Circular to Unitholders - Suntec REIT
Circular to Unitholders - Suntec REIT
Circular to Unitholders - Suntec REIT
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CIRCULAR DATED 18 SEPTEMBER 2007<br />
THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.<br />
Singapore Exchange Securities Trading Limited (the “SGX-ST”) takes<br />
no responsibility for the accuracy of any statements made, opinions<br />
expressed, or reports contained, in this <strong>Circular</strong>. If you are in any doubt as<br />
<strong>to</strong> the action you should take, you should consult your s<strong>to</strong>ckbroker, bank<br />
manager, solici<strong>to</strong>r, accountant or other professional adviser immediately.<br />
Approval in-principle has been obtained from the SGX-ST for the listing<br />
and quotation of the Conversion Units and the Consideration Units (as<br />
respectively defined herein). The SGX-ST’s in-principle approval is not <strong>to</strong><br />
be taken as an indication of the merits of the Acquisition, the Issue of the<br />
Convertible Bonds, the Conversion Units or the Consideration Units (as<br />
respectively defined herein).<br />
If you have sold or transferred all your units in <strong>Suntec</strong> Real Estate<br />
Investment Trust (“<strong>Suntec</strong> <strong>REIT</strong>”) and the units (“Units”), you should<br />
immediately forward this <strong>Circular</strong>, <strong>to</strong>gether with the Notice of Extraordinary<br />
General Meeting and the accompanying Proxy Form in this <strong>Circular</strong>, <strong>to</strong> the<br />
purchaser or transferee or <strong>to</strong> the bank, s<strong>to</strong>ckbroker or other agent through<br />
whom the sale or transfer was effected for onward transmission <strong>to</strong> the<br />
purchaser or transferee.<br />
(Constituted in the Republic of Singapore<br />
pursuant <strong>to</strong> a trust deed dated 1 November 2004 (as amended))<br />
Managed by<br />
SUNTEC REAL ESTATE INVESTMENT TRUST<br />
(Member of Cheung Kong Group)<br />
CIRCULAR TO UNITHOLDERS IN RELATION TO:<br />
1 THE PROPOSED ACQUISITION OF A ONE-THIRD INTEREST<br />
IN ONE RAFFLES QUAY;<br />
2 THE PROPOSED ISSUE OF UP TO S$450,000,000<br />
AGGREGATE PRINCIPAL AMOUNT OF S$ DENOMINATED<br />
CONVERTIBLE BONDS;<br />
3 THE PROPOSED ISSUE OF CONSIDERATION UNITS TO<br />
CAVELL LIMITED;<br />
4 THE PROPOSED GENERAL MANDATE FOR THE ISSUE OF<br />
NEW UNITS AND/OR CONVERTIBLE SECURITIES; AND<br />
5 THE PROPOSED SUPPLEMENT TO THE TRUST DEED IN<br />
CONNECTION WITH THE VALUATION OF REAL ESTATE.<br />
Financial Advisor <strong>to</strong> the Acquisition<br />
Joint Financial Advisers, Underwriters and Bookrunners for<br />
the Issue of Convertible Bonds<br />
Independent Financial Adviser <strong>to</strong> the Independent Direc<strong>to</strong>rs of<br />
ARA Trust Management (<strong>Suntec</strong>) Limited<br />
IMPORTANT DATES AND TIMES FOR UNITHOLDERS<br />
Last date and time for lodgement of Proxy Forms<br />
6 Oc<strong>to</strong>ber 2007 at 2.30 pm<br />
Date and time of Extraordinary General Meeting<br />
8 Oc<strong>to</strong>ber 2007 at 2.30 pm<br />
Place of Extraordinary General Meeting<br />
Level 3, Room 325 and 326,<br />
<strong>Suntec</strong> Singapore International Convention & Exhibition Centre<br />
1 Raffles Boulevard, <strong>Suntec</strong> City, Singapore 039593
Overview<br />
This overview section is qualified in its entirety by, and should be read in conjunction with, the full<br />
text of this <strong>Circular</strong>. Meanings of capitalized terms may be found in the Glossary of this <strong>Circular</strong>.<br />
The Acquisition of a One-third Interest in<br />
One Raffles Quay is a prime landmark commercial development located in Singapore’s<br />
Central Business District (“CBD”) and enjoys excellent connectivity and accessibility. One<br />
Raffles Quay Pte Ltd (“ORQPL”) is the developer and current owner of One Raffles Quay.<br />
The issued share capital of ORQPL is held in equal proportions (i.e. one-third each) by<br />
wholly-owned subsidiaries of Cheung Kong (Holdings) Limited, Hongkong Land International<br />
Holdings Limited and Keppel Land Properties Pte Ltd 1 .<br />
<strong>Suntec</strong> <strong>REIT</strong> is proposing <strong>to</strong> acquire a one-third<br />
interest in One Raffles Quay indirectly through the<br />
purchase of the entire issued share capital of<br />
Comina Investment Limited, a wholly-owned indirect<br />
subsidiary of Cheung Kong (Holdings) Limited.<br />
As One Raffles Quay is a recently completed<br />
development, a substantial number of major<br />
tenancies were leased at rents which are<br />
significantly below current market rental rates. As<br />
such, the trustee of <strong>Suntec</strong> <strong>REIT</strong> (the “Trustee”)<br />
has entered in<strong>to</strong> a deed of income support (the<br />
“Deed of Income Support”) with the Vendor that<br />
would enable <strong>Suntec</strong> <strong>REIT</strong> <strong>to</strong> strengthen its<br />
distributable income for the benefit of the<br />
<strong>Unitholders</strong>. Under the Deed of Income Support,<br />
the Vendor has undertaken <strong>to</strong> pay <strong>to</strong> the Trustee in quarterly instalments over 54 months,<br />
up <strong>to</strong> an aggregate amount of S$103.48 million (inclusive of GST).<br />
The agreed consideration payable <strong>to</strong> the Vendor in connection with the Acquisition (the<br />
“Agreed Consideration”) is S$941.5 million. The current estimated costs of the<br />
Acquisition is approximately S$954.6 million (the “Total Acquisition Cost”) 2 , which<br />
includes an acquisition fee of S$9.4 million payable <strong>to</strong> ARA Trust Management (<strong>Suntec</strong>)<br />
Limited (the “Manager”) in the form of Units. In addition <strong>to</strong> the Total Acquisition Cost, the<br />
costs in relation <strong>to</strong> the Debt Financing and the Issue of Convertible Bonds are<br />
approximately S$19.8 million.<br />
The Manager proposes <strong>to</strong> satisfy the Total Acquisition Cost and the costs in relation <strong>to</strong> the<br />
financing, (i) partly through the issue of Consideration Units <strong>to</strong> the Vendor, (ii) partly<br />
through the issue of Units <strong>to</strong> the Manager in satisfaction of the acquisition fee and partly<br />
with the proceeds of either (iii)(a) the drawdown of the Debt Financing or (b) the drawdown<br />
of the Debt Financing and the Issue of Convertible Bonds, in such proportion as the<br />
Manager in its discretion, deems appropriate.<br />
For the avoidance of doubt, notwithstanding that the resolution relating <strong>to</strong> the Issue of<br />
Convertible Bonds is passed, the Manager is not obliged <strong>to</strong>, and has at all times the<br />
discretion whether or not <strong>to</strong> proceed with the Issue of Convertible Bonds in order <strong>to</strong><br />
proceed with the Acquisition.<br />
1 On 30 July 2007, K-<strong>REIT</strong> Asia announced that it will acquire a one-third interest in One Raffles Quay through the acquisition of one-third of the<br />
issued share capital of ORQPL from Boulevard<br />
2 The Total Acquisition Cost comprises the Share Purchase Price, the Purchaser Loan, the acquisition fee payable <strong>to</strong> the <strong>Suntec</strong> <strong>REIT</strong> Manager in<br />
units, as well as the estimated professional and other fees and expenses in connection with the Acquisition
One Raffles Quay is a prime landmark commercial development located in Singapore’s CBD comprising a<br />
50-s<strong>to</strong>rey office <strong>to</strong>wer (the “North Tower”), a 29-s<strong>to</strong>rey office <strong>to</strong>wer (the “South Tower”), an underground<br />
link <strong>to</strong> the Raffles Place MRT station, a sheltered plaza serving as a drop-off point and a hub car park with<br />
713 car park lots.<br />
With its underground link <strong>to</strong> the Raffles Place MRT station, One Raffles Quay enjoys excellent connectivity<br />
and accessibility along the North-South and East-West MRT lines. In addition, One Raffles Quay is also<br />
well-positioned <strong>to</strong> capitalise on the future growth of the Marina Bay area, given its proximity <strong>to</strong> Marina Bay.<br />
One Raffles Quay has a large and diversified tenant base comprising 26 office tenants and five retail tenants as<br />
well as a Committed Occupancy of 100.0% for the North Tower and the South Tower (as at 30 June 2007). The<br />
major office tenants include ABN AMRO Asia Pacific Pte Ltd, Barclays PLC, Credit Suisse (Singapore) Limited,<br />
Deutsche Bank Aktiengesellschaft, Ernst & Young Services Pte Ltd and UBS AG.<br />
The table below sets out a summary of<br />
selected information on One Raffles Quay<br />
as at 30 June 2007:<br />
Gross Lettable Area (sq ft)<br />
1,339,407<br />
Net Lettable Area (sq ft)<br />
1,335,576<br />
Number of Tenants<br />
31<br />
Car Park Lots<br />
713<br />
Title<br />
Leasehold estate of 99 years<br />
commencing from 13 June 2001<br />
Temporary Occupation Permits<br />
24 April 2006 (South Tower) and<br />
26 Oc<strong>to</strong>ber 2006 (North Tower)<br />
Valuation (S$ million) 1<br />
941.5<br />
Committed Occupancy (%)<br />
100.0<br />
1 Reflects one-third interest in One Raffles Quay
Dhoby Ghaut<br />
PARK<br />
MALL<br />
Benefits <strong>to</strong> <strong>Unitholders</strong><br />
Yield Accretion<br />
1Based on the Manager’s forecast and an<br />
Agreed Consideration of S$941.5 million,<br />
the forecast consolidated Net Property<br />
Income yield for the ORQ Interest is<br />
approximately 4.2% for the forecast year<br />
ending 30 September 2008. This is higher<br />
than the annualised Net Property Income<br />
yield of approximately 3.6% for the Existing<br />
Properties for the nine months ended 30<br />
June 2007.<br />
National<br />
Museum<br />
Fort Canning Park<br />
River Valley Rd<br />
Orchard Rd<br />
Hill St<br />
The Manager believes that the Acquisition<br />
combined with the proposed issue of<br />
Consideration Units, Convertible Bonds<br />
and/or the drawdown of the Debt Financing<br />
will enhance the earnings and distributions<br />
enjoyed by <strong>Unitholders</strong>.<br />
SMU<br />
Bras Basah<br />
Stamford Rd<br />
Clarke Quay<br />
Empress<br />
Place<br />
SINGAPORE<br />
RIVER<br />
South Bridge Rd North Bridge Rd<br />
CHIJMES<br />
City Hall<br />
Beach Rd<br />
Fuller<strong>to</strong>n<br />
Hotel<br />
Bras Basah Rd<br />
Raffles<br />
The Plaza<br />
Padang<br />
One<br />
Fuller<strong>to</strong>n<br />
Raffles<br />
Place Collyer<br />
Quay<br />
Raffles Place<br />
One Marina<br />
Boulevard<br />
Esplanade<br />
Theatres<br />
by the Bay<br />
Merlion<br />
Park<br />
Bugis<br />
Rochor Rd<br />
Marina<br />
Square<br />
MARINA<br />
BAY<br />
SUNTEC<br />
CITY<br />
Esplanade<br />
Millenia<br />
Walk<br />
Raffles Boulevard<br />
Raffles Ave<br />
Ritz<br />
Carl<strong>to</strong>n<br />
Millenia<br />
Floating<br />
Stadium<br />
Bridge Under<br />
Construction<br />
Marina Bay Sands<br />
Nicoll Highway<br />
Promenade<br />
Nicoll Highway<br />
Singapore<br />
Flyer<br />
Marina South<br />
3.6%<br />
Net Property Yield of Existing Properties 1<br />
4.2%<br />
Projected Net Property Yield of<br />
One Raffles Quay 2<br />
1 Based on annualised Net Property Income yield for <strong>Suntec</strong> <strong>REIT</strong>’s Existing<br />
Properties for nine months ended 30 June 2007<br />
2 Projected Net Property Income yield includes dividend income, interest<br />
income and rental income support net of all taxes for forecast year ending<br />
30 September 2008<br />
KALLANG<br />
BASIN<br />
Tanjong Rhu<br />
From<br />
Changi Airport<br />
East Coast Parkway Expressway<br />
Marina Bay Golf Course<br />
Marina<br />
Barrage<br />
2The Acquisition Fits<br />
the Manager’s<br />
Investment Strategy<br />
The Acquisition fits the Manager's<br />
investment strategy for <strong>Suntec</strong> <strong>REIT</strong><br />
in expanding its portfolio of quality<br />
income-producing assets within the<br />
identified growth corridors.<br />
Given One Raffles Quay’s prime<br />
location, large and diversified tenant<br />
base, excellent connectivity and 100.0%<br />
Committed Occupancy as at 30 June<br />
2007, the Manager believes that One<br />
Raffles Quay will be a valuable addition<br />
<strong>to</strong> <strong>Suntec</strong> <strong>REIT</strong>’s existing portfolio of<br />
properties and will provide <strong>Suntec</strong><br />
<strong>REIT</strong> with an opportunity <strong>to</strong> generate<br />
sustainable growth for <strong>Unitholders</strong>.<br />
Tanjong Pagar<br />
Robinson Rd<br />
Shen<strong>to</strong>n Way<br />
The<br />
Sail<br />
Landmark<br />
One<br />
Shen<strong>to</strong>n<br />
Way<br />
Marina Boulevard<br />
Marina<br />
Business &<br />
Financial<br />
Centre<br />
Central Boulevard<br />
Marina Bay<br />
Bayfront<br />
<strong>Suntec</strong><br />
<strong>REIT</strong> Assets<br />
Growth<br />
Corridors<br />
MRT Stations<br />
North-South Line<br />
North-East Line East-West Line Circle Line<br />
(Under construction)<br />
Down<strong>to</strong>wn Line<br />
(Under construction)
3One Raffles Quay enjoys several key competitive strengths, including (i) its strategic location in the heart of<br />
the CBD and close <strong>to</strong> the new Marina Business and Financial Centre (“MBFC”); (ii) its excellent connectivity<br />
and accessibility with its direct link <strong>to</strong> one of Singapore’s four major MRT interchange stations, Raffles Place<br />
MRT; (iii) a strong tenant base including global financial institutions; and (iv) its large floor plates allowing for<br />
maximum efficiency and flexibility, and state-of-the-art building services and management systems.<br />
Prime and Iconic Office Development<br />
4Foothold in the<br />
Development of<br />
the Marina Bay Area<br />
Centrally located on prime waterfront<br />
space in Singapore's new financial district,<br />
One Raffles Quay is well-positioned <strong>to</strong><br />
capitalise on the future growth of the<br />
area and the development of Marina Bay.<br />
The proposed Integrated Resort, MBFC<br />
and other commercial, residential and<br />
recreational developments at Marina<br />
Bay will contribute <strong>to</strong> making the area<br />
a vibrant and sought-after location for<br />
professionals <strong>to</strong> live, work and play in.<br />
Greater Exposure <strong>to</strong> Prime Grade ‘A’ Office Market<br />
5The Acquisition will increase <strong>Suntec</strong><br />
<strong>REIT</strong>’s office portfolio from its<br />
current 1.4 million sq ft <strong>to</strong> 1.8 million<br />
sq ft, providing increased exposure<br />
<strong>to</strong> the strengthening Singapore office<br />
market and increasing demand<br />
for quality commercial buildings<br />
in the CBD. Furthermore, as One<br />
Raffles Quay is a recently completed<br />
development, a substantial number<br />
of major tenancies were leased at<br />
rents which are significantly below<br />
current market rental rates. As such,<br />
the office space in One Raffles Quay<br />
offers potential for rental growth<br />
opportunities upon renewal or<br />
replacement of these leases.<br />
Pre-Acquisition (By NLA ’000) 1 Post-Acquisition (By NLA ’000) 2<br />
1,383<br />
1.4 million sq ft<br />
of Office Space<br />
1,827<br />
1.8 million sq ft<br />
of Office Space<br />
1 Based on NLA for <strong>Suntec</strong> <strong>REIT</strong>’s Existing Properties as at 30 June 2007<br />
2 Based on NLA for <strong>Suntec</strong> <strong>REIT</strong>’s Existing Properties as at 30 June 2007 and<br />
one-third share of NLA of One Raffles Quay
Income<br />
Diversification<br />
6The Acquisition will improve <strong>Suntec</strong><br />
<strong>REIT</strong>’s income diversification and<br />
reduce the reliance of its income<br />
stream on any single property. The<br />
Manager expects that the contribution<br />
<strong>to</strong> <strong>Suntec</strong> <strong>REIT</strong>’s Net Property Income<br />
by <strong>Suntec</strong> City Mall and <strong>Suntec</strong> City<br />
Office Towers within <strong>Suntec</strong> <strong>REIT</strong>’s<br />
property portfolio for the forecast<br />
year ending 30 September 2008 will<br />
decrease from approximately 87.4%,<br />
prior <strong>to</strong> Completion, <strong>to</strong> approximately<br />
69.6%, due <strong>to</strong> the enlargement of<br />
<strong>Suntec</strong> <strong>REIT</strong>’s property portfolio<br />
resulting from the Acquisition.<br />
Pre-Acquisition (By NPI)<br />
CHIJMES<br />
4.5%<br />
Park Mall<br />
8.1%<br />
<strong>Suntec</strong> City<br />
87.4%<br />
FY2008 1 NPI: S$155.3m<br />
Post-Acquisition (By NPI)<br />
CHIJMES<br />
ORQ 3.6%<br />
20.3%<br />
Park Mall<br />
6.5%<br />
<strong>Suntec</strong> City<br />
69.6%<br />
FY2008 2 NPI: S$194.9m<br />
1 Net Property Income forecast year ending 30 September 2008<br />
2 Includes dividend income, interest income and rental income support<br />
net of all taxes<br />
Improved Quality and<br />
Diversity of Tenant Base<br />
7The Acquisition is expected <strong>to</strong> further enhance the tenancy<br />
profile of <strong>Suntec</strong> <strong>REIT</strong>’s office tenant base with the addition<br />
of major anchor office tenants such as as ABN AMRO Asia<br />
Pacific Pte Ltd, Barclays PLC, Credit Suisse (Singapore)<br />
Limited, Deutsche Bank Aktiengesellschaft, Ernst & Young<br />
Services Pte Ltd, and other major financial institutions.<br />
Rare Opportunity <strong>to</strong><br />
Own an Iconic Building<br />
8One Raffles Quay is a landmark building<br />
designed by the internationally renowned<br />
architectural firm Kohn Pedersen Fox Associates<br />
of New York. This is a rare opportunity for<br />
<strong>Suntec</strong> <strong>REIT</strong> <strong>to</strong> partner with reputable property<br />
companies Hongkong Land and K-<strong>REIT</strong> Asia, <strong>to</strong><br />
own a prestigious iconic prime grade ‘A’ office<br />
development with long term growth potential.<br />
33.3% 1 33.3%<br />
33.3% 2<br />
ORQPL<br />
1 To be held through 100% owned subsidiary Comina Investment Limited<br />
2 As per K-<strong>REIT</strong> Asia’s announcement dated 30 July 2007<br />
Enlarged Portfolio The table below sets out selected information about the Enlarged Portfolio.<br />
Existing Properties ORQ Interest Enlarged Portfolio<br />
Net Lettable Area (sq ft)<br />
Number of tenants<br />
Parking Lots<br />
Valuation (S$ million)<br />
Committed Occupancy (%)<br />
2,420,543<br />
619<br />
3,516 2<br />
3,871<br />
98.5<br />
445,192 1<br />
31<br />
713<br />
941.5 1, 3<br />
100.0<br />
2,865,735<br />
650<br />
4,229<br />
4,812.5<br />
98.7<br />
Forecast Year (financial year ending 30 September 2008) (S$ million)<br />
Net Property Income 4<br />
155.3<br />
39.6<br />
194.9<br />
1 Reflects one-third interest in One Raffles Quay.<br />
2 This figure includes 3,073 parking lots at <strong>Suntec</strong> City Mall and <strong>Suntec</strong> City Office Towers, which are owned by MCST. The purchase price, valuation<br />
and income statistics do not relate in any manner <strong>to</strong> these parking lots<br />
3 This takes in<strong>to</strong> account the Deed of Income Support where Vendor has undertaken <strong>to</strong> pay <strong>to</strong> the Trustee in quarterly instalments over 54 months,<br />
an aggregate amount of S$103.48 million (inclusive of GST)<br />
4 Includes dividend income, interest income and rental income support net of all taxes
Proposed Issue of Convertible Bonds<br />
Summary of Proposed Terms as follows:<br />
Size<br />
Up <strong>to</strong> S$450,000,000<br />
Issue price<br />
100% of aggregate principal amount<br />
