria(substantially completed in2Q12).- Commenced work toreposition Lot 10 in Malaysia.- Tenant remix and renovationsat Renhe Spring ZongbeiProperty in Chengdu, China.



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Good growth profile still intact. For the rest of 2012, we believe thatlocal retail REITs will continue to put in a good showing in their financialperformances, driven by improved occupancies, continued positive rentalreversions and higher contributions from past acquisitions and completedAEIs. While we anticipate inorganic growth to stay largely muted withinthe local retail scene for 2H12, we see possibility of asset injection byMCT (Mapletree Business City) and FCT (Changi City Point) in 2013. Thisshould provide the potential for further income expansion and sustainthe REITs growth profile.

Exhibit B-10: Results and outlook on local retail REITs

Drivers for 2Q12 performance Results vs.expectations

Outlook

CapitaMall Trust - Positive NPI growth due tocontribution from JCube andpositive rental reversions.

- In line with both OIRand consensusforecasts.

- Leasing activities progressingon track, with rental upside fromAEIs to be realizedprogressively over 2H12 and2013.- Focus on smooth execution ofAEIs and Westgate project.- Refinancing of S$783m CMBSdue in Oct is almost completed.

Frasers Centrepoint Trust - Good performance due to strongcontribution from Causeway Pointand newly-acquired Bedok Point,and positive rental reversions.

- Exceeded both OIRand consensusexpectations.

- Expects growth momentum tobe sustained through 3Q12.- Causeway Point occupancyexpected to improve to 100%upon AEI completion in Dec2012.- Asset injection of Changi CityPoint may happen in nextfinancial year.

Mapletree Comm Trust - NPI growth driven by strongpositive rental reversions, stepped-up rentals and contribution fromAlexandra Retail Centre.

- Not rated by OIR.- Slightly aboveconsensus estimates.

- Expects portfolio mix anddiversified tenant base to reducerisk and provide sustainability ofearnings.

- Focus on driving organicgrowth for portfolio.

Starhill Global REIT - Strong 2Q12 numbers due mainlyto improved office occupancy andhigher retail rentals from WismaAtria.


- Expects positive performanceto be maintained as the impactof positive rental reversions mayonly be realized in upcomingquarters.- May possibly benefit frominterest savings after refinancingits portion of its outstandingdebts.

Source: Companies, Bloomberg, OIR

Exhibit B-11: Details on portfolio assets

Investmentproperties (S$m)

Number ofproperties

% exposure toSingapore

% of assetsencumbered

% lease due forrenewal by 1Q13

CapitaMall Trust 8376.4 15 100.0 58.1 11.9

Frasers Centrepoint Trust 1707.3 5 100.0 39.0 13.4

Mapletree Comm Trust 2944.9 3 100.0 0.0 19.1

Starhill Global REIT 2700.2 13 62.8 58.0 2.7


Favourable market indicators. In terms of market outlook andcompetitive landscape, we note that indicators have by far suggestedcontinued strong consumer demand and favourable market dynamics.

Singapore retail sales excluding motor vehicles (seasonally adjusted)have clearly been tracking a positive trend line since 2003. In Jun, theretail sales again grew by 1.9% MoM and 2.3% YoY. Unemployment rate


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in 2Q12 have also shown a 10 basis point QoQ improvement, registeringa low 2.0% in Jun. Moreover, the nominal average monthly wages wereup 0.9% QoQ and 4.0% YoY to S$4,717 in 1Q12, suggesting thatconsumers may have a higher propensity to spend. These positivemarket indicators, together with rising tourist arrivals, are likely to keepthe demand for retail space buoyant, in our view.

Exhibit B-12: Retail sales and accompany retail sales indices (seasonally adjusted or S.A.)

Source: CEIC, Singstat, OIR

Exhibit B-13: Available shop space (public and private sectors)

Source: URA REALIS, OIR

Take-up rate likely to be healthy. In 1Q12, we understand that thetotal retail space in Singapore rose by 5k sqm to 3.42m sqm, repeatingthe same quantum seen in 4Q11. Outside Central Region retail spaceformed the largest proportion of the total stock at 32.8%, followed byFringe Area at 29.5%. According to CBREs 1Q12 estimates, there is~443k of potential retail supply flowing into the market between 2012

and 2015, forming 12.9% of current stock. The bulk of the supply isexpected to come from the suburbs, while the supply in Orchard is


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projected to remain subdued. However, given the confidence bydevelopers in suburban malls and healthy residential catchment areas bythe upcoming supply, the take-up is still expected to stay healthy. In2012 and 2013, we note that ~77.6k sqm and 165.4k sqm of retailspace is likely to be delivered to the market respectively. As theexpected supply forms only around 2.3% and 4.8% of current retailstock, we believe the net absorption is likely to be manageable.

Exhibit B-14: Supply of retail space in pipeline (sq ft)

Source: CBRE, URA REALIS, OIR

Exhibit B-15: Vacancy rates for shop spaces


Slight increase in vacancy rates. Vacancy rates have crept upmarginally across all geographical areas of the local retail sector in 1Q12.The impact was most pronounced in the Rest of Central Area, whichclocked a 80 basis points increase in vacancy rates to 9.4% (highestamong all areas). The Fringe Area, on the other hand, showed thesmallest rise of 20 basis points to 7.3%. Notably, the Outside Central

Region vacancy rate remains the lowest at 3.1% in 1Q12, beating theoverall retail space vacancy rate of 5.8%.


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Rental values and occupancy rates likely to remain stable. Despitethe dip in occupancy rates, rental rates have been stable throughout allparts of retail space in 1Q12. Similarly, capital values of retail spaceshave held up well, with the island-wide shop space prices grew 0.2%QoQ and 5.0% YoY, according to URA Property Price Index. At this

juncture, we believe occupancy rates and rental values will remain stablefor the rest of 2012, as any downward pressure from concerns on theupcoming supply and macroeconomic outlook is likely to be balanced outby still resilient domestic and tourist consumption.

Exhibit B-16: Median Rental and Property Rental Indices (PRI)


Exhibit B-17: Median Rental for Orchard, Rest of City and Outside Central Areas


NOTE:

1) Rest of City Area refers to the part within the Central Area outside the Orchard planning area.

2) Outside Central Area comprises Fringe Area, East Region, North East Region, North Region and West Region.


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Exhibit B-18: Median Prices and Property Price Indexes (PPI)


Downgrade to NEUTRAL on valuation grounds. In view of thefavourable market dynamics and active involvement in AEIs, we areconfident that local retail REITs will continue to deliver another year ofgrowth in 2012. YTD, we note that the REITs unit prices have risen by22.7% on average, as investors continue to accumulate them amid thepositive outlook. Based on 17 Aug closing prices, we note that local retailREITs are trading at an average of 10% premium to their book values,and are offering a consensus average DPU yields of 5.6% for the current

financial year. This compares to the S-REIT sector average P/B of 1.0xand DPU yield of 6.6%. As such, we believe that most of the positiveswithin the subsector have been priced in. We downgrade the local retailREIT subsector from Overweight to NEUTRAL based on valuationgrounds and maintain our HOLD rating on CMT [FV: S$2.04], the largestretail REIT listed on SGX. Within our coverage, we have BUY ratings forFCT [FV: S$1.89] and SGREIT [FV: S$0.79].

Switching preference to SGREIT. FCT was previously our top pickwithin the subsector, due to its 1) 100% exposure to more resilientsuburban malls, 2) healthy aggregate leverage of 31.7% and 3) cleargrowth potential from its Causeway Point AEI and strong rentalreversions. However, the stock is currently trading at 1.25x P/B after astrong run-up of 22.2% in its unit price YTD. While we continue to like

FCT for its investment merits, we believe SGREIT is a cheaper alternativeto ride on the strong domestic retail growth story, which is trading onlyat 0.77x P/B. Like FCT, we note that SGREIT possesses good growthpotential (resulting from Wisma Atria AEI), healthy aggregate leverage of30.5%, and is poised to benefit from favourable competitive landscape(limited supply of retail space at Orchard Road). Hence, we switch ourtop pick for the local retail REIT subsector from FCT to SGREIT.


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II. Overseas Retail REITs: Still growing well

Strong 2Q12 performance. CapitaRetail China Trust (CRCT), FortuneReal Estate Investment Trust (FRT) and Lippo Malls Indonesia RetailTrust (LMIRT) posted excellent YoY growth in NPI and distributableincome for 2Q12. CRCT and FRT experienced good rental reversions of15.2% and 20.6% YoY. Growth was also driven by contributions fromproperties previously acquired between mid 2011 and early 2012. Interms of DPU, FRT had the most impressive performance, with DPUclimbing by 32.5% YoY. CRCT registered 12.1% YoY DPU growth whileLMIRT saw DPU decline by 27.5% YoY due to a 1-for-1 rights issue in4Q11.

Exhibit B-19: YoY performance by overseas retail REITs

NPI%

ChgDistri income

%Chg

DPU % Chg

2Q12 2Q11 2Q12 2Q11 2Q12 2Q11

CapitaRetail ChinaTrust

S$24.9m S$20.6m 20.9% S$16.6m S$13.5m 23.5% 2.41 S cents 2.15 S cents 12.1%

Fortune REIT HK$196.8m HK$158.5m 24.2% HK$136.5m HK$102.0m 33.8%8.04 HK

cents6.07 HK

cents32.5%

Lippo Malls IndoRetail Trust

S$30.7m S$22.6m 36.2% S$17.1m S$11.9m 44.3% 0.79 S cents 1.09 S cents -27.5%

Source: Companies

Exhibit B-20: QoQ performance by overseas retail REITs

NPI%

ChgDistri income

%Chg

DPU % Chg

2Q12 1Q12 2Q12 1Q12 2Q12 1Q12

CapitaRetail ChinaTrust

S$24.9m S$25.4m -1.9% S$16.6m S$16.6m 0.1% 2.41 S cents 2.41 S cents 0.0%

Fortune REIT HK$196.8m HK$185.3m 6.2% HK$136.5m HK$131.8m 3.6%8.04 HK

cents7.78 HK

cents3.3%

Lippo Malls IndoRetail Trust

S$30.7m S$30.9m -0.4% S$17.1m S$15.0m 14.1% 0.79 S cents 0.69 S cents 14.5%

Source: Companies

Exhibit B-21: Results and outlook on overseas retail REITs

Drivers for 2Q12 performance Results vs. expectations Outlook

CapitaRetail China Trust - Growth in DPU was due to thecontribution from CapitaMallMinzhongleyuan, which wasacquired on 30 Jun 2011, andhigher rental growth at its multi-tenanted malls.- Portfolio rental reversion of 15.2%.

- Slightly better than OIR'sforecasts.- 1H12 DPU formed 57%of consensus estimates.

- Tenant remixing at CapitaMallXizhimen; bringing in internationalfast fashion brands, e.g. UNIQLOand Urban Renewal- The Chinese government haslowered interest rates this year toboost the economy.- China is experiencing long-termshift towards higher consumptionand increasingly organizedphysical retail sales.


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Fortune REIT - Strong 2Q12 DPU growth of 32.5%YoY due to good rental reversion of20.6% and contributions fromBelvedare Square and ProvidentSquare, which were acquired in Feb2012.

- Slightly better than OIR'sforecasts.- 1H12 DPU formed 53%of consensus estimates.

- AEI for the portfolio's largest mallby asset value, Fortune City One,is scheduled to be fully completedby the end of the year.- Portfolio should be relativeresilient since the malls aresuburban and ~57.5% of grossrental income comes from tenants

in the non-discretionarycategories.

Lippo Malls Indo Retail Trust - Strong performance was driven byfull-quarter contribution from PluitVillage and Plaza Medan Fair thatwere acquired in Dec 2011.

- Slightly below both OIRand consensus forecasts.

- Management is confident thatLMIRT's retail malls are wellpositioned to benefit from theattractive dynamics of theIndonesian retail mall industry.- Recent S$250m bond issue isexpected to provide LMIRT withadequate financial resources tofund next round of acquisitionswithout equity fund raising.


Healthy occupancies help support good rental reversions.Occupancies for the three overseas retail REITs have been good. For thepast four quarters, CRCTs portfolio has consistently registered overalloccupancies above 97% and has rental reversions between 11.5%-15.2%. Occupancy for FRTs portfolio has varied between 93.5% and97.1% over the past four quarters, and the rate of rental reversion hasbeen significantly climbed from ~15% for 3Q11/4Q11 to ~21% for1Q12/2Q12. As at 30 Jun, LMIRTs occupancy rate remained steady at94.7%, reflecting a gradual increase from 31 Dec 2011s 94.1%; theoccupancy had dropped from Sep 2011 to Dec 2011 due to theacquisition of Pluit Village in Dec 2011. The occupancy for LMIRT issignificantly higher than Indonesias retail industry average of 86.7%,based on Jones Lang Lasalles 1Q12 market review report.

Exhibit B-22: Portfolio occupancy and rental reversion

Occupancy rate (%) Rental reversion (%)

Jun2012

Mar2012

Dec2011

Sep 2011 2Q12 1Q12 4Q11 3Q11

CapitaRetail China Trust 97.1 97.4 98.1 97.7 15.2 13.0 11.5 11.9

Fortune REIT 96.5 97.1 97.0 93.5 20.6 20.8 15.2 15.0

Lippo Malls Indonesia Retail Trust 94.7 94.5 94.1 98.0 N.A. N.A. N.A. N.A.

AVERAGE: 96.1 96.3 96.4 96.4 17.9 16.9 13.4 13.5


Financial strength. In the S-REITs space, the average gearing ofoverseas retail REITs has been low, ranging between 18.5% to 21.7%for the past four quarters, due in part to LMIRTs low gearing of 9.2%-10.1%. It is important to note that LMIRT has launched two fixed-ratenotes under its S$750m guaranteed Euro MTN programme and this isexpected to bring its gearing up to 21%, which is still healthy. In Apr2012, CRCT established a S$500m Multicurrency Medium Term Note(MTN) programme, which gives it more financing options. The debtmaturity profile for CRCT is well-spaced out, while FRT and LMIRT haveno debt due till 2015 and 2014 respectively.


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Exhibit B-23: Debt level and debt duration


Jun2012

Mar2012

Dec2011

Sep2011

Jun2012

Mar2012

Dec2011

Sep2011

CapitaRetail China Trust 28.1 30.0 28.0 31.4 1.9 2.1 1.3 1.6

Fortune REIT 24.5 25.9 18.8 20.1 3.5 3.7 4.7 5.0

Lippo Malls Indonesia Retail Trust 1 9.3 9.2 8.7 10.1 2.0 2.3 2.5 0.5

AVERAGE: 20.6 21.7 18.5 20.5 2.5 2.7 2.8 2.4


Note: LMIRT's launched two notes totaling S$250m in early Jul; gearing post notes issue is expected to remain healthy at 21%.

Exhibit B-24: Debt burden

Cost of debt (%) Interest coverage (x)

2Q12 1Q12 4Q11 3Q11 2Q12 1Q12 4Q11 3Q11

CapitaRetail China Trust 2.6 2.6 2.6 2.7 7.8 8.2 8.0 7.1Fortune REIT 2.8 2.9 3.7 4.0 5.3 5.3 4.7 4.4

Lippo Malls Indonesia Retail Trust 6.8 11.1 9.3 6.6 11.3 6.9 7.1 10.0

AVERAGE: 4.1 5.5 5.2 4.4 8.1 6.8 6.6 7.1


Exhibit B-25: Debt maturity profile as of 30 Jun 2012

(S$ m) 2012 2013 2014 2015 2016 and later

CapitaRetail China Trust 33 151 121 88 50

Fortune REIT 0 0 0 177 611

Lippo Malls Indonesia Retail Trust 0 0 148 0 0

TOTAL: 33 151 268 265 661

% OF TOTAL DEBT 2.4% 10.9% 19.5% 19.3% 48.0%


Note: We assume an exchange rate of S$1=HK$6.2 for Fortune REIT's borrowings, which are denominated in HK$.