Maturity<br />
Up <strong>to</strong> 7 years from the date of the issue of<br />
the Convertible Bonds<br />
Conversion price<br />
25% – 50% over closing unit price on the last<br />
business day prior <strong>to</strong> the launch of the Offering<br />
Coupon<br />
2.0% – 4.0% per annum, payable semi-annually<br />
Yield-<strong>to</strong>-Put/Maturity<br />
2.0% – 4.0% per annum, calculated on a<br />
semi-annual basis<br />
Overall Yield Accretion<br />
The Manager proposes <strong>to</strong> satisfy the Total Acquisition<br />
Cost and the costs in relation <strong>to</strong> the financing (i) partly<br />
through the issue of Consideration Units <strong>to</strong> the Vendor,<br />
(ii) partly through the issue of Units <strong>to</strong> the Manager in<br />
satisfaction of the acquisition fee and partly with the<br />
proceeds of either (iii)(a) the drawdown of the Debt<br />
Financing or (b) the drawdown of the Debt Financing and<br />
the Issue of Convertible Bonds, in such proportion as<br />
the Manager in its discretion, deems appropriate.<br />
Based on market conditions, the Manager will determine<br />
the capital structure and may decide <strong>to</strong> finance the Total<br />
Acquisition Cost by issue of Consideration Units and the<br />
draw down of the Debt Financing, if the Manager determines<br />
this <strong>to</strong> be in the best interests of the <strong>Unitholders</strong>.<br />
The Manager believes that the Acquisition combined with<br />
the proposed issue of Consideration Units, Convertible<br />
Bonds and/or the drawdown of the Debt Financing will be<br />
overall yield accretive <strong>to</strong> <strong>Unitholders</strong>.<br />
The following charts illustrate the overall yield accretion,<br />
assuming the Acquisition is financed by the issue of<br />
Consideration Units, the drawdown of the Debt Financing<br />
and Issue of Convertible Bonds at the proposed terms in<br />
the following scenarios.<br />
It is intended that the Issue of Convertible Bonds will<br />
comprise a placement of Convertible Bonds with an<br />
aggregate principal amount of up <strong>to</strong> S$450.0 million <strong>to</strong><br />
institutional and accredited inves<strong>to</strong>rs. The Convertible<br />
Bonds will bear interest from the Issue Date payable<br />
semi-annually in arrears and will be convertible in<strong>to</strong><br />
Conversion Units, during the Conversion Period or, at the<br />
option of <strong>Suntec</strong> <strong>REIT</strong>, redeemed for cash in accordance<br />
with the terms and conditions of the Convertible Bonds.<br />
The Conversion Price will be determined between the<br />
Manager and the Joint Financial Advisers, Underwriters<br />
and Bookrunners closer <strong>to</strong> the date of commencement of<br />
the Issue of Convertible Bonds, having regard <strong>to</strong> market<br />
conditions. As such, the actual number of Conversion<br />
Units <strong>to</strong> be issued pursuant <strong>to</strong> full conversion of the<br />
Convertible Bonds will depend on the aggregate principal<br />
amount and the Conversion Price.<br />
Conversion Scenario<br />
Scenario A: Assuming Conversion Units and Consideration Units<br />
issued at the beginning of Forecast Year 1<br />
No Deferred Units 2<br />
- DPU Forecast<br />
8.32<br />
Existing<br />
Properties<br />
+2.0%<br />
8.49<br />
Low End<br />
Conv.<br />
Premium<br />
S$2.33 3<br />
+4.1%<br />
8.66<br />
High End<br />
Conv.<br />
Premium<br />
S$2.79 3<br />
Enlarged Portfolio<br />
7.45<br />
Existing<br />
Properties<br />
Deferred Units<br />
- DPU Forecast<br />
+3.6%<br />
7.72 7.86<br />
Low End<br />
Conv.<br />
Premium<br />
S$2.33 3<br />
+5.5%<br />
1 Forecast Year ending 30 September 2008<br />
2 Include first instalment of Deferred Units<br />
3 Conversion Price computed with conversion premium over<br />
an illustrative price of S$1.86 per Unit<br />
No Conversion Scenario<br />
High End<br />
Conv.<br />
Premium<br />
S$2.79 3<br />
Enlarged Portfolio<br />
Scenario B: Assuming Consideration Units have been issued<br />
at the beginning of Forecast Year 1<br />
No Deferred Units 2<br />
- DPU Forecast<br />
8.32<br />
+0.8%<br />
8.39<br />
+7.9%<br />
8.98<br />
7.45<br />
Deferred Units<br />
- DPU Forecast<br />
+1.2%<br />
7.54<br />
+8.3%<br />
8.07<br />
By approving the Issue of Convertible Bonds, the<br />
<strong>Unitholders</strong> are deemed <strong>to</strong> have approved the terms<br />
of the Convertible Bonds, <strong>to</strong>gether with the terms<br />
which are incidental or ancillary <strong>to</strong> such terms, and<br />
the issue of Conversion Units upon conversion of the<br />
Convertible Bonds.<br />
Existing<br />
Properties<br />
High End Low End<br />
Coupon Coupon<br />
Rate Rate<br />
4.0% 2.0%<br />
Enlarged Portfolio<br />
Existing<br />
Properties<br />
1 Forecast Year ending 30 September 2008<br />
2 Include first instalment of Deferred Units<br />
High End Low End<br />
Coupon Coupon<br />
Rate Rate<br />
4.0% 2.0%<br />
Enlarged Portfolio
IMPORTANT NOTICE<br />
The value of Units and the income derived from them may fall as well as rise. Units are not obligations<br />
of, deposits in, or guaranteed by, ARA Trust Management (<strong>Suntec</strong>) Limited as manager of <strong>Suntec</strong> <strong>REIT</strong><br />
(the “Manager”) or any of its affiliates. An investment in Units is subject <strong>to</strong> investment risks, including<br />
the possible loss of the principal amount invested.<br />
Inves<strong>to</strong>rs have no right <strong>to</strong> request the Manager <strong>to</strong> redeem their Units while the Units are listed. It is<br />
intended that the holders of Units in <strong>Suntec</strong> <strong>REIT</strong> (the “<strong>Unitholders</strong>”) may only deal in their Units<br />
through trading on the SGX-ST. Listing of the Units on the SGX-ST does not guarantee a liquid market<br />
for the Units.<br />
The past performance of <strong>Suntec</strong> <strong>REIT</strong> is not necessarily indicative of the future performance of <strong>Suntec</strong><br />
<strong>REIT</strong>.<br />
This <strong>Circular</strong> may contain forward-looking statements that involve risks and uncertainties. Actual future<br />
performance, outcomes and results may differ materially from those expressed in forward-looking<br />
statements as a result of a number of risks, uncertainties and assumptions. Representative examples<br />
of these risks, uncertainties and assumptions include (without limitation) general industry and economic<br />
conditions, interest rate trends, cost of capital and capital availability, competition from similar<br />
developments, shifts in expected levels of property rental income, changes in operating expenses<br />
(including employee wages, benefits and training costs), property expenses and governmental and<br />
public policy changes. You are cautioned not <strong>to</strong> place undue reliance on these forward-looking<br />
statements, which are based on the Manager’s current view of future events. All forecasts are based<br />
on the principal terms of the Convertible Bonds as set out in Appendix B of this <strong>Circular</strong> and the<br />
Manager’s assumptions as explained in Appendix C of this <strong>Circular</strong>. Such yields will vary accordingly<br />
for inves<strong>to</strong>rs who purchase Units in the secondary market at a market price higher or lower than the<br />
issue price range specified in this <strong>Circular</strong>. The major assumptions are with respect <strong>to</strong> certain expected<br />
levels of property rental income and property expenses over the relevant periods, which are considered<br />
by the Manager <strong>to</strong> be appropriate and reasonable as at the date of the <strong>Circular</strong>. The forecast financial<br />
performance of <strong>Suntec</strong> <strong>REIT</strong> is not guaranteed and there is no certainty that it can be achieved.<br />
Inves<strong>to</strong>rs should read the whole of this <strong>Circular</strong> for details of the forecasts and consider the<br />
assumptions used and make their own assessment of the future performance of <strong>Suntec</strong> <strong>REIT</strong>.<br />
The Securities Industry Council (“SIC”) has on 8 June 2007 decided <strong>to</strong> extend the ambit of the<br />
Singapore Code on Take-overs and Mergers (the “Takeover Code”) <strong>to</strong> real estate investment trusts<br />
(“<strong>REIT</strong>s”).<br />
The Monetary Authority of Singapore, on the advice of the SIC, will be making amendments <strong>to</strong> the<br />
Securities and Futures Act, Chapter 289 of Singapore and the Takeover Code, where necessary, <strong>to</strong> give<br />
effect <strong>to</strong> the extension of the Takeover Code <strong>to</strong> <strong>REIT</strong>s.<br />
Prior <strong>to</strong> these amendments, the SIC suggests that parties engaged in take-over or merger transactions<br />
involving <strong>REIT</strong>s comply with the Takeover Code. In particular, parties intending <strong>to</strong> (i) acquire 30% or<br />
more of the <strong>to</strong>tal units of a <strong>REIT</strong>; or (ii) when holding not less than 30% but not more than 50% of the<br />
<strong>to</strong>tal units of a <strong>REIT</strong>, acquire more than 1% of the <strong>to</strong>tal units of the <strong>REIT</strong> in any six-month period, should<br />
make a general offer for the <strong>REIT</strong>. The SIC should be consulted in cases of doubt.<br />
If you have sold or transferred all your Units, you should immediately forward this <strong>Circular</strong>, <strong>to</strong>gether with<br />
the Notice of Extraordinary General Meeting and the accompanying Proxy Form, <strong>to</strong> the purchaser or<br />
transferee or <strong>to</strong> the bank, s<strong>to</strong>ckbroker or other agent through whom the sale or transfer was effected<br />
for onward transmission <strong>to</strong> the purchaser or transferee.<br />
This <strong>Circular</strong> is not an offer or sale of securities in the United States. <strong>Unitholders</strong> are authorised <strong>to</strong> use<br />
this <strong>Circular</strong> solely for the purpose of considering the approvals sought herein. Any person <strong>to</strong> whom a<br />
i
copy of this <strong>Circular</strong> has been issued shall not circulate <strong>to</strong> any other person, reproduce or otherwise<br />
distribute this <strong>Circular</strong> or any information herein for any purpose whatsoever nor permit or cause the<br />
same <strong>to</strong> occur. Neither this <strong>Circular</strong> nor any copy or portion hereof may be sent or transmitted in<strong>to</strong> the<br />
United States or <strong>to</strong> any U.S. Person (as defined under the United States Securities Act of 1933, as<br />
amended (the “Securities Act”)). The Convertible Bonds <strong>to</strong> be issued by <strong>Suntec</strong> <strong>REIT</strong> have, in each<br />
case, not been and will not be registered under the Securities Act and may not be offered or sold within<br />
the United States or <strong>to</strong>, or for the account or benefit of U.S. Persons, except in certain transactions<br />
exempt from the registration requirements of the Securities Act. The Convertible Bonds are being<br />
offered and sold in offshore transactions within the meaning of Regulation S under the Securities Act.<br />
Any failure <strong>to</strong> comply with these restrictions may constitute a violation of United States securities laws.<br />
Pro Forma Impact of Deferred Units Issuance<br />
<strong>Suntec</strong> City Development Pte Ltd (“SCDPL”), the vendor of <strong>Suntec</strong> City Mall and <strong>Suntec</strong> City Office<br />
Towers (both as defined in the prospectus dated 29 November 2004 (the “Prospectus”) issued in<br />
connection with the initial public offering of Units from 30 November 2004 <strong>to</strong> 3 December 2004 and<br />
<strong>to</strong>gether, the “IPO Properties”) is entitled <strong>to</strong> be issued with 207,002,170 additional Units (the “Deferred<br />
Units”) in part satisfaction of the deferred payment consideration for the purchase for the IPO<br />
Properties. The Deferred Units will be issued at the offering price of S$1.00 per Unit under the initial<br />
public offering of the Units and in six equal instalments, with the first instalment <strong>to</strong> be issued on the date<br />
falling 42 months after 9 December 2004 (being the date of completion of the sale and purchase of the<br />
IPO Properties) and the rest semi-annually thereafter. Any change in rental rates, occupancy rates and<br />
Distributable Income (as defined herein) can affect the impact of any dilution in the yields of <strong>Suntec</strong><br />
<strong>REIT</strong> arising from the issuance of the Deferred Units in the future. The table below illustrates the pro<br />
forma impact on <strong>Suntec</strong> <strong>REIT</strong>’s forecast distributions for the financial year ending 30 September 2008<br />
(the “Forecast Year”) under the scenario where the Deferred Units are entirely issued on the Listing<br />
Date, the Conversion Units have not been exercised and the Consideration Units have been issued,<br />
and in relation <strong>to</strong>:<br />
(i)<br />
(ii)<br />
<strong>Suntec</strong> <strong>REIT</strong>’s existing portfolio of properties (comprising <strong>Suntec</strong> City Mall, <strong>Suntec</strong> City Office<br />
Towers, Park Mall and Chijmes) (the “Existing Properties”); and<br />
the Existing Properties and a one-third interest in One Raffles Quay (the “ORQ Interest”, and<br />
<strong>to</strong>gether with the Existing Properties, the “Enlarged Portfolio”).<br />
Forecast Year<br />
(financial year ending 30 September 2008)<br />
Existing Properties Enlarged Portfolio<br />
Distribution Yield (%) (1) 4.5 4.7<br />
Distribution Yield assuming that all Deferred Units<br />
are issued on the Listing Date (%)<br />
4.0 4.2<br />
(1)<br />
Includes first instalment of Deferred Units representing 34.5 million units.<br />
The above distribution yield is calculated based on (i) an illustrative price of S$1.86 per Unit, being the<br />
last closing price on the Latest Practicable Date (as defined herein), (ii) <strong>Suntec</strong> <strong>REIT</strong>’s existing portfolio<br />
of properties, and (iii) on the Manager’s assumptions as explained in Appendix C of this <strong>Circular</strong>. Such<br />
yields will vary accordingly for inves<strong>to</strong>rs who purchase Units in the secondary market at a market price<br />
different from such illustrative price.<br />
ii
TABLE OF CONTENTS<br />
Page<br />
CORPORATE INFORMATION ...............................................<br />
iv<br />
SUMMARY ............................................................. 1<br />
INDICATIVE TIMETABLE .................................................. 9<br />
LETTER TO UNITHOLDERS. ............................................... 10<br />
1. Summary of Approvals Sought. .......................................... 10<br />
2. The Acquisition and its Rationale ......................................... 13<br />
3. Details Concerning the Acquisition and Joint Ownership of One Raffles Quay ........ 20<br />
4. Financial Information Relating <strong>to</strong> the Acquisition .............................. 25<br />
5. Method of Financing .................................................. 32<br />
6. Profit Forecast ....................................................... 33<br />
7. Details of the Issue of Convertible Bonds ................................... 35<br />
8. The Proposed Issue of Consideration Units <strong>to</strong> the Vendor ...................... 37<br />
9. The General Mandate ................................................. 38<br />
10. The Valuation of Real Estate Supplement. .................................. 39<br />
11. Recommendations .................................................... 39<br />
12. Extraordinary General Meeting. .......................................... 40<br />
13. Prohibition from Voting. ................................................ 40<br />
14. Action <strong>to</strong> be Taken by <strong>Unitholders</strong> ........................................ 41<br />
15. Direc<strong>to</strong>rs’ Responsibility Statement. ....................................... 41<br />
16. Joint Financial Advisers, Underwriters And Bookrunners’ Responsibility Statement .... 41<br />
17. Consents. .......................................................... 42<br />
18. Documents on Display ................................................. 42<br />
GLOSSARY ............................................................ 43<br />
APPENDICES<br />
Appendix A One Raffles Quay and the Existing Properties .......................... A-1<br />
Appendix B Principal Terms of the Convertible Bonds. ............................. B-1<br />
Appendix C Profit Forecast ................................................. C-1<br />
Appendix D Independent Accountants’ Report on the Profit Forecast .................. D-1<br />
Appendix E Valuation Certificates. ............................................ E-1<br />
Appendix F Independent Financial Adviser’s Letter ................................ F-1<br />
Appendix G Taxation ...................................................... G-1<br />
Appendix H Proposed Supplement <strong>to</strong> the Trust Deed .............................. H-1<br />
NOTICE OF EXTRAORDINARY GENERAL MEETING ............................ I-1<br />
PROXY FORM<br />
iii
CORPORATE INFORMATION<br />
Direc<strong>to</strong>rs of ARA Trust<br />
Management (<strong>Suntec</strong>) Limited<br />
: Mr Chiu Kwok Hung, Justin (Chairman)<br />
Mr Ip Tak Chuen, Edmond<br />
Mr Lim Hwee Chiang, John<br />
Mr Tan Kian Chew (Independent Direc<strong>to</strong>r)<br />
Mrs Sng Sow-Mei (alias Poon Sow Mei)<br />
(Independent Direc<strong>to</strong>r)<br />
Mr Lim Lee Meng (Independent Direc<strong>to</strong>r)<br />
Mr Chow Wai Wai, John<br />
Mr Yeo See Kiat (Chief Executive Officer)<br />
Registered Office of the Manager : 9 Temasek Boulevard<br />
#09-01 <strong>Suntec</strong> Tower Two<br />
Singapore 038989<br />
Trustee of <strong>Suntec</strong> <strong>REIT</strong> (the<br />
“Trustee”)<br />
Financial Adviser <strong>to</strong> the<br />
Acquisition<br />
Joint Financial Advisers,<br />
Underwriters and Bookrunners<br />
for the Issue of Convertible<br />
Bonds<br />
: HSBC Institutional Trust Services (Singapore) Limited<br />
21 Collyer Quay<br />
#14-01 HSBC Building<br />
Singapore 049320<br />
: ARA Financial Pte. Ltd.<br />
9 Temasek Boulevard<br />
#09-01 <strong>Suntec</strong> Tower Two<br />
Singapore 038989<br />
: Citigroup Global Markets Singapore Pte. Ltd.<br />
3 Temasek Avenue<br />
#12-00 Centennial Tower<br />
Singapore 039190<br />
Deutsche Bank AG, Singapore Branch<br />
One Raffles Quay<br />
#16-00 South Tower<br />
Singapore 048583<br />
Unit Registrar and Unit Transfer<br />
Office<br />
Legal Adviser for the Acquisition<br />
and the Issue of Convertible<br />
Bonds, and <strong>to</strong> the Manager<br />
Legal Adviser for the Issue of<br />
Convertible Bonds and <strong>to</strong> the<br />
Manager as <strong>to</strong> English law<br />
Legal Adviser <strong>to</strong> the Joint<br />
Financial Advisers, Underwriters<br />
and Bookrunners for the Issue<br />
of Convertible Bonds as <strong>to</strong><br />
Singapore Law<br />
: Lim Associates (Pte) Ltd<br />
3 Church Street<br />
#08-01 Samsung Hub<br />
Singapore 049483<br />
: Allen & Gledhill LLP<br />
One Marina Boulevard<br />
#28-00<br />
Singapore 018989<br />
: Allen & Overy<br />
24 Raffles Place<br />
#22-00 Clifford Centre<br />
Singapore 048621<br />
: Venture Law LLC<br />
50 Raffles Place<br />
#30-00 Singapore Land Tower<br />