Exhibit B-26: Overseas retail REIT subsector debt maturity profile



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Active in AEIs. Retail is one of the least homogenous property sectors,and AEI and tenant remixing are important tools for differentiating retailproperties from the competition. CRCT is undergoing AEI at CapitaMallMinzhongleyuan, which it acquired for RMB395m in Jun 2011. The targetROI for AEI on CRCTs CapitaMall Minzhongleyuan is 10.8%, while thetarget ROI for FRTs AEI at Fortune City One, its largest asset, and atJubilee Square is higher at 15%.

Exhibit B-27: Corporate actions by overseas retail REITs


1Q Nil Nil - AEI at CapitaMallMinzhongleyuan underway; capexfor AEI estimated at RMB74.0m,AEI works to take place over thenext 2-3 years while the mallremains open; expected ROI of10.8%.

CAPITARETAIL CHINATRUST

2Q Nil Nil - Continuing AEI at CapitaMallMinzhongleyuan.

1Q - Acquired BelvedereSquare and ProvidentSquare for HK$1.9b;increased GRA by 23% to2.45m sq ft.

Nil - Fortune City One undergoingHK$100M AEI, which is to becompleted by end-2012; targetROI of 15%.

FORTUNE REAL ESTATEINVESTMENT TRUST

2Q Nil Nil - Fortune City One undergoingHK$100M AEI.- Jubilee Square commencedHK$15m AEI; target ROI of 15%;expected to be completed in 1H13.

1Q Nil Nil NilLIPPO MALLS INDONESIARETAIL TRUST

2Q Nil Nil Nil


CRCT and LMIRT emerging market exposure. CRCT and LMIRT areproxy plays for the long-term trends of growing household income andincreasing urbanization in China and Indonesia respectively. According toeconomists estimates on Bloomberg, China and Indonesia are expectedto have 8.2% and 5.5% growth in real GDP for 2012. For the first sevenmonths of 2012, Chinas retail sales grew by 14.2% YoY to RMB11.45tr(11.3% YoY in real terms). In addition, consumer inflation eased to itslowest in two and a half years in Jul, giving the government more roomfor monetary easing. The Chinese government is also committed toboosting consumption over the long term as a way to reduce the

economys reliance on exports. In Jun, Indonesias real retail sales indexclimbed 13.6% YoY. The long term trend towards more organizedphysical retail is also a driving factor for shopping mall sales in bothcountries. Both CRCT and LMIRT are beneficiaries of their strongsponsors. CRCTs sponsor is CapitaMalls Asia, one of the largest listedshopping mall developers, owners and managers in Asia. LMIRTssponsor is Indonesia's largest listed property company, PT. LippoKarawaci Tbk, which holds a dominant position in the retail propertyindustry in Indonesia. To our understanding, there is limited retail spacesupply coming out in the vicinity of CRCTs malls.

FRT both developed and emerging market exposure. FRTssponsor is Cheung Kong (Holdings) Ltd, one of the largest propertydevelopers in Hong Kong. FRT, which owns suburban malls in HK, sees a

lot of non-discretionary purchases by local HK residents. Whileeconomists polled by Bloomberg expect that HKs real GDP will grow at


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only 2.4% in 2012, HKs 1H12 retail sales grew by 13.1% YoY in valueand 9.0% YoY in volume. A key reason for the fast growth in retail salesis due to tourism. FRT provides a proxy play to China, as manymainlanders travel to HK to buy groceries such as toothpaste, shampoo,vitamins, fruits and baby milk formula. Like luxury goods, manygroceries can be bought for cheaper in HK, and mainlanders are moreassured of quality. With a population of around 7m, HK received 42mvisitors in 2011, of which 28.1m were from the mainland. In 2011, theaverage overnight tourist spent HK$4,430 per trip on shopping; anovernight tourist is one who stays for at least one night in HK. Overnightmainlander tourists spent an even greater amount (HK$5,795) onshopping per trip. FRTs malls are conveniently located, with most closeto MTR subway stations. We believe that there is not a significantamount of retail space supply coming out in vicinity of FRTs malls. OVERWEIGHT on overseas retail REITs. We are OVERWEIGHT onoverseas retail REITs. FRT was previously one of our top REITs picks,and its share price has climbed significantly since the beginning of theyear, with its acquisition of two properties and good 1H12 results serving

as price catalysts. However, based on valuations, we are now switchingour preference to CRCT [BUY, S$1.70], which has strong fundamentalsand deserves a premium for being the only pure-play mainland Chinaretail REIT.


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Section C: Industrial REITs - Flexing its muscles of resilience

We continue to favour industrial landlords. Despite the globalmarket uncertainty and tepid growth in the domestic economy, industrialREITs continued to deliver strong results that came in within ourexpectations. YoY growth in 2Q12 NPI ranging from 3.9-26.4% was seenamong the REITs, bolstered by contribution from completeddevelopments/acquisitions, positive rental reversions and improvedoperational performances. Mapletree Industrial Trust (MINT) was the topperformer for the quarter, raking up 14.1% YoY increase in DPU. Thiswas followed closely by Cambridge Industrial Trust (CREIT) andAscendas REIT (A-REIT), with 13.9% and 10.3% growth respectively.

Exhibit C-1: YoY performance by industrial REITs


2Q12 2Q11 2Q12 2Q11 2Q12 2Q11

AIMS AMP Cap Ind REIT 14.9 14.3 3.9% 11.4 12.1 -5.6% 2.50 2.65 -5.7%

Ascendas REIT 101.1 88.8 13.9% 75.5 64.9 16.4% 3.53 3.20 10.3%

Cache Logistics Trust 16.7 15.5 8.1% 13.9 13.3 4.5% 1.98 2.09 -5.0%

Cambridge Ind Trust 18.4 16.9 8.8% 13.2 12.3 7.1% 1.18 1.04 13.9%

Mapletree Ind Trust 48.3 38.2 26.4% 36.9 29.0 27.1% 2.26 1.98 14.1%

Mapletree Log Trust 67.5 57.0 18.4% 41.1 38.8 5.9% 1.70 1.60 6.3%

Sabana REIT 19.1 16.5 15.3% 14.5 13.8 4.7% 2.27 2.18 4.1%

Source: Companies

Consistent set of 2Q12 results. On a sequential basis, the

performance was also encouraging, given that positive growth wasregistered in all industrial REITs NPIs. Only AIMS AMP Capital IndustrialREIT (AAREIT) and Cache Logistics Trust (CACHE) saw a QoQ decline inDPU. However, we note that this was due to the absence of distributionin retained income seen in 1Q by AAREIT. For CACHE, it was attributableto an enlarged unit base arising from private placement to fund theacquisition of Pandan Logistics Hub, even though the property has yet tocontribute to its income.

Exhibit C-2: QoQ performance by industrial REITs


2Q12 1Q12 2Q12 1Q12 2Q12 1Q12AIMS AMP Cap Ind REIT 14.9 14.0 6.5% 11.4 10.6 7.9% 2.50 2.70 -7.4%

Ascendas REIT 101.1 95.1 6.3% 75.5 71.9 5.1% 3.53 3.50 0.9%

Cache Logistics Trust 16.7 16.1 3.9% 13.9 13.4 4.0% 1.98 2.09 -5.0%

Cambridge Ind Trust 18.4 18.0 2.3% 13.2 13.3 -1.0% 1.18 1.17 0.8%

Mapletree Ind Trust 48.3 46.0 5.2% 36.9 35.8 3.1% 2.26 2.22 1.8%

Mapletree Log Trust 67.5 61.4 10.0% 41.1 41.3 -0.5% 1.70 1.70 0.0%

Sabana REIT 19.1 18.5 3.1% 14.5 14.5 0.3% 2.27 2.26 0.4%

Source: Companies


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Operationally, industrial REITs have also performed. A time-seriestrend analysis showed that industrial landlords have generally beenposting improvements in their portfolio occupancy rates. As at 30 Jun,the subsector average occupancy rate stood at 98.4%, representing a 60basis points gain over the previous quarter. This reflects active leasemanagement on the part of REIT managers and continued healthydemand for industrial space by market players. As a result of thesepositive developments, the subsector WALE stood steady at 3.6 years in2Q, despite the passage of time.

Exhibit C-3: Portfolio occupancy and lease duration trend


Jun2012

Mar2012

Dec2011

Sep2011

Jun 2012 Mar 2012 Dec 2011 Sep 2011

AIMS AMP Cap Ind REIT 99.1 99.2 98.9 98.8 2.7 2.6 2.6 2.8

Ascendas REIT 96.4 96.4 95.9 96.4 4.0 4.0 4.1 4.3

Cache Logistics Trust 100.0 100.0 100.0 100.0 4.4 4.4 4.7 4.9

Cambridge Ind Trust 99.1 98.6 98.5 98.7 3.1 3.2 3.3 3.5

Mapletree Ind Trust 94.9 94.9 95.1 94.5 2.6 2.5 2.4 2.5

Mapletree Log Trust 99.0 98.7 98.8 99.0 6.0 6.0 6.0 6.0

Sabana REIT

100% formasterlease;98.4%

for multi-tenanted

96.0%for

masterlease;98.4%

for multi-tenanted

96.0%for

masterlease;98.4%

for multi-tenanted

100.0%for

masterlease;96.7%

for multi-tenanted

2.6 2.6 2.9 3.0

AVERAGE: 98.4 97.8 97.7 98.0 3.6 3.6 3.7 3.9


NOTE: WALE published by different REITs may be calculated based on income or area

Gearing ratio and debt duration at healthy levels. In addition, thefinancial positions of industrial REITs have remained largely resilient overthe past four quarters, despite a slew of debt funding exercises for yield-accretive acquisitions during the same period of time. This, we note, wasmainly supported by capital raising activities such as private placements(A-REIT and CACHE) and perpetual securities (Mapletree Logistics Trustor MLT), as well as asset revaluation gains in some of the REITsportfolios. As at Jun end, the subsector aggregate leverage tallied 33.5%,which was relatively unchanged from 33.9% seen in 1Q. This is fairly inline with the overall S-REIT sector average of 32.0%, implying stillcomfortable gearing levels among the industrial REITs.


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Exhibit C-4: Debt level and duration


Jun2012

Mar2012



Ascendas REIT 32.7 36.6 34.3 31.5 4.4 3.5 3.1 3.4





Sabana REIT 34.1 33.9 34.1 23.8 1.7 1.9 2.2 2.2

AVERAGE: 33.5 33.9 34.6 32.8 2.9 2.9 2.9 2.9


NOTE: Some REITs refinanced their debts after close of 2Q12 results

Strong financial resources available. Industrial REITs also havesignificantly enhanced financial capability and flexibility to weather anymarket downturn and capture any attractive investment opportunitieswhen these arise, thanks to their active capital management strategies.Over the past one year, we observe that a number of industrial REITshave taken advantage of the low interest rate environment to refinancetheir existing debt borrowings. This has kept the weighted average termof debt sustained at 2.9 years in the past four quarters. In the monthsahead, we expect the momentum to continue, as a few other REITmanagers (e.g. AAREIT, CACHE) have also announced the refinancing ofpart of their existing borrowings after the close of 2Q.

Exhibit C-5: Debt burden


2Q12 1Q12 4Q11 3Q11 2Q12 1Q12 4Q11 3Q11


Ascendas REIT 3.2 2.8 3.0 3.1 4.9 5.3 5.5 5.3





Sabana REIT 4.4 4.4 4.4 4.8 5.6 5.5 7.4 7.6

AVERAGE: 3.5 3.4 3.3 3.4 5.8 6.0 6.3 6.5


Limited refinancing risks. In addition, we note that there is a trendtowards longer debt tenure and unsecured borrowings, albeit at slightlyhigher interest costs. However, subsector average interest coverage ratiowas still very healthy at 5.8x, in our view. For the rest of 2012 and until1Q13, we estimate that only 3.8% of the total debt in the subsector isdue to mature, translating to limited refinancing risks. This is in starkcontrast to the situation faced by REITs during the global financial crisis,where some of them were hit by high gearing levels, elevated borrowingcosts and substantial refinancing difficulties.


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Exhibit C-6: Debt maturity profile

2012 2013 2014 20152016 andlater

AIMS AMP Cap Ind REIT 0 114 29 137 0

Ascendas REIT 22 257 395 300 1193

Cache Logistics Trust 0 0 218 0 35

Cambridge Ind Trust 0 0 267 50 100

Mapletree Ind Trust 84 251 344 126 264

Mapletree Log Trust 130 292 113 32 1053

Sabana REIT 0 265 100 0 0

TOTAL: 236 1178 1466 645 2645

% OF TOTAL DEBT 3.8% 19.1% 23.8% 10.5% 42.9%


Exhibit C-7: Industrial REIT subsector debt maturity profile


Exhibit C-8: Credit rating by rating agencies

Rating and Outlook

AIMS AMP Cap Ind REIT BBB- credit rating by S&P

Ascendas REIT A3 credit rating by Moodys

Cache Logistics Trust No credit rating

Cambridge Ind Trust BBB- credit rating with stable outlook by S&P

Mapletree Ind Trust BBB+ credit rating with a stable outlook by Fitch

Mapletree Log Trust Baa1 credit rating with stable outlook by Moodys

Sabana REIT BBB- credit rating with stable outlook by S&P

Source: Companies


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Positive outlook remains. Going forward, we keep our view thatindustrial REITs are likely to maintain their financial performances. Whilemost of the industrial landlords acknowledge that the macroeconomiclandscape has remained largely uncertain and volatile, they expect stableresults from their portfolios, driven by contribution from recentinvestments and healthy leasing activities in the industrial space. A fewindustrial REITs also cited the possibility of further positive rentalreversions, as current market rents are still above the passing rents atsome of their assets. This is positive for the REITs as they are in a goodposition to gain both organically and inorganically.

Exhibit C-9: Results and outlook on industrial REITs


Outlook

AIMS AMP Cap Ind REIT - Growth in NPI due to positiverental reversions, though partiallyoffset by income loss fromdivestment and extension of rent-free period upon expiry of masterlease at 3 Toh Tuck Link.- DPU was lower YoY partly due tohigher management fees and taxadjustments.

- Not rated by OIR.- In line with consensusestimates.

- Cautiously optimistic aboutindustrial property outlook.- Potential for moderate increasein rental rates, given currentshortage of quality industrialproperty.- Reduced lease expiry risk at 27Penjuru Lane.- Redevelopment works at 20Gul Way on schedule and withinbudget.

Ascendas REIT - Positive performance due tocompletion of developmentprojects, contribution fromacquisitions made over the pastyear and positive rental reversions.


- Expecting stable performancefor FY13, with acquisitions andcompleted developments tocontinue to contribute positivelyto income.- Growth in new leases/expansions suggests sustainedhealthy demand for industrialspace.- Current market rents still 16-

35% higher than averagepassing rents for area due forrenewal.

Cache Logistics Trust - Increase in NPI due to upwardrental adjustments and acquisitionsof properties.- DPU was 5.0% lower YoY due toenlarged share base resulting fromprivate placement.


- Expect to continue deliveringsustainable distributions goingforward given its strongerportfolio and financial position.- Contribution from Pan AsiaLogistics Centre and PandanLogistics Hub expected to bemore apparent in 2H12.- Continue to grow portfolio viaaccretive acquisitions and assetenhancement initiatives.- Potential to gain from interestsavings after refinancing ofdebts.