Singapore 048623<br />
iv
Legal Adviser <strong>to</strong> the Joint<br />
Financial Advisers, Underwriters<br />
and Bookrunners for the Issue<br />
of Convertible Bonds as <strong>to</strong><br />
English law<br />
: Latham & Watkins LLP<br />
80 Raffles Place<br />
#14-20 UOB Plaza 2<br />
Singapore 048624<br />
Legal Adviser <strong>to</strong> the Trustee : Shook Lin & Bok LLP<br />
1 Robinson Road<br />
#17-00 AIA Tower<br />
Singapore 048542<br />
Independent Financial Adviser <strong>to</strong><br />
the Independent Direc<strong>to</strong>rs of the<br />
Manager<br />
: Ernst & Young Corporate Finance Pte Ltd<br />
One Raffles Quay<br />
North Tower, Level 18<br />
Singapore 048583<br />
Independent Accountants : KPMG<br />
16 Raffles Quay<br />
#22-00 Hong Leong Building<br />
Singapore 048581<br />
Tax Adviser for the Acquisition<br />
and <strong>to</strong> the Manager<br />
: KPMG Tax Services Pte Ltd<br />
16 Raffles Quay<br />
#22-00 Hong Leong Building<br />
Singapore 048581<br />
Independent Valuers : CB Richard Ellis (Pte) Ltd<br />
6 Battery Road #32-01<br />
Singapore 049909<br />
Knight Frank Pte Ltd<br />
16 Raffles Quay<br />
#30-00 Hong Leong Building<br />
Singapore 048581<br />
v
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SUMMARY<br />
The following summary is qualified in its entirety by, and should be read in conjunction with, the full text<br />
of this <strong>Circular</strong>. Meanings of defined terms may be found in the Glossary on pages 43 <strong>to</strong> 50 of this<br />
<strong>Circular</strong>.<br />
Any discrepancies in the tables included herein between the listed amounts and <strong>to</strong>tals thereof are due<br />
<strong>to</strong> rounding.<br />
Summary of Approvals Sought<br />
The Manager seeks approvals from the <strong>Unitholders</strong> for the resolutions stated below:<br />
(1) The Proposed Acquisition of a One-Third Interest in One Raffles Quay (Ordinary<br />
Resolution)<br />
The proposed acquisition of a one-third interest in One Raffles Quay (as defined herein) through<br />
the acquisition of the entire issued share capital of Comina Investment Limited (“Comina” and the<br />
acquisition by <strong>Suntec</strong> <strong>REIT</strong>, the “Acquisition”) from Cavell Limited (“Vendor”).<br />
(2) The Proposed Issue of up <strong>to</strong> S$450,000,000 Aggregate Principal Amount of S$<br />
Denominated Convertible Bonds (Extraordinary Resolution)<br />
The proposed issue by <strong>Suntec</strong> <strong>REIT</strong> of up <strong>to</strong> S$450,000,000 aggregate principal amount of S$<br />
Denominated Convertible Bonds (the “Convertible Bonds”), which are interest-bearing and<br />
convertible in<strong>to</strong> new Units (the “Conversion Units”) or redeemable for cash, for placement <strong>to</strong><br />
institutional and other inves<strong>to</strong>rs (the “Issue of Convertible Bonds”), in order <strong>to</strong> part-finance the<br />
Acquisition and associated costs.<br />
(3) The Proposed Issue of Consideration Units <strong>to</strong> the Vendor (Ordinary Resolution)<br />
The proposed issue of such number of new Units <strong>to</strong> the Vendor or its nominee(s) of an aggregate<br />
value of S$94.15 million (the “Consideration Units”) as partial consideration for the Acquisition.<br />
The issue price for the Consideration Units will be equal <strong>to</strong> the volume weighted average price per<br />
Unit for all trades on the SGX-ST, in the ordinary course of trading, for the last 10 Market Days<br />
prior <strong>to</strong> (and excluding) the date of Completion.<br />
(4) The Proposed General Mandate for the Issue of New Units and Convertible Securities<br />
(Ordinary Resolution)<br />
The proposed general mandate <strong>to</strong> be given <strong>to</strong> the Manager for the issue of new Units and/or<br />
convertible securities in the financial year ending 30 September 2008 (“FY2008”) without the prior<br />
specific approval of <strong>Unitholders</strong> in a general meeting, provided that such number of new Units and<br />
convertible securities does not exceed 50.0% of the number of Units in issue at the end of the<br />
financial year ended 30 September 2007 (“FY2007”), of which the aggregate number of new Units<br />
and convertible securities issued other than on a pro rata basis <strong>to</strong> <strong>Unitholders</strong> shall not be more<br />
than 20.0% of the number of Units in issue at the end of FY2007 (the “General Mandate”).<br />
(5) The Proposed Supplement <strong>to</strong> the Trust Deed in Connection with the Valuation of Real<br />
Estate (Extraordinary Resolution)<br />
The proposed amendment <strong>to</strong> the trust deed constituting <strong>Suntec</strong> <strong>REIT</strong> dated 1 November 2004 (as<br />
amended) (the “Trust Deed”) for the purpose of clarifying that the method of valuation of Real<br />
Estate (as defined therein) should be the same whether the Real Estate is held indirectly through<br />
Special Purpose Vehicles (as defined therein) or held directly by <strong>Suntec</strong> <strong>REIT</strong> (the “Valuation of<br />
Real Estate Supplement”).<br />
1
OVERVIEW OF THE ACQUISITION<br />
Description of One Raffles Quay<br />
One Raffles Quay, a prime landmark commercial development, comprises (as at 30 June 2007):<br />
• a 50-s<strong>to</strong>rey office <strong>to</strong>wer (the “North Tower”) with approximately 765,902 sq ft (71,154 sq m) of net<br />
lettable area (“Net Lettable Area”);<br />
• a 29-s<strong>to</strong>rey office <strong>to</strong>wer (the “South Tower”) with approximately 565,659 sq ft (52,551 sq m) of<br />
Net Lettable Area;<br />
• approximately 4,015 sq ft (373 sq m) of Net Lettable Area for retail outlets and cafes along an<br />
underground link connecting the North Tower <strong>to</strong> the Raffles Place mass rapid transit (“MRT”)<br />
station;<br />
• a sheltered plaza serving as a drop-off point; and<br />
• a hub car park with 713 car park lots.<br />
(Details of One Raffles Quay can be found in Appendix A of this <strong>Circular</strong>.)<br />
Key Steps Taken <strong>to</strong> Secure the Acquisition<br />
Comina, a wholly-owned indirect subsidiary of Cheung Kong (Holdings) Limited (“Cheung Kong”), is<br />
a special purpose holding company holding one-third of the issued share capital of One Raffles Quay<br />
Pte Ltd (“ORQPL”).<br />
ORQPL is the developer and current owner of One Raffles Quay. As at 13 September 2007, being the<br />
latest practicable date prior <strong>to</strong> the printing of this <strong>Circular</strong> (the “Latest Practicable Date”), the issued<br />
share capital of ORQPL is held in equal proportions (i.e. one-third each) by Freyland Pte Ltd<br />
(“Freyland”), Comina and Boulevard Development Pte Ltd (“Boulevard”). Freyland and Boulevard are<br />
wholly-owned subsidiaries of Hongkong Land International Holdings Limited (“Hongkong Land<br />
International”) and Keppel Land Properties Pte Ltd (“Keppel Land Properties”), respectively. The<br />
rights and duties of Freyland, Comina and Boulevard as shareholders of ORQPL are governed by a<br />
shareholders’ agreement dated 28 March 2001 made between Freyland, Comina, Boulevard,<br />
Hongkong Land International, CKH China Enterprises Limited, Keppel Land Properties and ORQPL<br />
(the “Shareholders’ Agreement”).<br />
<strong>Suntec</strong> <strong>REIT</strong> has an opportunity <strong>to</strong> acquire a one-third interest in One Raffles Quay through the sale<br />
and purchase of the entire issued share capital of Comina. To this end, the Trustee entered in<strong>to</strong> a<br />
conditional share purchase agreement (the “Share Purchase Agreement”) with the Vendor and<br />
Cheung Kong Investment Company Limited (as guaran<strong>to</strong>r <strong>to</strong> the Vendor, the “Guaran<strong>to</strong>r”) in<br />
connection with the acquisition of the entire issued share capital of Comina.<br />
Under the terms of the Share Purchase Agreement, it is contemplated that upon Completion, the<br />
Trustee and Comina will enter in<strong>to</strong> a restated shareholders’ agreement (the “Restated Shareholders’<br />
Agreement”) with, inter alia, Freyland and RBC Dexia Trust Services Singapore Limited (in its capacity<br />
as the trustee of K-<strong>REIT</strong> Asia) 1 , the other shareholders of ORQPL, relating <strong>to</strong> the governance of their<br />
relationship as shareholders of ORQPL and ORQPL’s holding and management of One Raffles Quay.<br />
As contemplated under the terms of the Share Purchase Agreement, on 31 August 2007, all of the<br />
shares held by ORQPL in the capital of the property manager of One Raffles Quay, Raffles Quay Asset<br />
Management Pte Ltd (“RQAM”), had been transferred <strong>to</strong> Hongkong Land (Singapore) Pte Ltd, Charm<br />
1<br />
On 30 July 2007, K-<strong>REIT</strong> Asia announced that it will acquire a one-third interest in One Raffles Quay through the acquisition<br />
of one-third of the issued share capital of ORQPL from Boulevard.<br />
2
Aim International Limited and K-<strong>REIT</strong> Asia Property Management Pte. Ltd. (a wholly-owned subsidiary<br />
of Keppel Land Limited) in equal proportions (the “RQAM Restructuring”).<br />
On 30 July 2007, K-<strong>REIT</strong> Asia announced that it will acquire a one-third interest in One Raffles Quay<br />
through the acquisition of one-third of the issued share capital of ORQPL from Boulevard.<br />
As One Raffles Quay is a recently completed development, a substantial number of major tenancies<br />
were leased at rents which are significantly below current market rental rates. As such, the Trustee has<br />
entered in<strong>to</strong> a deed of income support (the “Deed of Income Support”) with the Vendor and the<br />
Guaran<strong>to</strong>r that would enable <strong>Suntec</strong> <strong>REIT</strong> <strong>to</strong> strengthen its Distributable Income for the benefit of the<br />
<strong>Unitholders</strong>. Under the Deed of Income Support, the Vendor has undertaken, starting from Completion,<br />
<strong>to</strong> pay <strong>to</strong> the Trustee quarterly instalments for 54 months up <strong>to</strong> an aggregate amount of S$103.48<br />
million (inclusive of GST). The Vendor’s commitment under the Deed of Income Support is guaranteed<br />
by the Guaran<strong>to</strong>r.<br />
Further details of the Restated Shareholders’ Agreement, the Share Purchase Agreement and the<br />
Deed of Income Support can be found in “Details Concerning the Acquisition and Joint Ownership of<br />
One Raffles Quay” at paragraph 3 of the Letter <strong>to</strong> <strong>Unitholders</strong> below.<br />
Estimated Costs of the Acquisition<br />
The agreed consideration payable <strong>to</strong> the Vendor in connection with the Acquisition (the “Agreed<br />
Consideration”) of S$941.5 million was negotiated on a willing-buyer and willing-seller basis, and shall<br />
be satisfied by:<br />
(i)<br />
(ii)<br />
payment of the Share Consideration (as defined herein) by the Trustee <strong>to</strong> the Vendor; and<br />
the extending of the Purchaser Loan (as defined herein) by the Trustee <strong>to</strong> ORQPL.<br />
The Trustee shall extend the Purchaser Loan <strong>to</strong> ORQPL on Completion <strong>to</strong> enable ORQPL <strong>to</strong> repay the<br />
Joynote Loan 2 (as defined herein).<br />
The Share Consideration will be paid on Completion, which shall be no later than 31 Oc<strong>to</strong>ber 2007 or<br />
such other date as the Trustee and the Vendor may mutually agree in writing.<br />
The Manager and the Trustee have each commissioned an independent property valuer, being Knight<br />
Frank Pte Ltd (“Knight Frank”) and CB Richard Ellis (Pte) Ltd (“CBRE”) respectively, <strong>to</strong> value the<br />
one-third interest in One Raffles Quay. Knight Frank in its valuation certificate stated that the aggregate<br />
open market value of the one-third interest in One Raffles Quay as at 2 July 2007 was S$941.5 million.<br />
CBRE in its valuation certificate stated that the aggregate open market value of the one-third interest<br />
in One Raffles Quay as at 2 July 2007 was S$941.5 million (see the valuation certificates of Knight<br />
Frank and CBRE (the “Independent Valuers”, and their valuation certificates, the “Valuation<br />
Certificates”) inAppendix E of this <strong>Circular</strong> for further details).<br />
The <strong>to</strong>tal costs of the Acquisition, comprising the Share Consideration, the Purchaser Loan, the<br />
acquisition fee payable <strong>to</strong> the Manager under the Trust Deed 3 , as well as the estimated professional<br />
and other fees and expenses in connection with the Acquisition, is currently estimated <strong>to</strong> be S$954.6<br />
million 4 (the “Total Acquisition Cost”) (see “Estimated Total Acquisition Cost” at paragraph 3.4 of the<br />
2<br />
3<br />
4<br />
The outstanding shareholder’s loan made by Joynote Ltd (a wholly-owned subsidiary of Cheung Kong) <strong>to</strong> ORQPL <strong>to</strong>gether<br />
with all accrued but unpaid interest thereon.<br />
As the Acquisition will constitute an “interested party transaction” under the Property Funds Guidelines, the acquisition fee<br />
payable <strong>to</strong> the Manager will be in the form of Units which shall not be sold within one year from their date of issuance. The<br />
acquisition fee payable is 1.0% of the Agreed Consideration.<br />
Excluding the fees and expenses in connection with the Issue of Convertible Bonds and the Debt Financing.<br />
3
Letter <strong>to</strong> <strong>Unitholders</strong> for further details). The costs in relation <strong>to</strong> <strong>Suntec</strong> <strong>REIT</strong>’s existing and additional<br />
credit facilities and debt financing (the “Debt Financing”) and the Issue of Convertible Bonds are<br />
approximately S$19.8 million.<br />
Interested Person Transaction and Interested Party Transaction<br />
The Trust Deed provides that for as long as the Manager is the manager of <strong>Suntec</strong> <strong>REIT</strong> and Cheung<br />
Kong and/or Mr Lim Hwee Chiang, John are controlling shareholders (as defined in the Listing Manual<br />
of the SGX-ST, the “Listing Manual”) of the Manager, all transactions between <strong>Suntec</strong> <strong>REIT</strong> and (i)<br />
Cheung Kong, (ii) Mr Lim Hwee Chiang, John and/or (iii) an associate of Cheung Kong or Mr Lim Hwee<br />
Chiang, John shall be considered as interested person transactions under the Listing Manual.<br />
The Vendor is a direct wholly-owned subsidiary of Cheung Kong and is therefore considered an<br />
associate of Cheung Kong. In addition, as the Manager is 30.0% indirectly owned by Cheung Kong, the<br />
Vendor is regarded as an associate of the Manager under the Listing Manual, and Cheung Kong is<br />
regarded as a controlling shareholder of the Manager. In addition, the Chairman of the Manager, Mr<br />
Chiu Kwok Hung, Justin, is also an executive direc<strong>to</strong>r of Cheung Kong.<br />
As such, the Acquisition will constitute an “interested person transaction” under Chapter 9 of the Listing<br />
Manual as well as an “interested party transaction” under the Property Fund Guidelines, in respect of<br />
which the approval of <strong>Unitholders</strong> is required (see “Interested Person Transaction and Interested Party<br />
Transaction” at paragraph 4.3.2 of the Letter <strong>to</strong> <strong>Unitholders</strong> for further details).<br />
Major Transaction<br />
The Acquisition also constitutes a “major transaction” by <strong>Suntec</strong> <strong>REIT</strong> under Chapter 10 of the Listing<br />
Manual (see “Major Transaction” at paragraph 4.3.1 of the Letter <strong>to</strong> <strong>Unitholders</strong> for further details).<br />
RATIONALE FOR THE ACQUISITION<br />
The Manager believes that the Acquisition will bring the following key benefits <strong>to</strong> <strong>Unitholders</strong>:<br />
• Yield Accretion<br />
The Manager believes that the Acquisition will improve the earnings and distributions enjoyed by<br />
<strong>Unitholders</strong>. Based on the Manager’s forecast and taking in<strong>to</strong> account the Agreed Consideration<br />
(as defined herein) of S$941.5 million, the forecast consolidated Net Property Income yield for the<br />
ORQ Interest (as defined herein) is approximately 4.2% for the Forecast Year. This is higher than<br />
the annualised Net Property Income yield of approximately 3.6% for the Existing Properties for the<br />
nine months ended 30 June 2007.<br />
The Acquisition, combined with the Debt Financing, the proposed Issue of Convertible Bonds and<br />
the issuance of Consideration Units will result in distribution per Unit (“DPU”) accretion of 0.37<br />
cents (an increase of approximately 4.4%) which will increase <strong>Suntec</strong> <strong>REIT</strong>’s DPU from 8.32<br />
cents <strong>to</strong> 8.69 cents for the Forecast Year. 5<br />
• The Acquisition Fits the Manager’s Investment Strategy<br />
The Acquisition fits the Manager’s principal investment strategy for <strong>Suntec</strong> <strong>REIT</strong> <strong>to</strong> invest in<br />
quality income-producing assets which are primarily used for retail and/or office purposes. The<br />
Manager’s acquisition growth strategy is underpinned by its key financial objective <strong>to</strong> provide<br />
<strong>Unitholders</strong> with a competitive rate of return for their investment by ensuring regular and stable<br />
distributions <strong>to</strong> <strong>Unitholders</strong> and long-term growth in distributions and net asset value per Unit.<br />
5<br />
Includes the first instalment of Deferred Units representing 34.5 million Units and based on the assumptions set out in<br />
Appendix C.<br />
4
One Raffles Quay has a large and diversified tenant base and is highly accessible as a result of<br />
its direct connectivity <strong>to</strong> the Raffles Place MRT station, one of Singapore’s four major MRT<br />
interchange stations. With a Committed Occupancy (as defined herein) of 100.0% as at 30 June<br />
2007, the Manager believes that One Raffles Quay will enjoy a stable and sustainable income<br />
stream. The Manager believes that One Raffles Quay will be a valuable addition <strong>to</strong> <strong>Suntec</strong> <strong>REIT</strong>’s<br />
existing portfolio of major commercial developments in Singapore.<br />
• Prime Landmark Office Development<br />
The Manager believes that One Raffles Quay is a quality asset which will enhance <strong>Suntec</strong> <strong>REIT</strong>’s<br />
existing portfolio of properties. One Raffles Quay enjoys several key competitive strengths<br />
including:<br />
(i)<br />
(ii)<br />
(iii)<br />
(iv)<br />
its strategic location in the heart of Singapore’s Central Business District (“CBD”) and close<br />
<strong>to</strong> Singapore’s new Marina Business and Financial Centre (“MBFC”);<br />
its excellent connectivity and accessibility with its direct link <strong>to</strong> one of Singapore’s four major<br />
MRT interchange stations, Raffles Place MRT, offering seamless sheltered commuting <strong>to</strong><br />
One Raffles Quay’s visi<strong>to</strong>rs and tenants;<br />
a strong tenant base including ABN AMRO Asia Pacific Pte Ltd, Barclays PLC, Credit Suisse<br />
(Singapore) Limited, Deutsche Bank Aktiengesellschaft, Ernst & Young Services Pte Ltd and<br />
UBS AG; and<br />
its large floor plates allowing for the subdivision and consolidation of office units for<br />
maximum efficiency and flexibility, and state-of-the-art building services and management<br />
systems <strong>to</strong> cater <strong>to</strong> the needs of global financial tenants.<br />
• Foothold in the Development of the Marina Bay Area<br />