Cambridge Ind Trust - Strong growth due to acquisitionsand increased rentals from multi-tenanted properties, partially offsetby impact from divestments.- DPU further boosted by capitaldistribution from the sale ofproperties.


- Expect recent acquisitions toprovide incremental incomegoing forward.- May possibly see 5-10%positive rental reversions fromportfolio.- May receive S$31.2m ascompensation (including ex-gratia payment) from SLAcompulsory land acquisition byJan 2013; proceeds expected tobe reinvested into newproperties or assetenhancement initiatives.


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Mapletree Ind Trust - Robust performance due toacquisitions, positive rentalreversions and stable occupancies.


- Cautiously optimistic that theREIT will continue to performwell for FY13, with rents to showresilience in near term.- Expect limited impact toleasing activities from changesto industrial GLS programmeand stricter development

conditions for new industrialsites.

Mapletree Log Trust - Improvement in results due tocontributions from recentacquisitions, enhanced occupancyrates and positive rental reversions.


- Expect portfolio to remainresilient, with rentals andoccupancy rates of well-located,quality facilities continue to besupported by firm demand andtight supply.- To focus on active asset andlease management, and prudentcapital management, withpriority on tenant retention andexpense management.

Sabana REIT - Positive growth due tocontributions from propertiesacquired in 4Q11.


- Positive on FY12 performance,given that majority of existingmaster leases will not expireuntil the end of 2013 and

beyond.


Predictable and stable income streams. As a note, all of theindustrial REITs, except AREIT and MINT, own properties which arepredominantly structured under master leases or occupied by singleusers. These arrangements are usually based on long-term leases whichincorporate rental escalation and security deposit clauses, therebyproviding significant visibility and stability in rental income, as well asdownside protection for the REITs.

Exhibit C-10: Tenancy mix and lease profile

(%)Multi-

tenantedMaster leases /

Single-user asset% due for renewal

by 1Q13Security deposits

(years)

AIMS AMP Cap Ind REIT 33.2 66.8 28.8 7.2

Ascendas REIT 62.0 38.0 9.1 6.0

Cache Logistics Trust 3.7 96.3 0.0 3 - 12

Cambridge Ind Trust 20.0 80.0 5.5 12.9

Mapletree Ind Trust 93.3 6.7 13.0 N.D.

Mapletree Log Trust 36.0 64.0 12.7 7.0

Sabana REIT 5.5 94.5 0.0 N.D.


NOTE:

1) N.D. - Not disclosed

2) Underlying lease expiry position for AAREIT's portfolio was reduced to 18.0% as at 30 Jun.

Growth profile remains intact. A look at the corporate actions YTDalso reveals that industrial REITs are still actively embarking on assetenhancement initiatives (AEIs) and (re)development projects to optimizetheir yields. This is likely to support the DPU growth in the quartersahead.


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Exhibit C-11: Corporate actions by industrial REITs


AIMS AMP Cap Ind REIT 1Q Nil Nil Nil

2Q Nil - Completed divestment of 31Admiralty Road (S$15.9m).

- Completed 50% of Phase 1of S$155.0m redevelopment

project on 20 Gul Way.Ascendas REIT 1Q - Announced and

completed acquisition ofCintech I, II and III(S$183.0m).

Nil - Completed development of90 Alps Ave (S$37.9m) andFoodAxis @ Senoko(S$57.8m).- Developing Unilever FourAcres Singapore (S$32.3m)and Nexus @ one-north(S$178m).- AEI on Phase 2 of 10 TohGuan Road (S$13.5m), 9Changi South Street 3(S$14.6m) and TechPlace II(S$42.4m).

2Q Nil - Announced divestment of 6Pioneer Walk (S$32.0m).

- Announced AEI on XilinDistricentre (S$6.0m).

Cache Logistics Trust 1Q - Announced acquisitionof 21 Changi North Way

(S$35.2m).

Nil Nil

2Q - Completed acquisitionof 21 Changi North Way(S$35.2m).- Announced acquisitionof 49 Pandan Road(S$66.0m).

Nil Nil

Cambridge Ind Trust 1Q - Completed acquisitionof 3C Toh Guan RoadEast (S$35.5m) and 25Pioneer Crescent(S$15.3m).- Announced acquisitionof 16 Tai Seng Street(S$72.3m).

- Divested 7 Ubi Close(S$18.6m)

- Developing Tuas View Circuit(S$13.2m) and SeletarAerospace Park (S$8.7m).- AEI on 30 Toh Guan Road(S$8.3m), 88 InternationalRoad (S$16.4m) and 4&6Clementi Loop (S$23.3m).

2Q - Completed acquisitionof 16 Tai Seng Street(S$72.3m).- Announced acquisitionof 30 Teban GardensCrescent (S$41.0m).

- Proposed sale of 97 units at63 Hillview Avenue.

Nil

Mapletree Ind Trust 1Q Nil Nil Nil

2Q Nil Nil - Developing Serangoon NorthAve 5 (S$50m).- AEI on Woodlands CentralCluster and Toa Payoh North 1Cluster.

Mapletree Log Trust 1Q - Announced acquisitionof 2 properties inMalaysia (S$24.6m) and2 properties in SouthKorea (S$71.3m).- Announced andcompleted acquisition of7 properties in Japan(S$291.8m).

Nil Nil

2Q - Completed acquisitionof 2 properties inMalaysia (S$24.6m) and2 properties in SouthKorea (S$71.3m).

Nil Nil

Sabana REIT 1Q Nil Nil Nil

2Q Nil Nil Nil


Likely moderation in acquisition activities. Announced acquisitionsappear to suggest that investment activities have moderated over thefirst two quarters. Specifically, acquisitions amounting to ~S$678.2mwere announced in 1Q, but the figure dwindled to S$107.0m in 2Q. Thisis consistent with our 2011 year-end strategy report that industrial REITsare likely to adopt a more cautious stance and be more selective on their


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acquisition plans, amid the market uncertainty. However, we reiteratethat industrial REITs have the firepower to acquire, should the assetsand valuations come in attractive. As of now, we hold our view thatcorporate actions may be skewed more towards smaller REITs, as bite-size acquisitions may not be very meaningful for REITs with hugeportfolio. We also believe that REITs with strong sponsors may turn tooverseas for acquisitions, as some of them had revealed that capitalvalues in the local scene may be a tad too high. Lastly, noting that theaggregate leverages of several REITs (e.g. AREIT, CACHE, and SabanaREIT) are set to increase after funding their committed acquisitions, webelieve further acquisitions in the subsector may possibly involve acombination of debt and equity, or capital recycling though divestmentand redeployment of funds.

Exhibit C-12: Details on portfolio assets

Investmentproperties

(S$ m)

Number ofproperties

% exposure toSingapore

Land leaseterm (years)

% of assetsencumbered

AIMS AMP Cap Ind REIT 932.7 25 100.0 41.8 100.0

Ascendas REIT 6308.3 102 98.8 48.3 41.5

Cache Logistics Trust 878.8 12 97.0 23.8 87.5

Cambridge Ind Trust 1131.4 47 100.0 37.3 16.7

Mapletree Ind Trust 2696.6 81 100.0 44.9 0.0

Mapletree Log Trust 4203.1 109 44.0 46.0 0.0

Sabana REIT 1043.9 20 100.0 39.7 95.6


Exhibit C-13: Exposure to various industrial building types


Good absorption expected in factory space. As most of theproperties held by industrial REITs are located in Singapore, we alsoanalyze the competitive landscape and supply/demand in the domesticindustrial property sector. According to URA statistics, there was anincrease of 200k sqm in factory space for 1Q12, equivalent to 0.6% of

the total stock of 31.46m sqm. In 2012, ~497.1k sqm of projects withapproval for development is scheduled for delivery, based on CBRE 1Q12


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Real Estate Research Report estimates. This forms 47.6% of totalprojects with approval that is projected to be delivered over 2012-2014,but it is still healthy in our view as it makes up a mere 1.6% of the totalavailable factory space (both public and private sectors) in Singapore. Inaddition, we note that the annual net absorption over the past 10 yearshave averaged at 686k sqm, which is larger than the space that is due tocome online. Hence, we believe the new supply in 2012 is likely toencounter sound absorption levels as well. As a reference, ~3.99m sqmof new factory space is expected to be released to the market for theperiod from 2012 to 2016. This is equivalent to 12.7% of the currentfactory space.

Exhibit C-14: Supply of factory space in pipeline


NOTE: The supply in factory space provided by URA includes business park space

Exhibit C-15: Supply and demand trends in factory space



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Factory occupancy, rental and capital values likely to remainstable. As at 1Q12 end, the occupancy rates for the entire factory stockstood unchanged at 93.2%, as compared to 1Q. The URA Property RentalIndex (PRI) for factory has been on an uptrend since 4Q09, althoughgrowth has shown signs of moderation. In 1Q12, the median rental formultiple-user factory was at S$1.94 psf pm, the highest level since 4Q98.Factory property prices, we note, have also risen steadily during thesame period, and have reached a record high of S$550 psf in 1Q. In viewof the current market uncertainty and elevated rental and asset prices,we believe that the island-wide factory occupancy rate, rental and capitalvalues are likely to stay flattish in the months ahead.

Exhibit C-16: Median Rental and Property Rental Indices (PRI)


Exhibit C-17: Median Prices and Property Price Indexes (PPI)



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Supply in warehouse still comfortable. In the warehouse space, wenote that the inventory had increased by 52k sqm to 7.17m sqm in 1Q12.This represents a YoY growth of 3.7% and a QoQ growth of 0.7%.Between 2012 and 2014, ~1.19m sqm of new warehouse space (16.6%of current stock) is projected to be released to market. Of this, 384k sqmis in the pipeline for delivery in 2012. This is still comfortable in ouropinion as it forms only 5.4% of the overall warehouse stock inSingapore.

Exhibit C-18: Supply of warehouse space in pipeline


Exhibit C-19: Supply and demand trends in warehouse space


Growth momentum likely to ease in warehouse space. Based onURA statistics, the overall occupancy rate for warehouse has beenimproving since 2009. In 1Q12, the occupancy rate registered a high of94.7%, up 190 basis points YoY and 40 basis points QoQ. This reflects

continued strong demand for warehouse space. Due in part to this, therental and property prices have also been on the rise. For 1Q12, the


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median rental and price of multiple-user warehouses reached a peak ofS$1.88 psf pm and S$691.7 psf respectively. This translates to a stronggrowth of 13.3% and 31.6% YoY. Nonetheless, a look at the averageannual net absorption over the past 10 years (201k sqm) shows that it islower than the supply of 384k sqm in new warehouse space for 2012.Hence, we expect occupancy, rental and warehouse asset price tostabilize in the upcoming months.

Exhibit C-20: Supply and demand trends in business park space


Healthy pre-commitment level in business and science park space.For the business and science park segment, a total of 16k sqm of spacewas added in 1Q12, bringing the island-wide stock to 1.43m sqm(+1.1% QoQ). According to CBRE, ~159.5k sqm of business and sciencepark space (26.9% of future supply) will be released in 2012. While thisforms 11.1% of the current business and science park space, only 63.0ksqm of the new supply is available for leases to the market due torelatively high pre-commitment level of 60.5%. This should alleviate anydownward pressure on the overall occupancy.

More cautious on business and science park space. According toURA statistics, the business and science park occupancy has remainedunchanged at 82.8% in 1Q12 versus 4Q11. CBREs own basket ofbusiness and science park occupancy was higher at 91.3%, but saw a

100 basis points drop during the quarter. On the rental front, URAdatapoints showed that the median rent for business parks was flat QoQat S$3.90 psf pm. However, CBREs data painted a slightly softer picture,showing a 2.7% QoQ decline in rents to S$3.75 psf pm in 1Q12. We arecurrently staying cautious on the business and science park space as theongoing weak market conditions may exert some pressure on theoccupancy and rents. On a more positive note, only AAREIT (9.1%exposure by valuation), A-REIT (34%) and MINT (18.5%) haveexposures to this segment, and their occupancy rates are generallyhigher than the industry average (91.0-100.0%).


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Maintain OVERWEIGHT. In conclusion, we expect industrial REITs tocontinue to perform, as their growth drivers and financial positionsremain sound. While growth appear to moderate in view of the uncertainglobal outlook, domestic market dynamics have remained largelyfavourable thus far. Average DPU yields for the current and next financialyears are still the highest among other REIT subsectors (7.6-7.7%). Weare maintaining our OVERWEIGHT view on the industrial REIT subsector.CACHEremains our preferred pick for the subsector due to its robustportfolio, healthy financial position and attractive FY12F yield of 7.6%.


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Section D: Office REITs Upgrade to OVERWEIGHT on compellingvaluations

2Q12 results - fundamentals holding up. Office REITs reported agood set of results in 2Q12 that were either in-line or exceeded marketexpectations. In particular, CapitaCommercial Trusts 2Q12 figures (CCT)came in above consensus, reflecting stronger than expected rentals forGrade A offices despite weakening hiring expectations and residualuncertainty in the macro-economic environment. We also note SuntecREIT had showed a 5.5% growth in its office segments gross revenuesdue to positive rental reversions. DPU growth was healthy across theboard for office REITs, with the exception of Suntec REIT which sufferedthe impact of the loss on income from CHIJMES (divested in Jan 12) andthe commencement of AEI works at Suntec City.

Exhibit D-1: YoY performance by office REITs

(S$ 'm) NPI % Chg Distri income % Chg DPU (S cents) % Chg

2Q12 2Q11 2Q12 2Q11 2Q12 2Q11

CapitaCommercial Trust 75.2 69.8 7.8% 58.5 54.4 7.5% 2.06 1.92 7.3%

Fraser Commercial Trust 26.6 24.9 7.1% 11.0 8.7 25.8% 1.70 1.38 23.2%

K-REIT Asia 31.3 14.3 118.6% 49.8 26.3 89.5% 1.94 1.04 86.5%

Suntec REIT 45.4 46.9 -3.1% 53.0 56.2 -5.7% 2.36 2.53 -6.8%

Source: Companies

Note: KREIT's 2Q11 DPU has been restated to take into account the effect of the fully underwritten, renounceable 17-for-20 rights issue of1,159,694,000 units at an issue price of $0.85 per rights unit and computed based on the issued units at the end of theperiod aggregated with 1,159,694,000 units which were issued on 13 December 2011.

Exhibit D-2: QoQ performance by office REITs

(S$ 'm) NPI % Chg Distri income % Chg DPU (S cents) % Chg

2Q12 1Q12 2Q12 1Q12 2Q12 1Q12

CapitaCommercial Trust 75.2 69.9 7.6% 58.5 53.9 8.4% 2.06 1.90 8.4%

Fraser Commercial Trust 26.6 24.8 7.6% 11.0 11.2 -2.0% 1.70 1.74 -2.3%

K-REIT Asia 31.3 28.5 9.7% 49.8 48.5 2.6% 1.94 1.90 2.1%

Suntec REIT 45.4 49.0 -7.3% 53.0 54.9 -3.5% 2.36 2.45 -3.8%

Source: Companies


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Exhibit D-3: Results and outlook on office REITs


Outlook

CapitaCommercial Trust - Improved performance mostly dueto revenue contribution by TwentyAnson, higher revenues from

Raffles City and HSBC Building,and higher yield protection incomefor One George Street

- Above consensusestimates

- Expect only 4.1% of officeleases, by gross rental income,to be due to renewal for the rest

of FY12- Rental reversions would likelyturn positive by 1H13- Converting storeroom space atGolden Shoe into lettable officespace, costing S$0.6m, with aprojected ROI of 14%- CapitaGreens construction and6BRs AEI remain on schedule

Fraser Commercial Trust - 3QFY13 results driven by theacquisition of the balance 50%interest in Caroline ChisholmCentre (CCC) and higher incomefrom direct tenant leases at ChinaSquare Central (CSC)

- In line with consensusestimates

- Secured a number of leaserenewals over the quarter; withlong-term lease at CCC, portfolioWALE was strengthened to 4.2years, up from 3.4 years in 2Q.- Refinanced its S$500m termloan facility early; blendedinterest margin is ~1ppt lower

than its previous borrowingmargin; expect interest savingsgoing forward.- Aggregate leverage is relativelyhigh at 39.5% but anticipatemanagement paring down debtsusing KeyPoint sale proceeds.