Centrally located on prime waterfront space in Singapore’s new financial district, One Raffles<br />
Quay is well-positioned <strong>to</strong> capitalise on the future growth of the area. The proposed Integrated<br />
Resort, MBFC and other commercial, residential and recreational developments at Marina Bay<br />
will contribute <strong>to</strong> making the area a vibrant and sought-after location for professionals <strong>to</strong> live, work<br />
and play. Upon Completion, <strong>Suntec</strong> <strong>REIT</strong> will be well-positioned <strong>to</strong> capture growth opportunities<br />
from the development of Marina Bay.<br />
• Greater Exposure <strong>to</strong> the Grade ‘A’ Office Market<br />
The demand for office space in quality commercial buildings in the CBD has shown marked<br />
improvement in the past year, underpinned by a strong economy and rapid expansion of<br />
Singapore’s financial services sec<strong>to</strong>r. With the current tight availability of office space coupled with<br />
strong demand, this improvement is expected <strong>to</strong> continue 6 .<br />
The Acquisition will increase <strong>Suntec</strong> <strong>REIT</strong>’s office portfolio <strong>to</strong> 1.8 million sq ft 7 , providing increased<br />
exposure <strong>to</strong> the strengthening Singapore office market. Furthermore, as One Raffles Quay is a<br />
recently completed development, a substantial number of major tenancies were leased at rents<br />
which are significantly below current market rental rates. (See Appendix A of this <strong>Circular</strong> for<br />
details on the lease expiry profile of One Raffles Quay.) As such, the office space in One Raffles<br />
Quay offers potential for rental growth opportunities upon renewal or replacement.<br />
6<br />
7<br />
CBRE Research Report 1st Quarter 2007.<br />
Includes the office space attributable <strong>to</strong> the acquisition of one-third interest in ORQPL.<br />
5
• Income Diversification<br />
The Acquisition is expected <strong>to</strong> benefit <strong>Unitholders</strong> by improving income diversification and<br />
reducing the reliance of <strong>Suntec</strong> <strong>REIT</strong>’s income stream on any single property. With the enlarged<br />
portfolio post the Acquisition, the reliance on the income contribution from <strong>Suntec</strong> City Mall and<br />
<strong>Suntec</strong> City Office Towers will be reduced. The Manager expects that the contribution <strong>to</strong> <strong>Suntec</strong><br />
<strong>REIT</strong>’s Net Property Income 8 by <strong>Suntec</strong> City Mall and <strong>Suntec</strong> City Office Towers within <strong>Suntec</strong><br />
<strong>REIT</strong>’s property portfolio for the Forecast Year will decrease from approximately 87.4%, prior <strong>to</strong><br />
Completion, <strong>to</strong> approximately 69.6%.<br />
• Improved Quality and Diversity of Tenant Base<br />
The Acquisition is expected <strong>to</strong> further enhance the tenancy profile of <strong>Suntec</strong> <strong>REIT</strong>’s office tenant<br />
base with the addition of major anchor office tenants such as ABN AMRO Asia Pacific Pte Ltd,<br />
Barclays PLC, Credit Suisse (Singapore) Limited, Deutsche Bank Aktiengesellschaft, Ernst &<br />
Young Services Pte Ltd and other major financial institutions, <strong>to</strong> <strong>Suntec</strong> <strong>REIT</strong>’s group of core blue<br />
chip tenants.<br />
• Greater Trading Liquidity and Flexibility<br />
The Conversion Units, when issued, are expected <strong>to</strong> increase the free float of Units on the<br />
SGX-ST. This could lead <strong>to</strong> an increase of <strong>Suntec</strong> <strong>REIT</strong>’s weighting in certain benchmark equity<br />
indices. <strong>Unitholders</strong> will be able <strong>to</strong> benefit from the expected improvement in trading liquidity.<br />
• Rare Opportunity <strong>to</strong> Own an Iconic Building<br />
One Raffles Quay is a landmark building designed by the internationally renowned architectural<br />
firm Kohn Pedersen Fox Associates of New York. The Acquisition presents a rare opportunity for<br />
<strong>Suntec</strong> <strong>REIT</strong> <strong>to</strong> partner with reputable property companies, Hongkong Land International’s parent<br />
entity, Hongkong Land Limited (“Hongkong Land”) and K-<strong>REIT</strong> Asia 9 , in owning a prestigious<br />
iconic prime grade ‘A’ office development with long term growth potential.<br />
These benefits are elaborated in “Rationale for the Acquisition” at paragraph 2.2 of the Letter <strong>to</strong><br />
<strong>Unitholders</strong> below.<br />
METHOD OF FINANCING<br />
The Manager proposes <strong>to</strong> satisfy the Total Acquisition Cost of S$954.6 million and the costs in relation<br />
<strong>to</strong> the financing of approximately S$19.8 million:<br />
(i)<br />
(ii)<br />
partly through the issue of Consideration Units of an aggregate value of S$94.15 million <strong>to</strong> the<br />
Vendor,<br />
partly through the issue of Units <strong>to</strong> the Manager in satisfaction of the acquisition fee of S$9.4<br />
million (being 1.0% of the Agreed Consideration), payable <strong>to</strong> the Manager pursuant <strong>to</strong> Clause 15.2<br />
of the Trust Deed (exclusive of GST);<br />
and partly with the proceeds of either (iii)(a) the drawdown of Debt Financing for the balance of<br />
approximately S$870.9 million, which <strong>Suntec</strong> <strong>REIT</strong> is expected <strong>to</strong> obtain for the purposes of the<br />
Acquisition, or (b) the drawdown of the Debt Financing and the Issue of Convertible Bonds, in such<br />
proportion as the Manager in its discretion, deems appropriate, <strong>to</strong> collectively raise the balance of<br />
S$870.9 million.<br />
8<br />
9<br />
Includes dividend income, interest income and rental income support net of all taxes.<br />
On 30 July 2007, K-<strong>REIT</strong> Asia announced that it will acquire a one-third interest in One Raffles Quay through the acquisition<br />
of one-third of the issued share capital of ORQPL from Boulevard.<br />
6
The Acquisition is expected <strong>to</strong> be completed on the date on which the Consideration Units are issued<br />
(the “Issue Date”).<br />
It is intended that the Issue of Convertible Bonds will comprise a placement of Convertible Bonds with<br />
an aggregate principal amount of up <strong>to</strong> S$450.0 million <strong>to</strong> institutional and other inves<strong>to</strong>rs. The<br />
Convertible Bonds will bear interest from the Issue Date payable semi-annually in arrears and will be<br />
convertible by holders in<strong>to</strong> new Units, at the option of the holders, during the Conversion Period (as<br />
defined herein) or redeemed for cash on the Maturity Date (as defined herein) in accordance with the<br />
terms and conditions of the Issue of the Convertible Bonds.<br />
Based on market conditions, the Manager will determine the amount of financing <strong>to</strong> be raised from the<br />
Debt Financing and the Issue of Convertible Bonds. The Manager may decide <strong>to</strong> finance the Total<br />
Acquisition Cost 10 by the issue of Consideration Units and a draw down of the Debt Financing, if the<br />
Manager determines this <strong>to</strong> be in the best interests of the <strong>Unitholders</strong>. If the Manager decides <strong>to</strong> issue<br />
the Convertible Bonds, the Manager shall issue the Convertible Bonds by no later than the date of<br />
Completion. The Manager shall issue the Convertible Bonds only if it determines that doing so would<br />
be in the best interests of the <strong>Unitholders</strong>, having regard <strong>to</strong> market conditions.<br />
Further details of <strong>Suntec</strong> <strong>REIT</strong>’s existing loan facilities and the financing for the Acquisition can be<br />
found in “Method of Financing” and “Details of the Issue of Convertible Bonds” at paragraphs 5 and 7<br />
of the Letter <strong>to</strong> <strong>Unitholders</strong> below. A summary of the principal terms of the Convertible Bonds is set out<br />
at Appendix B of this <strong>Circular</strong>.<br />
TEMPORARY STOCK COUNTER<br />
In order <strong>to</strong> ensure fairness <strong>to</strong> holders of existing Units, the Consideration Units will only be entitled <strong>to</strong><br />
participate in <strong>Suntec</strong> <strong>REIT</strong>’s Distributable Income for the period commencing from the date of the issue<br />
of the Consideration Units and thereafter. <strong>Suntec</strong> <strong>REIT</strong> will be announcing cumulative dividends in<br />
respect of the period from 1 July 2007 <strong>to</strong> the day immediately preceding the Issue Date.<br />
The Consideration Units will be issued under a temporary s<strong>to</strong>ck counter, which will be maintained for<br />
the period commencing from the Issue Date <strong>to</strong> the last day of “cum distribution” trading for the existing<br />
Units, in respect of the period from 1 July 2007 <strong>to</strong> the day immediately preceding the Issue Date (the<br />
“Books Closure Date”). The Books Closure Date is expected <strong>to</strong> be 7 November 2007. After the Books<br />
Closure Date, both the Consideration Units and the existing Units will be aggregated and traded under<br />
the existing <strong>Suntec</strong> <strong>REIT</strong> s<strong>to</strong>ck counter on the Main Board of the SGX-ST on the next market day.<br />
The separate temporary s<strong>to</strong>ck counter for the Consideration Units is necessary <strong>to</strong> differentiate the<br />
entitlement of existing Units <strong>to</strong> distribution for the period from 1 Oc<strong>to</strong>ber 2007 <strong>to</strong> 31 December 2007<br />
from the entitlement of the Consideration Units <strong>to</strong> distribution for the period commencing from the Issue<br />
Date <strong>to</strong> 31 December 2007, in line with current market practices.<br />
Other than in respect of entitlement <strong>to</strong> dividends (which will be with effect from the Issue Date), the<br />
Consideration Units would otherwise rank pari passu in all respects with the existing Units.<br />
THE GENERAL MANDATE<br />
The Manager proposes <strong>to</strong> seek the approval of <strong>Unitholders</strong> for a general mandate under Rule 887 of<br />
the Listing Manual <strong>to</strong> issue new Units and/or convertible securities in FY2008 without the prior specific<br />
approval of <strong>Unitholders</strong> in a general meeting, provided that such number of new Units and convertible<br />
securities does not exceed 50.0% of the number of Units in issue as at the end of FY2007, of which the<br />
10<br />
Excluding the acquisition fee of S$9.4 million (being 1.0% of the Agreed Consideration), payable <strong>to</strong> the Manager pursuant<br />
<strong>to</strong> Clause 15.2 of the Trust Deed (exclusive of GST).<br />
7
aggregate number of new Units and convertible securities issued other than on a pro rata basis <strong>to</strong><br />
<strong>Unitholders</strong> shall not be more than 20.0% of the number of Units in issue as at the end of FY2007.<br />
(See “The General Mandate” at paragraph 9 of the Letter <strong>to</strong> <strong>Unitholders</strong> for further details.)<br />
THE VALUATION OF REAL ESTATE SUPPLEMENT<br />
The Manager proposes <strong>to</strong> amend the Trust Deed for the purpose of clarifying that the method of<br />
valuation of Real Estate should be the same whether it is held indirectly through Special Purpose<br />
Vehicles or held directly by <strong>Suntec</strong> <strong>REIT</strong>.<br />
(See “The Valuation of Real Estate Supplement” at paragraph 10 of the Letter <strong>to</strong> <strong>Unitholders</strong> and<br />
Appendix H for further details.)<br />
8
INDICATIVE TIMETABLE<br />
Event<br />
Last date and time for lodgement of Proxy<br />
Forms<br />
Date and time of the Extraordinary General<br />
Meeting (the “EGM”)<br />
Date and Time<br />
: 6 Oc<strong>to</strong>ber 2007 at 2.30pm<br />
: 8 Oc<strong>to</strong>ber 2007 at 2.30pm<br />
If the approvals sought at the EGM are obtained:<br />
Commencement of the Issue of Convertible<br />
Bonds<br />
: To be determined by the Manager<br />
Close of the Issue of Convertible Bonds : To be determined by the Manager<br />
Issue of the Convertible Bonds : To be determined by the Manager (no later<br />
than the date of Completion)<br />
Issue of the Consideration Units as well as<br />
commencement of trading of the Consideration<br />
Units on the SGX-ST<br />
: To be determined (but is expected <strong>to</strong> be no<br />
later than 31 Oc<strong>to</strong>ber 2007)<br />
Target date for Completion : 31 Oc<strong>to</strong>ber 2007 (or such other date as may<br />
be agreed between the Trustee and the<br />
Vendor)<br />
The timetable for the events which are scheduled <strong>to</strong> take place after the EGM is indicative only and is<br />
subject <strong>to</strong> change at the Manager’s absolute discretion. The Manager intends <strong>to</strong> announce any<br />
changes (including any determination of the relevant dates) <strong>to</strong> the timetable above once the Manager<br />
becomes aware of such changes.<br />
9
SUNTEC REAL ESTATE INVESTMENT TRUST<br />
(Constituted in the Republic of Singapore<br />
pursuant <strong>to</strong> a trust deed dated 1 November 2004 (as amended))<br />
Direc<strong>to</strong>rs<br />
Mr Chiu Kwok Hung, Justin (Chairman)<br />
Mr Ip Tak Chuen, Edmond<br />
Mr Lim Hwee Chiang, John<br />
Mr Tan Kian Chew (Independent Direc<strong>to</strong>r)<br />
Mrs Sng Sow-Mei (alias Poon Sow Mei) (Independent Direc<strong>to</strong>r)<br />
Mr Lim Lee Meng (Independent Direc<strong>to</strong>r)<br />
Mr Chow Wai Wai, John<br />
Mr Yeo See Kiat (Chief Executive Officer)<br />
Registered Office<br />
9 Temasek Boulevard<br />
#09-01 <strong>Suntec</strong> Tower Two<br />
Singapore 038989<br />
18 September 2007<br />
To: <strong>Unitholders</strong> of <strong>Suntec</strong> Real Estate Investment Trust<br />
Dear Sir/Madam<br />
1. SUMMARY OF APPROVALS SOUGHT<br />
The Manager is convening an EGM <strong>to</strong> be held on 8 Oc<strong>to</strong>ber 2007 <strong>to</strong> seek the approval of<br />
<strong>Unitholders</strong> in respect of the resolutions relating <strong>to</strong> the Acquisition (Resolution 1), the Issue of<br />
Convertible Bonds (Resolution 2), the issue of Consideration Units (Resolution 3), the General<br />
Mandate (Resolution 4) and the Valuation of Real Estate Supplement (Resolution 5). Approval<br />
by way of an Ordinary Resolution (as defined herein) is required in respect of the resolutions<br />
relating <strong>to</strong> the Acquisition (Resolution 1), the issue of Consideration Units (Resolution 3) and the<br />
General Mandate (Resolution 4) while approval by way of an Extraordinary Resolution (as<br />
defined herein) is required for each of the other two resolutions.<br />
The following paragraphs summarise the approvals which the Manager is seeking from<br />
<strong>Unitholders</strong>.<br />
The resolutions relating <strong>to</strong> the Acquisition (Resolution 1), the General Mandate<br />
(Resolution 4) and the Valuation of Real Estate Supplement (Resolution 5) are not subject<br />
<strong>to</strong>, or contingent upon, any other resolution.<br />
For the avoidance of doubt, notwithstanding that the resolution relating <strong>to</strong> the Issue of<br />
Convertible Bonds is passed, the Manager is not obliged <strong>to</strong>, and has at all times the<br />
discretion whether or not <strong>to</strong> proceed with the Issue of Convertible Bonds. The resolutions<br />
relating <strong>to</strong> the Issue of Convertible Bonds (Resolution 2) and the issue of Consideration<br />
Units (Resolution 3) are subject <strong>to</strong> and contingent upon the passing of the resolution<br />
relating <strong>to</strong> the Acquisition (Resolution 1).<br />
1.1 Resolution 1: The Proposed Acquisition of a One-Third Interest in One Raffles Quay<br />
(Ordinary Resolution)<br />
The Manager proposes that <strong>Suntec</strong> <strong>REIT</strong> acquires the ORQ Interest indirectly through the<br />
purchase of the entire issued share capital of Comina from the Vendor.<br />
The Trust Deed provides that for as long as the Manager is the manager of <strong>Suntec</strong> <strong>REIT</strong> and<br />
Cheung Kong and/or Mr Lim Hwee Chiang, John are controlling shareholders of the Manager,<br />
10
all transactions between <strong>Suntec</strong> <strong>REIT</strong> and (i) Cheung Kong, (ii) Mr Lim Hwee Chiang, John,<br />
and/or (iii) an associate of Cheung Kong or Mr Lim Hwee Chiang, John shall be considered as<br />
interested person transactions under the Listing Manual.<br />
The Vendor, which is incorporated in British Virgin Islands, is a direct wholly-owned subsidiary<br />
of Cheung Kong, a company incorporated in Hong Kong. The Vendor is therefore considered an<br />
associate of Cheung Kong. In addition, as the Manager is 30.0% indirectly owned by Cheung<br />
Kong, the Vendor is regarded as both an associate and an associated company of the Manager<br />
under the Listing Manual and Cheung Kong is regarded as a “controlling shareholder” of the<br />
Manager.<br />
As such, the Acquisition will constitute an “interested person transaction” under Chapter 9 of the<br />
Listing Manual as well as an “interested party transaction” under the Property Funds Guidelines.<br />
Chapter 9 of the Listing Manual requires, among others, approval of <strong>Unitholders</strong> for an<br />
“interested person transaction” if the value thereof exceeds 5.0% of <strong>Suntec</strong> <strong>REIT</strong>’s latest audited<br />
net tangible assets (“NTA”). Paragraph 5 of the Property Funds Guidelines requires, among<br />
others, approval of <strong>Unitholders</strong> for an “interested party transaction” whose value exceeds 5.0%<br />
of <strong>Suntec</strong> <strong>REIT</strong>’s latest audited net asset value (“NAV”). The value of the Acquisition exceeds<br />
both the aforementioned thresholds.<br />
In compliance with the requirements of the Listing Manual and the Property Funds Guidelines,<br />
the Manager is therefore seeking <strong>Unitholders</strong>’ approval for the Acquisition. By approving the<br />
Acquisition, <strong>Unitholders</strong> will be deemed also <strong>to</strong> have approved the principal terms of the<br />
Restated Shareholders’ Agreement <strong>to</strong>gether with the terms which are incidental or ancillary <strong>to</strong><br />
the Acquisition and the arrangement in the provision of asset management services by RQAM.<br />
As the Manager is an associate of Cheung Kong, the Manager shall abstain from voting on<br />
Resolution 1.<br />
(See “The Acquisition and its Rationale”, “Details Concerning the Acquisition and Joint<br />
Ownership of One Raffles Quay” and “Profit Forecast” at paragraphs 2, 3 and 6 for further<br />
details.)<br />
1.2 RESOLUTION 2: THE PROPOSED ISSUE OF UP TO S$450,000,000 AGGREGATE<br />
PRINCIPAL AMOUNT OF S$ DENOMINATED CONVERTIBLE BONDS (EXTRAORDINARY<br />
RESOLUTION)<br />
The Listing Manual provides that specific prior approval of the <strong>Unitholders</strong> is required for an<br />
issue of convertible securities (which include the Convertible Bonds).<br />
Furthermore, the Trust Deed, read <strong>to</strong>gether with the Listing Manual, provides that specific prior<br />
approval of the <strong>Unitholders</strong> by Extraordinary Resolution is required for an issue of Units if the<br />
number of such Units (<strong>to</strong>gether with any other issue of Units, other than by way of a rights issue<br />
offered on a pro rata basis <strong>to</strong> all existing <strong>Unitholders</strong>, in the same financial year) would,<br />
immediately after the issue, exceed 10.0% of the outstanding Units.<br />
Assuming that the Manager proceeds with the Issue of Convertible Bonds, it is expected that the<br />
number of Conversion Units <strong>to</strong> be issued upon conversion of the Convertible Bonds, <strong>to</strong>gether<br />
with any other issue of Units, will immediately after the issue, exceed 10.0% of the outstanding<br />
Units.<br />
Accordingly, the Manager is seeking the approval of the <strong>Unitholders</strong> <strong>to</strong> issue the Convertible<br />
Bonds. By approving the Issue of Convertible Bonds, the <strong>Unitholders</strong> would be deemed <strong>to</strong> have<br />
approved the terms of the Convertible Bonds, and the issue of Conversion Units upon<br />
conversion of the Convertible Bonds.<br />
11
Approval in-principle has been obtained from the SGX-ST for the listing and quotation of the<br />
Conversion Units and the Consideration Units. The SGX-ST’s in-principle approval is not an<br />
indication of the merits of the proposed Acquisition. The approval in-principle is subject <strong>to</strong>, inter<br />
alia, the Unitholder’s approval at the EGM and the compliance by <strong>Suntec</strong> <strong>REIT</strong> with Rule 825 of<br />
the Listing Manual such that <strong>Suntec</strong> <strong>REIT</strong> will not issue such amount of Convertible Bonds,<br />
whereby the number of new Units arising from the conversion of the Convertible Bonds in<br />
aggregate exceeds 50% of the number of issued Units of <strong>Suntec</strong> <strong>REIT</strong>.<br />
The Manager has undertaken <strong>to</strong> abstain from voting on Resolution 2.<br />
(See “Details of the Issue of Convertible Bonds” at paragraph 7 below for further details.)<br />
1.3 Resolution 3: The Proposed Issue of Consideration Units <strong>to</strong> the Vendor (Ordinary<br />
Resolution)<br />
The Trust Deed provides that for as long as the Manager is the manager of <strong>Suntec</strong> <strong>REIT</strong> and<br />
Cheung Kong and/or Mr Lim Hwee Chiang, John are controlling shareholders of the Manager,<br />
all transactions between <strong>Suntec</strong> <strong>REIT</strong> and (i) Cheung Kong, (ii) Mr Lim Hwee Chiang, John<br />
and/or (iii) an associate of Cheung Kong or Mr Lim Hwee Chiang, John shall be considered as<br />
interested person transactions.<br />
The Vendor is a direct wholly-owned subsidiary of Cheung Kong and is therefore considered an<br />
associate of Cheung Kong. In addition, as the Manager is 30.0% indirectly owned by Cheung<br />
Kong, the Vendor is regarded as an associate of the Manager under the Listing Manual, and<br />
Cheung Kong is regarded as a controlling shareholder of the Manager. In addition, the Chairman<br />
of the Manager, Mr Chiu Kwok Hung, Justin, is also an executive direc<strong>to</strong>r of Cheung Kong.<br />
As such, the Acquisition will constitute an “interested person transaction” under Chapter 9 of the<br />
Listing Manual as well as an “interested party transaction” under the Property Fund Guidelines,<br />
in respect of which the approval of <strong>Unitholders</strong> is required.<br />
As the Manager is an associate of Cheung Kong, the Manager shall abstain from voting on<br />
Resolution 3.<br />
(See “The Proposed Issue of Consideration Units <strong>to</strong> the Vendor” at paragraph 8 below for further<br />
details.)<br />
12
1.4 Resolution 4: The Proposed General Mandate for the Issue of New Units and Convertible<br />
Securities (Ordinary Resolution)<br />
The Manager is seeking <strong>Unitholders</strong>’ approval for a general mandate under Rule 887 of the<br />
Listing Manual <strong>to</strong> issue new Units and/or convertible securities in FY2008 without the prior<br />
specific approval of <strong>Unitholders</strong> in a general meeting, provided that such number of new Units<br />
and convertible securities does not exceed 50.0% of the number of Units in issue at the end of<br />
FY2007, of which the aggregate number of new Units and convertible securities issued other<br />
than on a pro rata basis <strong>to</strong> <strong>Unitholders</strong> shall not be more than 20.0% of the number of Units in<br />
issue at the end of FY2007. Units arising from the conversion of the convertible securities may<br />
be issued notwithstanding that the General Mandate may have ceased <strong>to</strong> be in force at the time<br />
the convertible securities are issued.<br />
Where the terms of the issue of the convertible securities provide for adjustment <strong>to</strong> the number<br />
of warrants or other convertible securities in the event of rights, bonus or other capitalisation<br />
issues, additional convertible securities may be issued notwithstanding that the General<br />
Mandate may have ceased <strong>to</strong> be in force at the time the convertible securities are issued,<br />
provided that the adjustment does not give the holder of such convertible securities a benefit that<br />
a Unitholder does not receive.<br />
(See “The General Mandate” at paragraph 9 below for further details.)<br />
1.5. Resolution 5: The Proposed Supplement <strong>to</strong> the Trust Deed in Connection with the<br />
Valuation of Real Estate (Extraordinary Resolution)<br />
Lastly, the Manager is seeking <strong>Unitholders</strong>’ approval <strong>to</strong> amend the Trust Deed for the purpose<br />
of clarifying that the method of valuation of Real Estate should be the same whether it is held<br />
indirectly through Special Purpose Vehicles or held directly by <strong>Suntec</strong> <strong>REIT</strong>.<br />
The Trust Deed provides that sanction of an Extraordinary Resolution is required for<br />
modification, alteration or addition <strong>to</strong> the Trust Deed. Accordingly, the Manager is seeking the<br />
approval of the <strong>Unitholders</strong> for the proposed supplement.<br />
(See “The Valuation of Real Estate Supplement” at paragraph 10 and Appendix H below for<br />
further details.)<br />
2. THE ACQUISITION AND ITS RATIONALE<br />
2.1 Description of One Raffles Quay<br />
One Raffles Quay, a prime landmark commercial development, is located on Lot 175C of Town<br />
Subdivision 30 and Lot 80002A of Town Subdivision 30 and comprises (as at 30 June 2007):<br />
• the North Tower, a 50-s<strong>to</strong>rey office <strong>to</strong>wer with approximately 765,902 sq ft (71,154 sq m)<br />
of Net Lettable Area;<br />
• the South Tower, a 29-s<strong>to</strong>rey office <strong>to</strong>wer with approximately 565,659 sq ft (52,551 sq m)<br />
of Net Lettable Area;<br />
• approximately 4,015 sq ft (373 sq m) of Net Lettable Area for retail outlets and cafes along<br />
an underground link connecting the North Tower <strong>to</strong> the Raffles Place MRT station;<br />
• a sheltered plaza serving as a drop-off point; and<br />
• a hub car park with 713 car park lots.<br />
More information about One Raffles Quay can be found in Appendix A of this <strong>Circular</strong>.<br />
13
2.2 Rationale for the Acquisition<br />
The Manager believes that the Acquisition will bring the following key benefits <strong>to</strong> <strong>Unitholders</strong>:<br />
2.2.1 Yield Accretion<br />
Based on the Manager’s forecast and an Agreed Consideration of S$941.5 million, the<br />
forecast consolidated Net Property Income yield for the ORQ Interest is approximately<br />
4.2% for the Forecast Year. This is higher than the annualised Net Property Income yield<br />
of approximately 3.6% for the Existing Properties for the nine months ended 30 June<br />
2007.<br />
The Manager believes that the Acquisition combined with the proposed issue of<br />
Consideration Units, Convertible Bonds and/or the drawdown of the Debt Financing will<br />
enhance the earnings and distributions enjoyed by <strong>Unitholders</strong>.<br />
To illustrate the overall yield accretion resulting from the Acquisition, taking in<strong>to</strong> account<br />
the Consideration Units, and assuming the drawdown of the Debt Financing and the<br />
proposed Issue of Convertible Bonds, the tables below show <strong>Suntec</strong> <strong>REIT</strong>’s forecast<br />
DPU in relation <strong>to</strong>:<br />
(i)<br />
(ii)<br />
the Existing Properties; and<br />
the Enlarged Portfolio,<br />
including the pro forma impact in the situation where the Deferred Units (as defined<br />
herein) had been entirely issued on 9 December 2004, the date of admission of <strong>Suntec</strong><br />
<strong>REIT</strong> <strong>to</strong> the Official List of the SGX-ST (the “Listing Date”) and the Forecast Year:<br />
(i)<br />
(ii)<br />
based on (a) an illustrative conversion price range of S$2.33 <strong>to</strong> S$2.79 11 for the<br />
Convertible Bonds, and (b) an aggregate principal amount of up <strong>to</strong> S$450,000,000<br />
for the Convertible Bonds (which increases <strong>Suntec</strong> <strong>REIT</strong>’s Leverage Ratio 12 from<br />
23.3% as at 30 June 2007 (see paragraph 5.3 for further details) <strong>to</strong> approximately<br />
36.6%); and<br />
in the following scenarios:<br />
(a)<br />
(b)<br />
Scenario A: assuming that the Conversion Units had been issued at the<br />
beginning of the Forecast Year; and<br />
Scenario B: assuming that the Conversion Units have not been issued.<br />
For instance, under Scenario A and based on an illustrative conversion price of S$2.51<br />
(the mid-point in the illustrative conversion price range of S$2.33 <strong>to</strong> S$2.79 13 )forthe<br />
Convertible Bonds, the Acquisition, combined with the proposed Debt Financing, will<br />
provide a DPU accretion of 0.25 cents (an increase of approximately 3.0%) which will<br />
increase <strong>Suntec</strong> <strong>REIT</strong>’s DPU from 8.32 cents <strong>to</strong> 8.57 cents for the Forecast Year. At the<br />
lowest illustrative conversion price of S$2.33, the Convertible Bonds issued will be fully<br />
converted in<strong>to</strong> approximately 193.1 million Conversion Units representing approximately<br />
13.5% of <strong>Suntec</strong> <strong>REIT</strong> existing Units as of 30 June 2007. At the highest illustrative<br />
conversion price of S$2.79, the Convertible Bonds issued will be fully converted in<strong>to</strong><br />
11<br />
12<br />
13<br />
The illustrative conversion price of S$2.33 is based on a 25% premium over an illustrative price of S$1.86 per Unit, being<br />
the last closing price on the Latest Practicable Date. The illustrative conversion price of S$2.79 is based on a 50% premium<br />
over an illustrative price of S$1.86 per Unit, being the last closing price on the Latest Practicable Date.<br />
<strong>Suntec</strong> <strong>REIT</strong>’s Leverage Ratio refers <strong>to</strong> the ratio of <strong>Suntec</strong> <strong>REIT</strong>’s borrowings (excluding deferred payments for assets<br />
whether <strong>to</strong> be settled in cash or Units) <strong>to</strong> the value of its Deposited Property.<br />
The illustrative conversion price of S$2.33 is based on a 25% premium over an illustrative price of S$1.86 per Unit, being<br />
the last closing price on the Latest Practicable Date. The illustrative conversion price of S$2.79 is based on a 50% premium<br />
over an illustrative price of S$1.86 per Unit, being the last closing price on the Latest Practicable Date.<br />
14
approximately 161.3 million Conversion Units representing approximately 11.3% of<br />
<strong>Suntec</strong> <strong>REIT</strong> existing Units as of 30 June 2007.<br />
Under Scenario B and based on an illustrative coupon rate of 3.00% and a conversion<br />
premium of 35% for the Convertible Bonds, the Acquisition, combined with the proposed<br />
Debt Financing, will provide a DPU accretion of 0.37 cents (an increase of approximately<br />
4.4%) which will increase <strong>Suntec</strong> <strong>REIT</strong>’s DPU from 8.32 cents <strong>to</strong> 8.69 cents for the<br />
Forecast Year.<br />
Based on market conditions, the Manager will determine the amount of financing <strong>to</strong> be<br />
raised from the Debt Financing and the Issue of Convertible Bonds. The Manager may<br />
decide <strong>to</strong> finance the Total Acquisition Cost 14 by the issue of Consideration Units and a<br />
draw down of the Debt Financing, if the Manager determines this <strong>to</strong> be in the best<br />
interests of the <strong>Unitholders</strong>.<br />
The table in Scenario C is presented for the purposes of illustrating the pro forma impact<br />
in the event that the Total Acquisition Cost 14 is financed by the issue of Consideration<br />
Units and a draw down of the Debt Financing. Under Scenario C, based on an illustrative<br />
interest rate of 3.5%, the Acquisition, if funded by the issue of Consideration Units and<br />
a drawdown from the Debt Financing, will provide a DPU accretion of 0.22 cents (an<br />
increase of approximately 2.6%, which will increase <strong>Suntec</strong> <strong>REIT</strong>’s DPU from 8.32 cents<br />
<strong>to</strong> 8.54 cents for the Forecast Year).<br />
The forecast on the tables presented on the following pages must be read <strong>to</strong>gether with<br />
the detailed Profit Forecast as well as the accompanying assumptions and sensitivity<br />
analysis in Appendix C of this <strong>Circular</strong>, and the report of KPMG (the “Independent<br />
Accountants”) on the Profit Forecast in Appendix D of this <strong>Circular</strong>.<br />
14<br />
Excluding the acquisition fee of S$9.4 million (being 1.0% of the Agreed Consideration), payable <strong>to</strong> the Manager pursuant<br />
<strong>to</strong> Clause 15.2 of the Trust Deed (exclusive of GST).<br />
15
Scenario A: Forecast DPU (Assuming that (i) <strong>Suntec</strong> <strong>REIT</strong>’s Leverage Ratio is increased<br />
<strong>to</strong> approximately 27.4% (1) after the Completion of the Acquisition, (ii) the issue of<br />
Consideration Units at the beginning of the Forecast Year, and (iii) the Conversion Units<br />
had been issued at the beginning of the Forecast Year)<br />
Illustrative<br />
Conversion<br />
Premium and<br />
Conversion<br />
Price for the<br />
Convertible<br />
Bonds (3)<br />
25%<br />
(S$2.33)<br />
30%<br />
(S$2.42)<br />
35%<br />
(S$2.51)<br />
40%<br />
(S$2.60)<br />
45%<br />
(S$2.70)<br />
50%<br />
(S$2.79)<br />
Forecast Year<br />
(financial year ending 30 September 2008) (2)<br />
No Deferred Units Issued (4)<br />
Existing<br />
Properties<br />
Enlarged<br />
Portfolio<br />
Assuming Deferred Units<br />
Had Been Issued<br />
Existing<br />
Properties (4)<br />
Enlarged<br />
Portfolio<br />
DPU (cents) 8.32 8.49 7.45 7.72<br />
DPU increase over<br />
Existing Properties (%)<br />
— 2.0 — 3.6<br />
DPU (cents) 8.32 8.53 7.45 7.75<br />
DPU increase over<br />
Existing Properties (%)<br />
— 2.5 — 4.0<br />
DPU (cents) 8.32 8.57 7.45 7.78<br />
DPU increase over<br />
Existing Properties (%)<br />
— 3.0 — 4.4<br />
DPU (cents) 8.32 8.60 7.45 7.81<br />
DPU increase over<br />
Existing Properties (%)<br />
— 3.4 — 4.8<br />
DPU (cents) 8.32 8.63 7.45 7.83<br />
DPU increase over<br />
Existing Properties (%)<br />
— 3.7 — 5.1<br />
DPU (cents) 8.32 8.66 7.45 7.86<br />
DPU increase over<br />
Existing Properties (%)<br />
— 4.1 — 5.5<br />
Note:<br />
(1) Based on <strong>Suntec</strong> <strong>REIT</strong>’s Leverage Ratio as at 30 June 2007 (being the date of the latest unaudited financial<br />
statements of <strong>Suntec</strong> <strong>REIT</strong>) and taking in<strong>to</strong> account of the impact of the Debt Financing drawn down <strong>to</strong> fund the<br />
Acquisition and the Acquisition on Deposited Property. It is assumed that the Acquisition is financed by a drawdown<br />
of S$420.9 million under the Debt Financing, an issue of S$450 million of Convertible Bonds and an issue of<br />
S$94.1 million of Consideration Units.<br />
(2) The forecast DPU will vary <strong>to</strong> the extent that the Conversion Units are issued on a date other than 1 Oc<strong>to</strong>ber 2007.<br />
(3) Based on a conversion premium range of 25% <strong>to</strong> 50% over an illustrative price of S$1.86 per Unit, being the last<br />
closing price on the Latest Practicable Date.<br />
(4) DPU includes the first instalment of Deferred Units representing 34.5 million Units.<br />
16
Scenario B: Forecast DPU (Assuming that (i) <strong>Suntec</strong> <strong>REIT</strong>’s Leverage Ratio is increased<br />
<strong>to</strong> approximately 36.6% (1) after the Completion of the Acquisition, (ii) the issue of<br />
Consideration Units at the beginning of the Forecast Year, and (iii) the Conversion Units<br />
have not been issued during the Forecast Year)<br />
Illustrative<br />
Coupon Rate<br />
for the<br />
Convertible<br />
Bonds (%)<br />
2.00<br />
2.25<br />
2.50<br />
2.75<br />
3.00<br />
3.25<br />
3.50<br />
3.75<br />
4.00<br />
Forecast Year<br />
(financial year ending 30 September 2008)<br />
No Deferred Units Issued<br />
Existing<br />
Properties (2)<br />
Enlarged<br />
Portfolio<br />
Assuming Deferred Units<br />
Had Been Issued<br />
Existing<br />
Properties (2)<br />
Enlarged<br />
Portfolio<br />
DPU (cents) 8.32 8.98 7.45 8.07<br />
DPU increase over<br />
Existing Properties (%)<br />
— 7.9 — 8.3<br />
DPU (cents) 8.32 8.91 7.45 8.01<br />
DPU increase over<br />
Existing Properties (%)<br />
— 7.1 — 7.5<br />
DPU (cents) 8.32 8.83 7.45 7.94<br />
DPU increase over<br />
Existing Properties (%)<br />
— 6.1 — 6.6<br />
DPU (cents) 8.32 8.76 7.45 7.87<br />
DPU increase over<br />
Existing Properties (%)<br />
— 5.3 — 5.6<br />
DPU (cents) 8.32 8.69 7.45 7.81<br />
DPU increase over<br />
Existing Properties (%)<br />
— 4.4 — 4.8<br />
DPU (cents) 8.32 8.61 7.45 7.74<br />
DPU increase over<br />
Existing Properties (%)<br />
— 3.5 — 3.9<br />
DPU (cents) 8.32 8.54 7.45 7.67<br />
DPU increase over<br />
Existing Properties (%)<br />
— 2.6 — 3.0<br />
DPU (cents) 8.32 8.47 7.45 7.61<br />
DPU increase over<br />
Existing Properties (%)<br />
— 1.8 — 2.1<br />
DPU (cents) 8.32 8.39 7.45 7.54<br />
DPU increase over<br />
Existing Properties (%)<br />
— 0.8 — 1.2<br />
Note:<br />
(1) Based on <strong>Suntec</strong> <strong>REIT</strong>’s Leverage Ratio as at 30 June 2007 (being the date of the latest unaudited financial<br />
statements of <strong>Suntec</strong> <strong>REIT</strong>) and taking in<strong>to</strong> account of the impact of the Debt Financing drawn down <strong>to</strong> fund the<br />
Acquisition and the Acquisition on Deposited Property. It is assumed that the Acquisition is financed by a drawdown<br />
of S$420.9 million under the Debt Financing, an issue of S$450 million of Convertible Bonds and an issue of<br />
S$94.1 million of Consideration Units.<br />
(2) DPU includes the first instalment of Deferred Units representing 34.5 million Units.<br />
17
Scenario C: Forecast DPU (Assuming that (i) the <strong>Suntec</strong> <strong>REIT</strong>’s Leverage Ratio is<br />
increased <strong>to</strong> approximately 36.6% (1) after the Completion of the Acquisition, (ii) the issue<br />
of Consideration Units at the beginning of the Forecast Year and (iii) the draw down of<br />
Debt Financing at the beginning of the Forecast Year)<br />
Interest Rate<br />
3.50%<br />
3.60%<br />
3.70%<br />
3.80%<br />
3.90%<br />
4.00%<br />
Forecast Year<br />
(financial year ending 30 September 2008)<br />
No Deferred Units Issued<br />
Existing<br />
Properties (2)<br />
Enlarged<br />
Portfolio<br />
Assuming Deferred Units<br />
Had Been Issued<br />
Existing<br />
Properties (2)<br />
Enlarged<br />
Portfolio<br />
DPU (cents) 8.32 8.54 7.45 7.67<br />
DPU increase over<br />
Existing Properties (%)<br />
— 2.6 — 3.0<br />
DPU (cents) 8.32 8.48 7.45 7.62<br />
DPU increase over<br />
Existing Properties (%)<br />
— 1.9 — 2.3<br />