K-REIT Asia - 2Q12 results driven by incomecontribution from the 87.51%interest in OFC, acquired 14 Dec 11- Enhanced performance fromPrudential Tower, 275 GeorgeStreet and 77 King Street


- Expect accretion fromconversion of holding structure ofMBFC Phase 1 to a LLP due totax transparency on income- Anticipate income accretionfrom acquisition of additional12.39% interest in OFC to99.9%.

Suntec REIT - 2Q12s lower NPI attributable tothe divestment of CHIJMES and thecommencement of AEI works at theSuntec City asset- Office segment's gross revenueincreased 5.5% YoY due to positiverental reversions, alleviatingweakness from the retail segmentwhich declined 16.1% YoY

- In line with consensusestimates.

~193,000 sq ft NLA will beclosed progressively during thePhase 1 AEI at Suntec City, withcompletion expected by 2Q13- May utilize part of the proceedsof the Chijmes divestment tomitigate the temporary dip inDPU- Good office numbers couldcontinue to cushion the impactfrom the AEI



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Occupancy rates up with limited office supply. Because new officesupply was somewhat limited over 2Q12, with REIT managers eager tobump up occupancy rates at decent rental levels currently, we sawoccupancy rates increase over 2Q12 at all four office REITs. In addition,an estimated net absorption of ~470,000 sq ft over the quarter wassomewhat above market expectations which anticipated a weaker officetake-up given a weaker GDP outlook and softer hiring expectations atbanking and financial services firms (typically key drivers of officedemand in Singapore).

Exhibit D-4: Portfolio occupancy and lease duration trend


Jun2012

Mar2012

Dec2011

Sep2011

Jun 2012 Mar 2012 Dec 2011 Sep 2011

CapitaCommercial Trust 96.2 96.0 95.8 97.2 3.5 4.2 4.5 4.7

Fraser Commercial Trust 96.7 96.1 97.6 98.0 4.2 3.4 3.4 3.6

K-REIT Asia 97.0 96.1 94.1 98.0 6.2 6.4 6.7 7.0

Suntec REIT

Office:99.9%;Retail:98.5%




na na na na

AVERAGE: 97.5 96.9 96.7 98.0 4.6 4.7 4.9 5.1


NOTE: WALE published by different REITs may be calculated based on income or area

For CCT, WALE is calculated by NLA, for top 10 tenants only, excluding RC Hotels.

Calculation of average occupancy rates excludes retail portion of Suntec portfolio.

Balance sheets still looking good. Office REITs currently have anaverage leverage ratio of 37.8% which is still within acceptable levels.Amongst them, CCT has the lowest ratio at 30.1% which, in our view,points at a relatively stronger capacity for asset expansion versus itspeers should suitable acquisitions targets appear in a weakeningenvironment ahead. All four REITs have showed ready ability to roll overits debt schedule in the year to date, with all-in funding costs and thedebt durations keeping at healthy levels of about 3.0% and 3.0 years onaverage.

Exhibit D-5: Debt level and duration


Jun2012

Mar2012



Fraser Commercial Trust 39.5 36.1 36.8 36.6 na na na na

K-REIT Asia 43.9 41.8 41.6 39.8 3.6 3.0 3.1 3.6

Suntec REIT 37.5 37.4 37.3 39.9 2.2 2.4 2.7 2.9

AVERAGE: 37.8 36.5 36.5 35.9 3.0 2.9 2.9 3.1


NOTE: Some REITs refinanced their debts after close of 2Q12results


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Exhibit D-6: Debt burden


Jun2012

Mar2012



Fraser Commercial Trust 4.0 3.9 4.0 4.2 3.1 3.3 3.0 2.9

K-REIT Asia 2.0 2.0 2.4 2.5 5.3 5.5 5.5 4.6

Suntec REIT 2.9 2.8 2.8 2.8 4.0 4.2 4.4 4.0

AVERAGE: 3.0 3.0 3.2 3.3 4.1 4.3 4.3 3.9


Active portfolio optimization with asset enhancement initiativesWith the exception of K-REIT increasing its stake in OFC to 99.9% afteracquiring an additional 12.39% interest on 25 Jun 12, there were noacquisitions over 2Q12 as managers opted to focus on asset

enhancement initiatives instead as the market enters a downward trendof office rentals. In Jun 12, Suntec REIT embarked on its major AEI ofSuntec City and expects to close ~193,000 sq ft NLA progressivelyduring Phase 1. The NLA is likely to increase to 380,000 sq ft uponcompletion in 2Q13 and management has already secured pre-commitments for over 45% of the enlarged NLA. Suntec REIT isprojecting rental enhancement of 25% and ROI of 10.1% for this AEIproject.


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Exhibit D-7: Corporate actions by office REITs


CapitaCommercial Trust 1Q - Acquisition of 20Anson for S$430.0million (S$2,121 psf) on22 Mar 12

- Nil - Redevelopment of MarketStreet Car Park into Grade Aoffice CapitaGreen (targetedfor competion 4Q14)- S$92m AEI at 6BR (ongoingtill end-2013)

2Q - Nil - Nil - Converting storeroom spaceat Golden Shoe into lettableoffice space, costing S$0.6m,with a projected ROI of 14%

Fraser Commercial Trust 1Q - Completed theacquisition of theremaining 50% interestin Caroline ChisholmCentre on 13 Ap 12 forAUD83.0m (S$112.6m)

- Nil - Took over management ofChina Square Central on 30Mar 12 after master leaseexpired- 18 Cross Street main towerAEI (ongoing)

2Q - Nil - Announced divestment ofKeyPoint for S$360m;estimated net proceeds is

S$357.8m; estimated S$72.8mgain

- Nil

K-REIT Asia 1Q - Nil - Nil - Nil

2Q - Increased interest inOFC to 99.9% with theacquisition of anadditional 12.39%interest on 25 Jun 12

- Nil - Converted holding companyof MBFC Ph 1 to an LLP whichwould not be subject tocorporate income tax on 15Jun 12

Suntec REIT 1Q - Nil - Divested CHIJMES in Jan 12for S$177m, expected gain ofS$39.5m

- Nil

2Q - Nil - Nil - Commenced AEI works atSuntec City in Jun 12- ~193,000 sq ft NLA will be

closed progressively duringPhase 1 with completionexpected by 2Q13- projected rental enhancementof 25% and ROI of 10.1%



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Office rentals fell over the last three quarters. After office rentalsreached an inflection point in 3Q11, we saw rental levels dip over threeconsecutive quarters as macro economic uncertainties held sway overthe market. In 2Q12, Grade A office rentals fell an additional 4.7% QoQ cumulating to a 8.7% dip over 4Q11-2Q12 from S11.06 to S$10.10.On the other hand, the fall for Grade B rentals over 2Q11 was a moresubdued 0.6% QoQ, mostly due to a relatively smaller Grade B supplyover the period. However, as limited new supply came into market over2Q12, core CDB vacancies showed a reversal from a rising trend toregister a 0.9% dip to 8.4%. A similar picture was seen for island-widevacancy rates which declined 0.9% from 7.3% as of end 1Q12 to 6.4%.

Exhibit D-8: Singapore office rental levels Exhibit D-9: Singapore core CBD vacancy rates

Source: CBRE Source: CBRE

But office absorption coming in above expectations. Net absorptionin 2Q12 came in at ~470,000 sq ft which contributed to a decline invacancies. This was in line with our forecast but markedly above marketexpectations which anticipated a weaker demand given a weaker GDPforecast in Singapore and softer hiring expectations. We estimate thatGrade A capital values had dipped 2% QoQ marginally to $2,450 psf in2Q12 (1Q12: S$2,500 psf) as investment sales slowed and marketplayers adopted a wait and see attitude in light of the residualuncertainty in the macro-economy.

Limited supply till 2H13. Looking ahead, it is likely a situation oflimited office pipeline completion would ensue in the reminder of FY12with only ~70k sq ft of office space (a mixed use development in UpperPickering St) slated for opening in 3Q12, which has been fully pre-leasedto AGC. Given this, vacancies could continue to face downward pressure,in our view, until mid 2013 when Asia Square T2 and The MetropolisT1&2 are completed.


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Exhibit D-10: Pipeline of office space (Present to 2016)Expected

CompletionProposed Project Micro-market Area Net Floor Area

(sf)

2012 Hotel/Office at Upp Pickering St. Upp Pickering Street Decentralized 70,084

Q3 2013 Orchardgateway Orchard Road Fringe CBD 37,353

Q2 2013 Jurong Gateway Road Western suburbs Decentralised 315,385

Q3 2013 Asia Square Tower 2 Marina Bay Core CBD 782,284

Q3 2013 The Metropolis Western suburbs Decentralised 1,180,000

Q3 2013 Fusionopolis Link Western suburbs Decentralised 91,500

Q4 2013 Paya Lebar / Eunos Rd 8 Tampines / Eastern suburbs Decentralised 430,000

Q4 2014 Capitagreen Raffles Place Core CBD 720,000

Q4 2014 5 Shenton Way Shenton Way Core CBD 290,000

Q4 2014 Westgate Western suburbs Decentralised 306,400

2014 Balestier Rd / Ah Hood Road Development Others Decentralised 70,000

2014 Robinson / Cecil Street Shenton Way Core CBD 353,475

Q4 2015 Peck Seah / Choon Guan Street Tanjong Pagar Fringe CBD 850,0002015 South Beach Beach Road/City Hall Fringe CBD 505,740

2015 EON Shenton Tanjong Pagar Fringe CBD 101,045

Q4 2016 Marina South Bay (4 plots) Marina Bay Core CBD 1,761,852

Q4 2016 Ophir-Rochor Beach Road/City Hall Fringe CBD 586,315

Total supply 8,451,433

Core CBD total supply 3,907,611

Sources: CBRE, OIR

Valuations look cheap here. We continue to forecast for office rentals

to fall 10%-20% over the next 12 months. However, at this juncture, wejudge that market valuations of office REITs are cheap and likely pricingin overly pessimistic expectations ahead. The office REIT sector is nowtrading at an average price-book ratio of 0.82, despite relatively robustbalance sheets (sector average gearing and interest coverage of 38%and 4.1x, respectively) and a still attractive sector average forward yieldof 6.4%.

Upgrade Office REITs to OVERWEIGHT - top picks are CCT and

FCOT. We upgrade the sector to OVERWEIGHT from neutral previously,and also upgrade CCT to our top pick in the office sector with a BUYrating and an increased fair value of S$1.53 (S$1.31 previously), mostlydue to stronger cap rate assumptions for prime Grade A office assets. Wealso like FCOT for its growth potential, strong execution and attractive

P/B of 0.8x. Maintain BUY and raise our fair value for FCOT from S$1.16to S$1.23 as we similarly incorporate firmer cap rates assumptions.


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Section E: Hospitality REITs ART offers better yield than CDLHT

Decent 2Q12 results. Both ART and CDLHT posted 2Q12 DPUs thatwere fairly flat YoY. ART posted a 2Q12 DPU increase of 2.1% YoY whileCDLHTs DPU contracted by 1.4% YoY. CDLHTs NPI fell 4.2% YoY toS$34.1m due to a one-off property tax refund of S$3.3m in 2Q11. On aQoQ basis, ARTs performance stood out with a 12% increase indistributable income to S$27.1m. Revenue growth was chiefly due tocontributions from Citadines Shinjuku Tokyo and Citadines Karasuma-Gojo Kyoto as well as better performance from the serviced residences inUK, the Philippines and China. ART performed slightly above OIRsestimates and CDLHT performed slightly below, the latter due to a lowerpayout ratio than we expected (though within managements guidance).

Exhibit E-1: YoY performance by hospitality REITs


2Q12 2Q11 2Q12 2Q11 2Q12 2Q11

Ascott Residence Trust 42.7 41.2 3.8% 27.1 26.3 3.1% 2.38 2.33 2.1%

CDL Hospitality Trusts 34.1 35.6 -4.2% 31.4 31.7 -0.9% 2.92 2.96 -1.4%

Source: Companies

Exhibit E-2: QoQ performance by hospitality REITs


2Q12 1Q12 2Q12 1Q12 2Q12 1Q12

Ascott Residence Trust 42.7 37.2 14.9% 27.1 24.2 12.1% 2.38 2.14 11.2%

CDL Hospitali ty Trusts 34.1 36.0 -5.4% 31.4 29.8 5.1% 2.92 2.78 5.0%

Source: Companies

Exhibit E-3: Results and outlook on hospitality REITs

Drivers for 2Q12 performance Results vs. expectations Outlook

Ascott Residence Trust - Better results driven by additionalcontribution from newly acquiredCitadines Shinjuku and CitadinesKyoto, and stronger performancefrom the groups servicedresidences in The Philippines, Chinaand United Kingdom.- RevPAU growth was driven by anincrease in the average rental rates.

- Slightly better than OIRforecasts.- 1H12 DPU formed 53%of consensus estimates.

- ART remains confident in themarkets it operates in.- Shareholders have approved thedivestment of Somerset GrandCairnhill Singapore and theacquisition of Ascott Raffles PlaceSingapore, Ascott Guangzhou andNew Cairnhill Serviced Residence.- Ascott Jakarta commenced

phased renovation works in Jul.- Management continues to exploreopportunities in Asia as well asLondon, Paris and key cities inGermany.

CDL Hospitality Trusts - 5.9% RevPAR growth for itsSingapore hotels, excluding StudioM Hotel, which was acquired on 3May 2011.- Recognition of a full quartersrevenue contribution from Studio MHotel, as compared to 59 days in2Q11.

- Slightly lower than OIRforecasts.- 1H12 DPU formed 55%of consensus estimates.

- Global economic uncertaintieshave lead corporates to makebookings later than they didpreviously; Singapore hoteliers maytry to increase booking visibility byoffering slight discounts to havecorporates book early, which maygive confidence to hoteliers topursue greater overall daily ratesincreases and greater RevPARgrowth.- Hotel room supply is expected togrow slower than visitor arrivals overthe next few years.



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Both are doing well operationally. ARTs 2Q12 and 1H12 Revenue perAvailable Unit (RevPAU) for its serviced residences climbed 6% YoY and5% YoY to S$156 and S$147 respectively. In London, good response tothe rebranded Citadines Prestige Trafalgar Square London helped ARTachieve better rental yields. CDLHTs Singapore hotels saw Revenue perAvailable Room (RevPAR) grow by 5.9% YoY and 7.5% YoY in 2Q12 and1H12 to S$217 and S$215 respectively (excluding Studio M Hotel, whichwas acquired in May 2011). CDLHT has benefitted from the growingtourism industry in Singapore. For the first five months this year, visitorarrivals to Singapore grew by 12.3% YoY to 5.9m.

Exhibit E-4: Occupancy and RevPAR/RevPAU

Occupancy rate (%) RevPAR/RevPAU (S$)

2Q12 1Q12 4Q11 3Q11 2Q12 1Q12 4Q11 3Q11

Ascott Residence Trust - Portfolio 's SRs N.A. N.A. N.A. N.A. 156 137 146 146

Ascott Residence Trust - Singapore SRs N.A. N.A. N.A. N.A. 248 235 234 249

CDL Hospitality Trusts - Singapore hotels1 88.1 88.5 88.6 89.5

s reit sector 120821 oir

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