DPU (cents) 8.32 8.43 7.45 7.57<br />
DPU increase over<br />
Existing Properties (%)<br />
— 1.3 — 1.6<br />
DPU (cents) 8.32 8.37 7.45 7.52<br />
DPU increase over<br />
Existing Properties (%)<br />
— 0.6 — 0.9<br />
DPU (cents) 8.32 8.31 7.45 7.47<br />
DPU increase over<br />
Existing Properties (%)<br />
— –0.1 — 0.3<br />
DPU (cents) 8.32 8.26 7.45 7.42<br />
DPU increase over<br />
Existing Properties (%)<br />
— –0.7 — –0.4<br />
Note:<br />
(1) Based on <strong>Suntec</strong> <strong>REIT</strong>’s Leverage Ratio as at 30 June 2007 (being the date of the latest unaudited financial<br />
statements of <strong>Suntec</strong> <strong>REIT</strong>) and taking in<strong>to</strong> account of the impact of the Debt Financing drawn down <strong>to</strong> fund the<br />
Acquisition and the Acquisition on Deposited Property. It is assumed that the Acquisition is financed by a drawdown<br />
of S$870.9 million under the Debt Financing and an issue of S$94.1 million of Consideration Units.<br />
(2) DPU includes the first instalment of Deferred Units representing 34.5 million Units.<br />
2.2.2 The Acquisition Fits the Manager’s Investment Strategy<br />
The Acquisition fits the Manager’s principal investment strategy for <strong>Suntec</strong> <strong>REIT</strong> <strong>to</strong><br />
invest in quality income-producing assets which are primarily used for retail and/or office<br />
purposes. The Manager’s acquisition growth strategy is underpinned by its key financial<br />
objective <strong>to</strong> provide <strong>Unitholders</strong> with a competitive rate of return for their investment by<br />
ensuring regular and stable distributions <strong>to</strong> <strong>Unitholders</strong> and long-term growth in<br />
distributions and net asset value per unit.<br />
One Raffles Quay has a large and diversified tenant base and is highly accessible as a<br />
result of its direct connectivity <strong>to</strong> the Raffles Place MRT station, one of Singapore’s four<br />
major MRT interchange stations. With a Committed Occupancy of 100.0% as at 30 June<br />
2007, the Manager believes that One Raffles Quay will enjoy a stable and sustainable<br />
income stream. The Manager believes that One Raffles Quay will be a valuable addition<br />
<strong>to</strong> <strong>Suntec</strong> <strong>REIT</strong>’s existing portfolio of major commercial developments in Singapore.<br />
18
2.2.3 Prime Landmark Office Development<br />
The Manager believes that One Raffles Quay is a quality asset which will enhance<br />
<strong>Suntec</strong> <strong>REIT</strong>’s existing portfolio of properties. One Raffles Quay enjoys several key<br />
competitive strengths, including:<br />
(i)<br />
(ii)<br />
(iii)<br />
(iv)<br />
its strategic location in the heart of the CBD and close <strong>to</strong> the new MBFC;<br />
its excellent connectivity and accessibility with its direct link <strong>to</strong> one of Singapore’s<br />
four major MRT interchange stations, Raffles Place MRT, offering seamless and<br />
sheltered commuting <strong>to</strong> One Raffles Quay’s visi<strong>to</strong>rs and tenants;<br />
a strong tenant base including ABN AMRO Asia Pacific Pte Ltd, Barclays PLC,<br />
Credit Suisse (Singapore) Limited, Deutsche Bank Aktiengesellschaft, Ernst &<br />
Young Services Pte Ltd and UBS AG; and<br />
its large floor plates allowing for the subdivision and consolidation of office units for<br />
maximum efficiency and flexibility, and state-of-the-art building services and<br />
management systems <strong>to</strong> cater <strong>to</strong> the needs of global financial tenants.<br />
2.2.4 Foothold in the Development of the Marina Bay Area<br />
Centrally located on prime waterfront space in Singapore’s new financial district, One<br />
Raffles Quay is well-positioned <strong>to</strong> capitalise on the future growth of the area. The<br />
proposed Integrated Resort, MBFC and other commercial, residential and recreational<br />
developments at Marina Bay will contribute <strong>to</strong> making the area a vibrant and soughtafter<br />
location for professionals <strong>to</strong> live, work and play in. Upon Completion, <strong>Suntec</strong> <strong>REIT</strong><br />
will be well-positioned <strong>to</strong> capture growth opportunities from the development of Marina<br />
Bay.<br />
2.2.5 Greater Exposure <strong>to</strong> the Grade ‘A’ Office Market<br />
The demand for office space in quality commercial buildings in the CBD has shown<br />
marked improvement in the past year, underpinned by a strong economy and rapid<br />
expansion of Singapore’s financial services sec<strong>to</strong>r. This improvement is expected <strong>to</strong><br />
continue.<br />
The Acquisition will increase <strong>Suntec</strong> <strong>REIT</strong>’s office portfolio <strong>to</strong> 1.8 million sq ft 15 , providing<br />
increased exposure <strong>to</strong> the strengthening Singapore office market. Furthermore, as One<br />
Raffles Quay is a recently completed development, a substantial number of major<br />
tenancies were leased at rents which are significantly below current market rental rates<br />
(see Appendix A of this <strong>Circular</strong> for details on the lease expiry profile of One Raffles<br />
Quay). As such, the office space in One Raffles Quay offers potential for rental growth<br />
opportunities upon renewal or replacement.<br />
2.2.6 Income Diversification<br />
The Acquisition is expected <strong>to</strong> benefit <strong>Unitholders</strong> by improving income diversification<br />
and reducing the reliance of <strong>Suntec</strong> <strong>REIT</strong>’s income stream on any single property. With<br />
the enlarged portfolio post the Acquisition, the reliance on the income contribution from<br />
<strong>Suntec</strong> City Mall and <strong>Suntec</strong> City Office Towers will be reduced. The Manager expects<br />
that the contribution <strong>to</strong> <strong>Suntec</strong> <strong>REIT</strong>’s Net Property Income 16 by <strong>Suntec</strong> City Mall and<br />
<strong>Suntec</strong> City Office Towers within <strong>Suntec</strong> <strong>REIT</strong>’s property portfolio for the Forecast Year<br />
15<br />
16<br />
Includes the office space attributable <strong>to</strong> the acquisition of one-third interest in One Raffles Quay.<br />
Includes dividend income, interest income and rental income support net of all taxes.<br />
19
will decrease from approximately 87.4%, prior <strong>to</strong> Completion, <strong>to</strong> approximately 69.6%,<br />
due <strong>to</strong> the enlargement of <strong>Suntec</strong> <strong>REIT</strong>’s property portfolio resulting from the<br />
Acquisition.<br />
Net Property Income Contribution for the Forecast Year<br />
(financial year ending 30 September 2008)<br />
Existing Properties<br />
Enlarged Portfolio<br />
<strong>Suntec</strong> City Mall and <strong>Suntec</strong> City Office Towers 87.4% 69.6%<br />
Park Mall 8.1% 6.5%<br />
Chijmes 4.5% 3.6%<br />
ORQ Interest — 20.3%<br />
Total 100.0% 100.0%<br />
Such diversification of income means that <strong>Unitholders</strong> can expect <strong>to</strong> enjoy an even more<br />
stable stream of income and less dependence on a single asset within <strong>Suntec</strong> <strong>REIT</strong>’s<br />
property portfolio.<br />
2.2.7 Improved Quality and Diversity of Tenant Base<br />
The Acquisition is expected <strong>to</strong> further enhance the tenancy profile of <strong>Suntec</strong> <strong>REIT</strong>’s<br />
office tenant base with the addition of major anchor office tenants such as ABN AMRO<br />
Asia Pacific Pte Ltd, Barclays PLC, Credit Suisse (Singapore) Limited, Deutsche Bank<br />
Aktiengesellschaft, Ernst & Young Services Pte Ltd and other major financial institutions,<br />
<strong>to</strong> <strong>Suntec</strong> <strong>REIT</strong>’s group of core blue chip tenants.<br />
(See Appendix A of this <strong>Circular</strong> for further details on the tenants of One Raffles Quay.)<br />
2.2.8 Greater Trading Liquidity and Flexibility<br />
The Conversion Units, if and when issued, are expected <strong>to</strong> increase the free float of<br />
Units on the SGX-ST. This could lead <strong>to</strong> an increase of <strong>Suntec</strong> <strong>REIT</strong>’s weighting in<br />
certain benchmark equity indices. <strong>Unitholders</strong> will be able <strong>to</strong> benefit from the expected<br />
improvement in trading liquidity.<br />
2.2.9 Rare Opportunity <strong>to</strong> Own an Iconic Building<br />
One Raffles Quay is a landmark building designed by the internationally renowned<br />
architectural firm Kohn Pedersen Fox Associates of New York. This is a rare opportunity<br />
for <strong>Suntec</strong> <strong>REIT</strong> <strong>to</strong> partner with reputable property companies Hongkong Land and<br />
K-<strong>REIT</strong> Asia 17 , in owning a prestigious iconic prime grade ‘A’ office development with<br />
long term growth potential.<br />
3. DETAILS CONCERNING THE ACQUISITION AND JOINT OWNERSHIP OF ONE RAFFLES<br />
QUAY<br />
3.1 Joint Ownership of One Raffles Quay with K-<strong>REIT</strong> Asia and Freyland<br />
Comina, a wholly-owned indirect subsidiary of Cheung Kong, is a special purpose holding<br />
company holding one-third of the issued share capital of ORQPL. ORQPL is the developer and<br />
17<br />
On 30 July 2007, K-<strong>REIT</strong> Asia announced that it will acquire a one-third interest in One Raffles Quay through the acquisition<br />
of one-third of the issued share capital of ORQPL from Boulevard.<br />
20
current owner of One Raffles Quay. The rights and duties of Freyland, Comina and Boulevard as<br />
the current shareholders of ORQPL, are governed by the Shareholders’ Agreement dated 28<br />
March 2001.<br />
<strong>Suntec</strong> <strong>REIT</strong> has an opportunity <strong>to</strong> acquire a one-third interest in One Raffles Quay through the<br />
sale and purchase of the entire issued share capital of Comina. To this end, on 30 July 2007, the<br />
Trustee entered in<strong>to</strong> the Share Purchase Agreement with the Vendor and the Guaran<strong>to</strong>r in<br />
connection with the acquisition of the entire issued share capital of Comina.<br />
Under the terms of the Share Purchase Agreement, it is contemplated that upon Completion, the<br />
Trustee and Comina will enter in<strong>to</strong> the Restated Shareholders’ Agreement with, inter alia, the<br />
other shareholders of ORQPL relating <strong>to</strong> the governance of their relationship as shareholders of<br />
ORQPL and ORQPL’s holding and management of One Raffles Quay.<br />
As contemplated under the terms of the Share Purchase Agreement, the RQAM Restructuring<br />
<strong>to</strong>ok place on 31 August 2007, under which all the shares held by ORQPL in the capital of<br />
RQAM, had been transferred <strong>to</strong> Hongkong Land (Singapore) Pte Ltd, Charm Aim International<br />
Limited and K-<strong>REIT</strong> Asia Property Management Pte. Ltd. (a wholly-owned subsidiary of Keppel<br />
Land Limited) in equal proportions.<br />
3.2 Certain Terms of the Share Purchase Agreement<br />
The agreed consideration payable <strong>to</strong> the Vendor of S$941.5 million was negotiated on a<br />
willing-buyer and willing-seller basis, and shall be satisfied by:<br />
(i)<br />
(ii)<br />
payment of the Share Consideration by the Trustee <strong>to</strong> the Vendor; and<br />
the extending of the Purchaser Loan by the Trustee <strong>to</strong> ORQPL.<br />
The Trustee shall extend the Purchaser Loan <strong>to</strong> ORQPL on Completion <strong>to</strong> enable ORQPL <strong>to</strong><br />
repay the Joynote Loan 18 .<br />
The Share Consideration will be paid on Completion, which shall be no later than 31 Oc<strong>to</strong>ber<br />
2007 or such other date as the Trustee and the Vendor may mutually agree in writing.<br />
The Manager and the Trustee have each commissioned an independent property valuer, being<br />
Knight Frank and CBRE respectively, <strong>to</strong> value the one-third interest in One Raffles Quay. Knight<br />
Frank in its valuation certificate stated that the market value of the one-third interest in One<br />
Raffles Quay as at 2 July 2007 was S$941.5 million. CBRE in its valuation certificate stated that<br />
the market value of the one-third interest in One Raffles Quay as at 2 July 2007 was S$941.5<br />
million (see the Valuation Certificates in Appendix E of this <strong>Circular</strong> for further details). The<br />
Independent Valuers arrived at their respective valuations by using discounted cash flow<br />
analysis and capitalisation approach. In addition <strong>to</strong> this method, Knight Frank also used the<br />
comparable sales method as a reference for its valuation of one-third interest of One Raffles<br />
Quay.<br />
In connection with the Acquisition, on 11 September 2007, the Trustee has entered in<strong>to</strong> a<br />
supplemental agreement <strong>to</strong> the Share Purchase Agreement in respect of the entire issued share<br />
capital of Comina (the “Supplemental Agreement”).<br />
Under the terms of the Supplemental Agreement, the consideration for the acquisition of the<br />
entire issued share capital shall be satisfied by (i) allotment and issue of the Consideration Units<br />
in <strong>Suntec</strong> <strong>REIT</strong>, and (ii) payment in cash, by <strong>Suntec</strong> <strong>REIT</strong> <strong>to</strong> the Vendor.<br />
18<br />
The outstanding shareholder’s loan made by Joynote Ltd (a wholly-owned subsidiary of Cheung Kong) <strong>to</strong> ORQPL <strong>to</strong>gether<br />
with all accrued but unpaid interest thereon.<br />
21
<strong>Suntec</strong> <strong>REIT</strong> will allot and issue such number of Consideration Units <strong>to</strong> the Vendor of an<br />
aggregate value of S$94.15 million. The issue price for the Consideration Units will be equal <strong>to</strong><br />
the volume weighted average price per unit for all trades on the SGX-ST, in the ordinary course<br />
of trading, for the last 10 Market Days prior <strong>to</strong> (and excluding) the date of Completion.<br />
3.3 Restated Shareholders Agreement<br />
By approving the Acquisition, <strong>Unitholders</strong> will be deemed <strong>to</strong> have also approved the<br />
Restated Shareholders’ Agreement as set out below, <strong>to</strong>gether with the terms which are<br />
incidental or ancillary <strong>to</strong> such terms:<br />
Freyland, Comina and RBC Dexia Trust Services Singapore Limited (in its capacity as trustee for<br />
K-<strong>REIT</strong> Asia) 19 (collectively the “Shareholders”) and Hongkong Land International, the Trustee,<br />
and ORQPL will enter in<strong>to</strong> the Restated Shareholders’ Agreement, which shall provide inter alia,<br />
that the aforesaid parties shall use their best endeavours <strong>to</strong> procure that the requirements for<br />
funding, capital expenditure and working capital are funded in the following order of priority:<br />
(1) by raising maximum external financing from banks, financial institutions, insurance<br />
corporations and other institutional lenders on the most favourable terms reasonably<br />
obtainable, without any mortgage or other forms of security, secured principally by<br />
guarantees from each Shareholder or its associated company given on a several basis in<br />
proportion <strong>to</strong> each Shareholder’s shareholding percentage;<br />
(2) by shareholder’s loans from each Shareholder or its associated company or by subscribing<br />
for any debt securities issued by ORQPL <strong>to</strong> each Shareholder in proportion <strong>to</strong> its<br />
shareholding percentage; and<br />
(3) by subscription of share capital by each Shareholder in proportion <strong>to</strong> its shareholding<br />
percentage.<br />
Each Shareholder also agrees <strong>to</strong> fund in proportion equal <strong>to</strong> its shareholding percentage, by way<br />
of shareholder’s loans and subscription of share capital or debt securities issued by ORQPL all<br />
funding requirements of ORQPL which are not financed by external financiers <strong>to</strong> enable ORQPL<br />
<strong>to</strong> meet its financial obligations for the carrying on of business.<br />
Under the Restated Shareholders’ Agreement, the following matters, inter alia, shall require the<br />
unanimous approval:<br />
• the approval of the annual operating plan and capital budget of ORQPL and each of its<br />
subsidiary (the “Group Company”) and any change thereof and the approval of any<br />
standard operating procedures and any change thereof;<br />
• the sale or other disposition of any asset or property of a Group Company (other than in<br />
respect of One Raffles Quay);<br />
• the disposal or assignment of the whole or any part of One Raffles Quay and the terms on<br />
which such disposal or assignment is <strong>to</strong> be carried out, including, without limitation, the<br />
price for the whole or that part of One Raffles Quay being disposed of or assigned;<br />
• any contract between a Group Company and (i) any of its shareholder, direc<strong>to</strong>r or officer,<br />
(ii) any shareholder, direc<strong>to</strong>r or officer of any other Group Company, or (iii) an associated<br />
company of such Group Company’s shareholder, direc<strong>to</strong>r or officer, which has a value or<br />
involves sums in excess of S$100,000 other than the ORQ Asset Management Agreement<br />
(as defined herein);<br />
19<br />
On 30 July 2007, K-<strong>REIT</strong> Asia announced that it will acquire a one-third interest in One Raffles Quay through the acquisition<br />
of one-third of the issued share capital of ORQPL from Boulevard.<br />
22
• the appointment, remuneration, compensation or removal of any senior company<br />
employees and the remuneration and compensation of all direc<strong>to</strong>rs;<br />
• the appointment of any committee of the board of direc<strong>to</strong>rs of ORQPL and delegating of<br />
any of the powers of the board of direc<strong>to</strong>rs of ORQPL <strong>to</strong> any such committee;<br />
• the approval and revision of leasing strategy for the lease of One Raffles Quay units and<br />
the range of rental rate(s); and<br />
• the entry by ORQPL in<strong>to</strong> any partnership, joint venture, co-operation agreement, joint<br />
development agreement, or merger or consolidation, with any other party.<br />
Subject <strong>to</strong> the approval by unanimous resolution of the shareholders of ORQPL, the board shall<br />
appoint an executive committee <strong>to</strong> review, evaluate and make decisions on matters relating <strong>to</strong><br />
the management of One Raffles Quay.<br />
The Trustee is also guaranteeing the due and punctual performance and observance of Comina<br />
of all its obligations, commitments and undertakings under and/or pursuant <strong>to</strong> the Restated<br />
Shareholders’ Agreement.<br />
3.4 Estimated Total Acquisition Cost<br />
The current estimated Total Acquisition Cost is approximately S$954.6 20 million, comprising:<br />
(i)<br />
(ii)<br />
(iii)<br />
The Agreed Consideration of S$941.5 million, which represents the aggregate value of the<br />
Share Consideration, as described in paragraph 3.2 above and the Purchaser Loan;<br />
the acquisition fee of S$9.4 million (being 1.0% of the Agreed Consideration), payable <strong>to</strong><br />
the Manager pursuant <strong>to</strong> Clause 15.2 of the Trust Deed (exclusive of GST); and<br />
the estimated professional and other fees and expenses incurred in connection with the<br />
Acquisition of approximately S$3.7 million (inclusive of GST).<br />
The acquisition fee payable <strong>to</strong> the Manager will be in the form of Units which shall not be sold<br />
within one year from their date of issuance.<br />
In addition <strong>to</strong> the above, the costs in relation <strong>to</strong> the Debt Financing and the Issue of Convertible<br />
Bonds are approximately S$19.8 million (inclusive of GST).<br />
3.5 Conditions Precedent for Completion<br />
Under the Share Purchase Agreement, Completion is subject <strong>to</strong> and conditional upon, inter alia,<br />
the following conditions precedent:<br />
(i)<br />
(ii)<br />
(iii)<br />
the RQAM Restructuring, the repayment of all sums owing by RQAM <strong>to</strong> ORQPL and the<br />
termination of the letter of financial support dated 18 May 2007 given by ORQPL in favour<br />
of the board of direc<strong>to</strong>rs of RQAM;<br />
the Acquisition having been approved by the unitholders of <strong>Suntec</strong> <strong>REIT</strong> at a general<br />
meeting of <strong>Suntec</strong> <strong>REIT</strong>; and<br />
ARA Trust Management (<strong>Suntec</strong>) Limited being the manager of <strong>Suntec</strong> <strong>REIT</strong> on<br />
Completion.<br />
20<br />
Total Acquisition Cost does not include the fees and expenses in connection with the Issue of Convertible Bonds and the<br />
Debt Financing.<br />
23
3.6 Asset Management Agreement<br />
The asset management services in relation <strong>to</strong> One Raffles Quay are currently being carried out<br />
by RQAM, a Singapore incorporated company. Pursuant <strong>to</strong> the RQAM Restructuring, completed<br />
on 31 August 2007, the entire share capital of RQAM has been transferred by ORQPL <strong>to</strong> Charm<br />
Aim International Limited, K-<strong>REIT</strong> Asia Property Management Pte Ltd and Hongkong Land<br />
(Singapore) Pte Ltd in equal proportions.<br />
The existing asset management agreement between ORQPL and RQAM in relation <strong>to</strong> the<br />
management of One Raffles Quay has been terminated and the new asset management<br />
agreement (“ORQ Asset Management Agreement”) has superseded the original asset<br />
management agreement in its entirety.<br />
RQAM is responsible for providing the following services under the ORQ Asset Management<br />
Agreement:<br />
• building management;<br />
• lease administration;<br />
• financial management;<br />
• formal reporting;<br />
• secretarial services;<br />
• accounting services; and<br />
• administrative services.<br />
In consideration of the due performance by RQAM of the aforesaid services, ORQPL shall pay<br />
RQAM:<br />
• a management fee equal <strong>to</strong> three (3) per cent of the Gross Revenue from One Raffles<br />
Quay;<br />
• in relation <strong>to</strong> each lease entered in<strong>to</strong> by a tenant, a marketing fee equivalent <strong>to</strong>:<br />
— two months’ Gross Rent in the event that such lease is for a term of five years or<br />
more; or<br />
— one month’s Gross Rent in the event that such lease is for a term of two years or<br />
more, but less than five years; or<br />
— one half month’s Gross Rent in the event that such lease is for a term of less than two<br />
years;<br />
• in relation <strong>to</strong> renewal of leases, a marketing fee equivalent <strong>to</strong> one-quarter month’s Gross<br />
Rent; and<br />
• in relation <strong>to</strong> leases with rent review provision, a marketing fee equivalent <strong>to</strong> one-quarter<br />
month’s Gross Rent based on the reviewed rent on each of the rent review.<br />
3.7 Deed of Income Support<br />
By approving the proposed Acquisition, the <strong>Unitholders</strong> will be deemed <strong>to</strong> have also<br />
approved the arrangement in the Deed of Income Support as described below.<br />
As One Raffles Quay is a recently completed development, a substantial number of major<br />
tenancies were leased at rents which are significantly below current market rental rates. As such,<br />
the Deed of Income Support that the Trustee has entered in<strong>to</strong> with the Vendor and the Guaran<strong>to</strong>r<br />
would enable <strong>Suntec</strong> <strong>REIT</strong> <strong>to</strong> strengthen its distributable income for the benefit of the<br />
<strong>Unitholders</strong>.<br />
24
Under the Deed of Income Support, the Vendor has undertaken, starting from Completion, <strong>to</strong> pay<br />
<strong>to</strong> <strong>Suntec</strong> <strong>REIT</strong> quarterly instalments for 54 months up <strong>to</strong> an aggregate amount of S$103.48<br />
million (inclusive of GST). The Vendor’s commitment under the Deed of Income Support is<br />
guaranteed by the Guaran<strong>to</strong>r. Both CBRE and Knight Frank have taken in<strong>to</strong> account these<br />
payments under the Deed of Income Support in their valuation of the Property.<br />
4. FINANCIAL INFORMATION RELATING TO THE ACQUISITION<br />
4.1 Certain Financial Information Relating <strong>to</strong> the Acquisition<br />
The following table presents, in summary, certain selected financial information in relation <strong>to</strong> the<br />
Acquisition, assuming that the Acquisition is completed on 1 Oc<strong>to</strong>ber 2007 and one-third of the<br />
income from One Raffles Quay accrues <strong>to</strong> <strong>Suntec</strong> <strong>REIT</strong> through ORQPL and Comina from 1<br />
Oc<strong>to</strong>ber 2007:<br />
ORQ Interest<br />
Forecast Year<br />
(financial year ending 30 September 2008)<br />
Net Property Income (1) (S$ million) 39.6<br />
Net Property Income Yield (2) (%) 4.2<br />
Notes:<br />
(1) Includes dividend income, interest income and rental income support (net of all taxes) that <strong>Suntec</strong> <strong>REIT</strong> will derive<br />
from its one-third interest in ORQPL.<br />
See Appendix C of this <strong>Circular</strong> for the major assumptions made calculating the forecast Net Property Income of<br />
One Raffles Quay.<br />
(2) Net Property Income yield for One Raffles Quay is calculated as <strong>Suntec</strong> <strong>REIT</strong>’s one-third share of Net Property<br />
Income from One Raffles Quay over the Agreed Consideration of approximately S$941.5 million.<br />
The detailed Profit Forecast in relation <strong>to</strong> the Acquisition and the assumptions for the forecast<br />
information included in the table above are set out in Appendix C of this <strong>Circular</strong>.<br />
4.2 Pro Forma Financial Effects of the Acquisition<br />
The pro forma financial effects of the Acquisition on the DPU and NAV per Unit presented below<br />
are strictly for illustrative purposes and were prepared based on the audited financial statements<br />
of <strong>Suntec</strong> <strong>REIT</strong> for the financial year ended 30 September 2006 (the “Audited Financial<br />
Statements”) as well as the unaudited monthly management accounts of ORQPL for the<br />
financial period from 1 Oc<strong>to</strong>ber 2005 <strong>to</strong> 30 September 2006.<br />
In preparing the pro forma financial effects below, the following assumptions were made:<br />
(i)<br />
(ii)<br />
(iii)<br />
The income support for the period from 1 Oc<strong>to</strong>ber 2005 <strong>to</strong> 30 September 2006 is assumed<br />
<strong>to</strong> be an equivalent amount of the income support for the period from 1 Oc<strong>to</strong>ber 2007 <strong>to</strong> 30<br />
September 2008 of S$27.7 million (see paragraph 3.7 above);<br />
The Convertible Bonds are issued with an aggregate principal amount of S$450 million at<br />
a Conversion Price of S$2.51 (the mid-point in the illustrative conversion price range of<br />
S$2.33 <strong>to</strong> S$2.79 21 ) for each Conversion Unit (purely for illustrative purposes only);<br />
One Raffles Quay is held jointly with K-<strong>REIT</strong> Asia 22 and Freyland, with one-third of the<br />
income from One Raffles Quay accruing <strong>to</strong> <strong>Suntec</strong> <strong>REIT</strong> through Comina; and<br />
21<br />
22<br />
The illustrative conversion price of S$2.33 is based on a 25% premium over an illustrative price of S$1.86 per Unit, (being<br />
the last closing price on the Latest Practicable Date). The illustrative conversion price of S$2.79 is based on a 50% premium<br />
over an illustrative price of S$1.86 per Unit, (being the last closing price on the Latest Practicable Date).<br />
On 30 July 2007, K-<strong>REIT</strong> Asia announced that it will acquire a one-third interest in One Raffles Quay through the acquisition<br />
of one-third of the issued share capital of ORQPL from Boulevard.<br />
25
(iv)<br />
<strong>Suntec</strong> <strong>REIT</strong> has extended one-third of the <strong>to</strong>tal shareholders’ loan extended <strong>to</strong> One<br />
Raffles Quay for the financial period from 1 Oc<strong>to</strong>ber 2005 <strong>to</strong> 30 September 2006.<br />
Consequently, <strong>Suntec</strong> <strong>REIT</strong>’s interest income from shareholders’ loan is assumed <strong>to</strong> be an<br />
equivalent of one-third of the interest expense of One Raffles Quay for the financial period<br />
from 1 Oc<strong>to</strong>ber 2005 <strong>to</strong> 30 September 2006;<br />
and the following fac<strong>to</strong>rs were taken in<strong>to</strong> account:<br />
(i)<br />
(ii)<br />
The Total Acquisition Cost (see paragraph 3.4 above); and<br />
The estimated finance costs of the Debt Financing (see paragraph 5.1 below) and fees and<br />
expenses in connection with the Issue of Convertible Bonds (see paragraph 7.3 below).<br />
The pro forma impact in the situations where the Deferred Units had been entirely issued on<br />
Listing Date and/or the Convertible Bonds issued were fully converted in<strong>to</strong> 179.3 million<br />
Conversion Units under the Issue of Convertible Bonds, assuming a conversion price of S$2.51<br />
(the mid-point in the illustrative conversion price range of S$2.33 <strong>to</strong> S$2.79 23 ) for each<br />
Conversion Unit are also presented below (purely for illustrative purposes only).<br />
23<br />
The illustrative conversion price of S$2.33 is based on a 25% premium over an illustrative price of S$1.86 per Unit, (being<br />
the last closing price on the Latest Practicable Date). The illustrative conversion price of S$2.79 is based on a 50% premium<br />
over an illustrative price of S$1.86 per Unit, (being the last closing price on the Latest Practicable Date).<br />
26
4.2.1 Pro Forma DPU<br />
The pro forma financial effects of the Acquisition on <strong>Suntec</strong> <strong>REIT</strong>’s DPU for FY2006, as<br />
if the Acquisition was completed on 1 Oc<strong>to</strong>ber 2005, and held for FY2006, are as follows:<br />
Existing Properties<br />
Enlarged Portfolio<br />
Net income before tax (S$’000) 79,164 69,586 (1)<br />
Distributable Income (S$’000) 94,935 100,032<br />
Issued Units (’000) 1,302,139 (2) 1,359,841 (3)<br />
DPU (cents) (excluding Deferred Units) 7.29 7.36<br />
Issued Units (’000) (Assuming that all<br />
Deferred Units were issued on the Listing<br />
Date)<br />
DPU (cents) (Assuming that all Deferred<br />
Units were issued on the Listing Date)<br />
Issued Units (’000) (Assuming that the<br />
Convertible Bonds were fully converted on 1<br />
Oc<strong>to</strong>ber 2005)<br />
DPU (cents) (Assuming that the Convertible<br />
Bonds were fully converted on 1 Oc<strong>to</strong>ber<br />
2005)<br />
Issued Units (’000) (Assuming that all<br />
Deferred Units were issued on the Listing<br />
Date and the Convertible Bonds were fully<br />
converted on 1 Oc<strong>to</strong>ber 2005)<br />
DPU (cents) (Assuming that all Deferred<br />
Units were issued on the Listing Date and<br />
the Convertible Bonds were fully converted<br />
on 1 Oc<strong>to</strong>ber 2005)<br />
1,509,141 (4) 1,566,843 (5)<br />
6.29 6.38<br />
NA 1,539,052 (6)<br />
NA 6.50<br />
NA 1,746,054 (7)<br />
NA 5.73<br />
Notes:<br />
(1) Includes <strong>Suntec</strong> <strong>REIT</strong>’s 33.3% share of loss in ORQPL, where temporary occupation permit (“TOP”) was<br />
only obtained on 24 April 2006 for the South Tower and 26 Oc<strong>to</strong>ber 2006 for the North Tower.<br />
(2) Comprises of 1,299,937,526 Units issued as at 30 September 2006 and 2,201,468 Units issued in<br />
Oc<strong>to</strong>ber 2006 as partial satisfaction of asset management fees incurred for the quarter ended 30<br />
September 2006.<br />
(3) Comprises the Units set out in Note 2, 50,615,887 Consideration Units assumed <strong>to</strong> be issued as partial<br />
consideration for the Acquisition at an illustrative price of S$1.86 per Unit, and 5,061,589 Units assumed<br />
<strong>to</strong> be issued in satisfaction of the acquisition fee payable <strong>to</strong> the Manager for the Acquisition at an<br />
illustrative price of S$1.86 per Unit. An additional 2,024,386 Units assumed <strong>to</strong> be issued as part<br />
satisfaction of the asset management fees payable <strong>to</strong> the Manager at an illustrative price of S$1.85 per<br />
Unit, as a result of the Acquisition.<br />
(4) Comprises the Units set out in Note 2 and 207,002,170 Deferred Units.<br />
(5) Comprises the Units set out in Note 3 and 207,002,170 Deferred Units.<br />
(6) Comprises the Units set out in Note 3 and 179,211,470 Conversion Units assumed <strong>to</strong> be issued as at 30<br />
September 2006.<br />
(7) Comprises the Units set out in Note 5 and 179,211,470 Conversion Units assumed <strong>to</strong> be issued as at 30<br />
September 2006.<br />
27
4.2.2 Pro Forma NAV<br />
The pro forma financial effects of the Acquisition on the NAV per Unit as at 30 September<br />
2006, as if the Acquisition was completed on 30 September 2006, are as follows:<br />
Existing Properties<br />
Enlarged Portfolio<br />
NAV (S$’000) 2,138,204 (1) 2,241,290 (2)<br />
Issued Units (’000) (Assuming that all<br />
Deferred Units were issued on the Listing<br />
Date)<br />
NAV per Unit (S$) (Assuming that all<br />
Deferred Units were issued on the Listing<br />
Date)<br />
NAV (S$’000) (Assuming that the<br />
Convertible Bonds were fully converted on<br />
30 September 2006)<br />
Issued Units (’000) (Assuming that all<br />
Deferred Units were issued on the Listing<br />
Date and the Convertible Bonds were fully<br />
converted on 30 September 2006)<br />
NAV per Unit (S$) (Assuming that all<br />
Deferred Units were issued on the Listing<br />
Date and the Convertible Bonds were fully<br />
converted on 30 September 2006)<br />
1,509,141 (3) 1,564,819 (4)<br />
1.417 1.432<br />
NA 2,679,396 (5)<br />
NA 1,744,030 (6)<br />
NA 1.536<br />
Notes:<br />
(1) Based on the audited financial statements of <strong>Suntec</strong> <strong>REIT</strong> for the year ended 30 September 2006 and<br />
adjusted for the distribution in November 2006 in relation <strong>to</strong> <strong>Suntec</strong> <strong>REIT</strong>’s Distributable Income for the<br />
quarter ended 30 September 2006.<br />
(2) Based on the audited financial statements of <strong>Suntec</strong> <strong>REIT</strong> for the year ended 30 September 2006 and<br />
adjusted for the distribution in November 2006 in relation <strong>to</strong> <strong>Suntec</strong> <strong>REIT</strong>’s Distributable income for the<br />
quarter ended 30 September 2006 and based on the assumption that the Acquisition and the Issue of the<br />
Convertible Bonds were completed on 30 September 2006.<br />
(3) Comprises of 1,299,937,526 of issued Units as at 30 September 2006, 2,201,468 Units issued in Oc<strong>to</strong>ber<br />
2006 as partial satisfaction of asset management fees incurred for the quarter ended 30 September 2006<br />
and 207,002,170 Deferred Units.<br />
(4) Comprises the Units set out in Note 3 and 5,061,589 Units assumed <strong>to</strong> be issued as satisfaction of the<br />
acquisition fee payable <strong>to</strong> the Manager for the Acquisition at an illustrative price of S$1.86 per Unit, and<br />
50,615,887 Consideration Units assumed <strong>to</strong> be issued as partial consideration for the Acquisition at an<br />
illustrative price of S$1.86 per Unit.<br />
(5) Based on the assumption that the Acquisition and the Issue of the Convertible Bonds were completed on<br />
30 September 2006 and the Convertible Bonds were fully converted on the same day.<br />
(6) Comprises the Units set out in Note 4 and 179,211,470 Conversion Units assumed <strong>to</strong> be issued on 30<br />
September 2006.<br />
28
4.2.3 Pro Forma Capitalisation<br />
The following tables set forth the pro forma capitalisation of <strong>Suntec</strong> <strong>REIT</strong> as at 30<br />
September 2006 assuming the Acquisition was completed on 30 September 2006, as<br />
adjusted <strong>to</strong> reflect the assumptions that approximately 179.3 million Conversion Units<br />
are issued pursuant <strong>to</strong> full conversion of the Convertible Bonds at S$2.51 (the mid-point<br />
in the illustrative conversion price range of S$2.33 <strong>to</strong> S$2.79), which is at a 35%<br />
conversion premium (purely for illustrative purposes only), where 50.6 million<br />
Consideration Units have been issued, and 5.1 million Units are issued as payment of<br />
acquisition fee <strong>to</strong> the Manager at an illustrative price of S$1.86 per Unit. The information<br />
in these tables should be read in conjunction with paragraphs 5 and 6 below.<br />
As at 30 September 2006<br />
Actual As adjusted (1) 30 September 2006)<br />
As adjusted (1)<br />
(Assuming that the<br />
Convertible Bonds<br />
were fully converted on<br />
(S$’000) (S$’000) (S$’000)<br />
Total debt 1,031,795 1,867,017 1,446,167<br />
Total <strong>Unitholders</strong>’ funds (2) 2,138,204 (3) 2,241,290 2,679,396<br />
Total capitalisation 3,169,999 4,108,307 4,125,563<br />
Notes:<br />
(1) Assuming the Acquisition was completed on 30 September 2006 and was financed by the draw down of<br />
S$420.9 million under the Debt Financing, the issue of Convertible Bonds and the Consideration Units.<br />
(2) <strong>Unitholders</strong>’ funds comprises issued units (net of issue unit costs), issuable units, Deferred Units, hedging<br />
reserve and retained earnings of <strong>Suntec</strong> <strong>REIT</strong>.<br />
(3) Based on the audited financial statements of <strong>Suntec</strong> <strong>REIT</strong> for the year ended 30 September 2006 and<br />
adjusted for the distribution in November 2006 in relation <strong>to</strong> <strong>Suntec</strong> <strong>REIT</strong>’s Distributable Income for the<br />
quarter ended 30 September 2006.<br />
4.3 Requirement for <strong>Unitholders</strong>’ Approval<br />
4.3.1 Major Transaction<br />
(i)<br />
(ii)<br />
Chapter 10 of the Listing Manual governs the acquisition or disposal of assets,<br />
including options <strong>to</strong> acquire or dispose of assets, by <strong>Suntec</strong> <strong>REIT</strong>. Such<br />
transactions are classified in<strong>to</strong> the following categories:<br />
(a)<br />
(b)<br />
(c)<br />
(d)<br />
non-discloseable transactions;<br />
discloseable transactions;<br />
major transactions; and<br />
very substantial acquisitions or reverse takeovers.<br />
A proposed acquisition by <strong>Suntec</strong> <strong>REIT</strong> may fall in<strong>to</strong> any of the categories set out<br />
in sub-paragraph 4.3.1(i) above depending on the size of the relative figures<br />
computed on the following bases of comparison:<br />
(a)<br />
(b)<br />
the net profits attributable <strong>to</strong> the assets acquired, compared with <strong>Suntec</strong><br />
<strong>REIT</strong>’s net profits;<br />
the aggregate value of the consideration given, compared with <strong>Suntec</strong> <strong>REIT</strong>’s<br />
market capitalisation; and<br />
29
(c)<br />
the number of Consideration Units issued by <strong>Suntec</strong> <strong>REIT</strong>, compared with the<br />
number of Units previously in issue.<br />
Where any of the relative figures computed on the bases set out above exceeds<br />
20.0%, the transaction is classified as a major transaction. The Listing Manual<br />
requires that a major transaction involving <strong>Suntec</strong> <strong>REIT</strong> be made conditional upon<br />
approval by <strong>Unitholders</strong> in a general meeting. However, the approval of<br />
<strong>Unitholders</strong> is not required in the case of an acquisition of profitable assets if only<br />
sub-paragraph 4.3.1(ii)(a) exceeds the relevant 20.0% threshold.<br />
(iii)<br />
The relative figures for the Acquisition using the applicable bases of comparison<br />
described in sub-paragraphs 4.3.1(ii)(a) <strong>to</strong> 4.3.1(ii)(c) are set out in the table below.<br />
The figures in the table below are calculated based on the ORQ Interest.<br />
Comparison of:<br />
Profits (S$ million)<br />
Relative figure<br />
The ORQ Interest: <strong>Suntec</strong> <strong>REIT</strong>:<br />
6.6%<br />
5.2 (1) 79.2 (2)<br />
Consideration against<br />
market capitalisation<br />
(S$ million)<br />
Number of<br />
Consideration Units <strong>to</strong><br />
be issued against the<br />
existing Units<br />
Agreed Consideration:<br />
941.5<br />
Consideration Units:<br />
50,615,887<br />
<strong>Suntec</strong> <strong>REIT</strong>’s market 34.0%<br />
capitalisation:<br />
2,766.18 (3)<br />
Existing Units:<br />
1,425,867,465 (4) 3.5%<br />
Notes:<br />
(1) Based on the adjusted net profit attributable <strong>to</strong> One Raffles Quay as extracted from Comina’s<br />
audited accounts for the financial year ended 31 December 2006. The adjusted net profit is derived<br />
from the earnings from One Raffles Quay before income tax, minority interests and extraordinary<br />
items.<br />
(2) Based on <strong>Suntec</strong> <strong>REIT</strong>’s net income in its audited financial statements for the year ended 30<br />
September 2006.<br />
(3) Based on the last traded price of S$1.94 per Unit on SGX-ST on 30 June 2007, the date prior <strong>to</strong><br />
the announcement of the Acquisition.<br />
(4) As at 30 June 2007.<br />
4.3.2 Interested Person Transaction and Interested Party Transaction<br />
Under Chapter 9 of the Listing Manual, where <strong>Suntec</strong> <strong>REIT</strong> proposes <strong>to</strong> enter in<strong>to</strong> a<br />
transaction with an interested person and the value of the transaction (either in itself or<br />
when aggregated with the value of other transactions, each of a value equal <strong>to</strong> or greater<br />
than S$100,000, with the same interested person during the same financial year) is<br />
equal <strong>to</strong> or exceeds 5.0% of <strong>Suntec</strong> <strong>REIT</strong>’s and its associates’ latest audited NTA,<br />
<strong>Unitholders</strong>’ approval is required in respect of the transaction. Based on the Audited<br />
Financial Statements, the NTA of <strong>Suntec</strong> <strong>REIT</strong> was S$2,163.0 million as at 30<br />
September 2006. The Share Purchase Agreement was entered in<strong>to</strong> on 30 July 2007,<br />
accordingly, if the value of a transaction which is proposed <strong>to</strong> be entered in<strong>to</strong> in the<br />
FY2007 by <strong>Suntec</strong> <strong>REIT</strong> with an interested person is, either in itself or in aggregation<br />
with all other earlier transactions (each of a value equal <strong>to</strong> or greater than S$100,000)<br />
entered in<strong>to</strong> with the same interested person during the same financial year, equal <strong>to</strong> or<br />
in excess of S$108.2 million, such a transaction would be subject <strong>to</strong> <strong>Unitholders</strong>’<br />
approval. Given that the Agreed Consideration is S$941.5 million, the value of the<br />
Acquisition exceeds the said threshold.<br />
Paragraph 5 of the Property Funds Guidelines imposes a requirement for <strong>Unitholders</strong>’<br />
approval for an interested party transaction by <strong>Suntec</strong> <strong>REIT</strong> whose value exceeds 5.0%<br />
30
of <strong>Suntec</strong> <strong>REIT</strong>’s latest audited NAV. Based on the Audited Financial Statements, the<br />
NAV of <strong>Suntec</strong> <strong>REIT</strong> was S$2,163.0 million as at 30 September 2006. Accordingly, if the<br />
value of a transaction which is proposed <strong>to</strong> be entered in<strong>to</strong> by <strong>Suntec</strong> <strong>REIT</strong> with an<br />
interested party is equal <strong>to</strong> or greater than S$108.2 million, such a transaction would be<br />
subject <strong>to</strong> <strong>Unitholders</strong>’ approval. Given the Agreed Consideration of S$941.5 million, the<br />
value of the Acquisition exceeds the said threshold.<br />
The Trust Deed provides that for as long as the Manager is the manager of <strong>Suntec</strong> <strong>REIT</strong><br />
and Cheung Kong and/or Mr Lim Hwee Chiang, John are controlling shareholders of the<br />
Manager, all transactions between <strong>Suntec</strong> <strong>REIT</strong> and (i) Cheung Kong, (ii) Mr Lim Hwee<br />
Chiang, John and/or (iii) an associate of Cheung Kong or Mr Lim Hwee Chiang, John<br />
shall be considered as interested person transactions under the Listing Manual.<br />
The Vendor is a direct wholly-owned subsidiary of Cheung Kong and is therefore<br />
considered an associate of Cheung Kong. As such, the Acquisition will constitute an<br />
“interested person transaction” under Chapter 9 of the Listing Manual.<br />
The Vendor is a related corporation of the Manager as they are 100.0% directly and<br />
30.0% indirectly owned by Cheung Kong respectively. As a related corporation of the<br />
Manager, the Vendor is considered <strong>to</strong> be an “interested party” of <strong>Suntec</strong> <strong>REIT</strong> for the<br />
purposes of paragraph 5 of the Property Funds Guidelines. In addition, the Chairman of<br />
the Manager, Mr Chiu Kwok Hung, Justin, is also an executive direc<strong>to</strong>r of Cheung Kong.<br />
As such, the Acquisition will also constitute an “interested party transaction” under the<br />
Property Funds Guidelines. Accordingly, the Acquisition is subject <strong>to</strong> <strong>Unitholders</strong>’<br />
approval under Chapter 9 of the Listing Manual and paragraph 5 of the Property Funds<br />
Guidelines.<br />
As at the Latest Practicable Date, the value of all interested person transactions<br />
between <strong>Suntec</strong> <strong>REIT</strong> and Cheung Kong and/or the associates of Cheung Kong for the<br />
current financial year ending 30 September 2007 was approximately S$17.0 million. As<br />
at the Latest Practicable Date, the value of all of <strong>Suntec</strong> <strong>REIT</strong>’s interested person<br />
transactions during the current financial year ending 30 September 2007 was<br />
approximately S$22.0 million.<br />
4.4 Advice of the Independent Financial Adviser<br />
The Manager has appointed Ernst & Young Corporate Finance Pte Ltd (the “IFA”) <strong>to</strong> advise its<br />
Independent Direc<strong>to</strong>rs in relation <strong>to</strong> the Acquisition (<strong>to</strong>gether with the entry in<strong>to</strong> the Share<br />
Purchase Agreement). A copy of the letter from the IFA <strong>to</strong> the Independent Direc<strong>to</strong>rs (the “IFA<br />
Letter”), containing its advice in full, is set out in Appendix F of this <strong>Circular</strong> and <strong>Unitholders</strong> are<br />
advised <strong>to</strong> read the IFA Letter carefully.<br />
Having considered the fac<strong>to</strong>rs and made the assumptions set out in its letter, and subject <strong>to</strong> the<br />
qualifications set out therein, the IFA is of the view that the Acquisition <strong>to</strong>gether with the entry in<strong>to</strong><br />
the Share Purchase Agreement are on normal commercial terms and will not be prejudicial <strong>to</strong> the<br />
interests of <strong>Suntec</strong> <strong>REIT</strong> and its minority <strong>Unitholders</strong>.<br />
The IFA has therefore advised the Independent Direc<strong>to</strong>rs <strong>to</strong> recommend that <strong>Unitholders</strong> vote in<br />
favour of the Acquisition.<br />
4.5 Interests of Direc<strong>to</strong>rs and Substantial <strong>Unitholders</strong><br />
As at the Latest Practicable Date, Mr Chiu Kwok Hung, Justin, is both the Chairman and a<br />
direc<strong>to</strong>r of the Manager as well as an executive direc<strong>to</strong>r of Cheung Kong. Mr Ip Tak Chuen,<br />
Edmond is both a direc<strong>to</strong>r of the Manager and an executive direc<strong>to</strong>r of Cheung Kong.<br />
31
Save as disclosed above and based on information available <strong>to</strong> the Manager as at the Latest<br />
Practicable Date, none of the Direc<strong>to</strong>rs or the Substantial <strong>Unitholders</strong> 24 have an interest, direct<br />
or indirect, in the Acquisition.<br />
4.6 Direc<strong>to</strong>r’s Service Contracts<br />
Following Completion, it is contemplated that each of ORQPL’s shareholders will have a<br />
one-third representation on the board of ORQPL. Save as aforesaid, no person is proposed <strong>to</strong><br />
be appointed as a Direc<strong>to</strong>r in connection with the Acquisition, the Share Purchase Agreement,<br />
the Restated Shareholders’ Agreement or any other transaction contemplated in relation <strong>to</strong> the<br />
Acquisition.<br />
5. METHOD OF FINANCING<br />
5.1 The Financing Plan<br />
The Manager proposes <strong>to</strong> satisfy the Total Acquisition Cost of S$954.6 million and the costs in<br />
relation <strong>to</strong> the financing of approximately S$19.8 million:<br />
(i)<br />
(ii)<br />
partly through the issue of Consideration Units of an aggregate value of S$94.15 million <strong>to</strong><br />
the Vendor,<br />
partly through the issue of Units <strong>to</strong> the Manager in satisfaction of the acquisition fee of<br />
S$9.4 million (being 1.0% of the Agreed Consideration), payable <strong>to</strong> the Manager pursuant<br />
<strong>to</strong> Clause 15.2 of the Trust Deed (exclusive of GST);<br />
and partly with the proceeds of either (iii)(a) the drawdown of Debt Financing for the balance of<br />
approximately S$870.9 million, which <strong>Suntec</strong> <strong>REIT</strong> is expected <strong>to</strong> obtain for the purposes of the<br />
Acquisition, or (b) the drawdown of the Debt Financing and the Issue of Convertible Bonds, in<br />
such proportion as the Manager in its discretion, deems appropriate, <strong>to</strong> collectively raise the<br />
balance of S$870.9 million.<br />
Based on market conditions, the Manager will determine the amount of financing <strong>to</strong> be raised<br />
from the Debt Financing and the Issue of Convertible Bonds. The Manager may decide <strong>to</strong><br />
finance the Total Acquisition Cost 25 by the issue of Consideration Units and a draw down of the<br />
Debt Financing, if the Manager determines this <strong>to</strong> be in the best interests of the <strong>Unitholders</strong>.<br />
5.2 <strong>Suntec</strong> <strong>REIT</strong>’s Existing and Additional Credit Facilities<br />
<strong>Suntec</strong> <strong>REIT</strong> has a S$700.0 million term loan facility with Platinum AC1 Limited (“Platinum”) and<br />
a S$500.0 million term loan facility with Sunshine Assets Limited (“Sunshine”), both of which are<br />
special purpose companies held by RBC Dexia Trust Services Singapore Limited and HSBC<br />
Institutional Trust Services (Singapore) Limited respectively. As at the Latest Practicable Date,<br />
the term loan facility with Platinum is fully drawn and S$215.0 million has been drawn down from<br />
the term loan facility with Sunshine in five tranches. To fund their loans <strong>to</strong> <strong>Suntec</strong> <strong>REIT</strong>, Platinum<br />
issued floating rate notes with an aggregate face value of S$700.0 million which are rated AAA<br />
by Fitch Inc. and Aaa by Moody’s Inves<strong>to</strong>rs Service, while Sunshine issued a mixture of fixed and<br />
floating rate notes with an aggregate face value of S$215.0 million, all of which are rated Baa2<br />
by Moody’s Inves<strong>to</strong>rs Service.<br />
In addition, <strong>Suntec</strong> <strong>REIT</strong> has a S$50.0 million revolving credit facility with United Overseas Bank<br />
Limited, of which S$7.5 million has been drawn down, and a S$150.0 million revolving credit<br />
facility with Citibank N.A., Singapore Branch, which has not been drawn down.<br />
24<br />
25<br />
A person with an interest in one or more Units constituting not less than 5.0% of all outstanding Units.<br />
Excluding the acquisition fee of S$9.4 million (being 1.0% of the Agreed Consideration), payable <strong>to</strong> the Manager pursuant<br />
<strong>to</strong> Clause 15.2 of the Trust Deed (exclusive of GST).<br />
32
The Manager has also put in place additional revolving credit facilities of S$871 million<br />
(“Acquisition Facilities”) which will be used, <strong>to</strong>gether with the existing credit facilities, <strong>to</strong><br />
part-finance the Acquisition.<br />
5.3 <strong>Suntec</strong> <strong>REIT</strong>’s Leverage<br />
As at 30 June 2007 (being the date of the latest unaudited financial statements of <strong>Suntec</strong> <strong>REIT</strong>),<br />
<strong>Suntec</strong> <strong>REIT</strong> has a Leverage Ratio of approximately 23.3%. 26<br />
As at 30 June 2007, the aggregate valuation of the Existing Properties (including the acquisition<br />
of 30,172 sq ft of strata office space in <strong>Suntec</strong> Tower One and <strong>Suntec</strong> Tower Two between<br />
December 2006 and February 2007) was approximately S$3,871.0 million. This is approximately<br />
S$659.0 million higher than the aggregate valuation of the Existing Properties as at 30<br />
September 2006.<br />
Property<br />
Valuation<br />
(as at 30 September 2006)<br />
(S$ million)<br />
Valuation<br />
(as at 30 June 2007) (1)<br />
(S$ million)<br />
Increase<br />
(S$ million)<br />
<strong>Suntec</strong> City Mall and <strong>Suntec</strong><br />
2,830.0 3,470.0 (3) 640.0<br />
City Office Towers (2)<br />
Park Mall (4) 247.0 266.0 19.0<br />
Chijmes (2) 135.0 135.0 0.0<br />
Aggregate for the Existing<br />
Properties<br />
3,212.0 3,871.0 659.0<br />
Notes:<br />
(1) Based on a valuation undertaken on 31 March 2007.<br />
(2) Independent valuation of properties by Knight Frank.<br />
(3) Includes 30,172 sq ft of strata office space in <strong>Suntec</strong> Tower One and <strong>Suntec</strong> Tower Two acquired between<br />
December 2006 and February 2007.<br />
(4) Independent valuation of the property by CBRE.<br />
Upon Completion, based on <strong>Suntec</strong> <strong>REIT</strong>’s Deposited Property of approximately S$4,868.3<br />
million (which takes in<strong>to</strong> account the Deposited Property of the Existing Properties as at 30 June<br />
2007), the drawdown of Debt Financing and/or the Issue of Convertible Bonds are expected <strong>to</strong><br />
increase <strong>Suntec</strong> <strong>REIT</strong>’s Leverage Ratio from approximately 23.3% <strong>to</strong> approximately 36.6%.<br />
6. PROFIT FORECAST<br />
Based on the proposed financing plan described under paragraph 5.1 above, the tables on the<br />
following pages summarise <strong>Suntec</strong> <strong>REIT</strong>’s forecast consolidated statement of net income of the<br />
Existing Properties and the ORQ Interest for the Forecast Year, assuming the Convertible Bonds<br />
are issued with an aggregate principal amount of S$450.0 million <strong>to</strong> part-finance the Total<br />
Acquisition Cost 27 .<br />
The forecast must be read <strong>to</strong>gether with the detailed Profit Forecast as well as the<br />
accompanying assumptions and sensitivity analysis in Appendix C of this <strong>Circular</strong>, and the<br />
report of the Independent Accountants on the Profit Forecast in Appendix D of this <strong>Circular</strong>.<br />
26<br />
27<br />
<strong>Suntec</strong> <strong>REIT</strong>’s Aggregate Leverage Ratio, which refers <strong>to</strong> the ratio of <strong>Suntec</strong> <strong>REIT</strong>’s borrowings and deferred payments<br />
(including deferred payments for assets whether <strong>to</strong> be settled in cash or Units) <strong>to</strong> the value of its Deposited Property, is<br />
28.6% as at 30 June 2007.<br />
Excluding the acquisition fee of S$9.4 million (being 1.0% of the Agreed Consideration), payable <strong>to</strong> the Manager pursuant<br />
<strong>to</strong> Clause 15.2 of the Trust Deed (exclusive of GST).<br />
33
Forecast Consolidated Statement of Total Return<br />
Existing<br />
Properties (1)<br />
FY2008<br />
S$(’000)<br />
Enlarged<br />
Portfolio (2)<br />
FY2008<br />
S$(’000)<br />
Gross Revenue 212,064 212,064<br />
Property expenses (56,809) (56,809)<br />
Net property income 155,255 155,255<br />
Other income (3) — 27,741<br />
Finance income 10,950 23,795<br />
Finance expenses (41,480) (75,753)<br />
Net financing costs (30,530) (51,958)<br />
Asset management fees (18,829) (23,755)<br />
Trust expenses (2,282) (2,446)<br />
Net income before share of profit in jointly controlled<br />
entity 103,614 104,837<br />
Share of profit of jointly controlled entity — 4,051<br />
Net income before tax 103,614 108,888<br />
Income tax expense — (4,993)<br />
Total return for the year 103,614 103,895<br />
Reconciliation from <strong>to</strong>tal return for the year <strong>to</strong> income available for distribution<br />
Net income before share of profit in jointly controlled entity 103,614 104,837<br />
Net tax adjustment (4) 18,917 29,046<br />
Taxable income 122,531 133,883<br />
Less: Income tax expense — (4,993)<br />
Add: Dividend income (5) — 4,051<br />
Income available for distribution 122,531 132,941<br />
Total issued and issuable units (’000)<br />
(excluding Deferred Units) (6) 1,472,456 1,530,263<br />
Distribution per unit based on the <strong>to</strong>tal number of units<br />
entitled <strong>to</strong> distribution (cents) (excluding Deferred<br />
Units) (7) 8.32 8.69<br />
Total issued and issuable units (’000) (including Deferred<br />
Units) (8) 1,644,958 1,702,765<br />
Distribution per unit based on the <strong>to</strong>tal number of units<br />
entitled <strong>to</strong> distribution (cents) (including Deferred Units) (9) 7.45 7.81<br />
Notes:<br />
(1) This relates <strong>to</strong> the forecast results of the Existing Properties for FY2008.<br />
(2) This relates <strong>to</strong> the forecast results of the Enlarged Portfolio for FY2008 assuming the completion of the Acquisition<br />
on 1 Oc<strong>to</strong>ber 2007.<br />
(3) This relates <strong>to</strong> the income support derived from the Deed of Income Support from the Vendor.<br />
(4) These comprise mainly asset management fees payable in units, amortization of transaction costs, non-deductible<br />
interest expense, trustee fees and fit-out subsidies granted <strong>to</strong> tenants.<br />
34
(5) This relates <strong>to</strong> dividend income <strong>to</strong> be received by <strong>Suntec</strong> <strong>REIT</strong> from Comina, which is tax-exempt income.<br />
(6) This includes of the Manager’s forecast of Units <strong>to</strong> be issued as partial satisfaction of asset management fee<br />
incurred for FY2008 and the first instalment of the Deferred Units assumed <strong>to</strong> be issued in June 2008 (i.e. the date<br />
falling 42 months after 9 December 2004, being the completion of the sale and purchase of the initial portfolio of<br />
properties) and the rest semi-annually thereafter.<br />
(7) This is based on income available for distribution over <strong>to</strong>tal issued and issuable units (excluding the remaining<br />
balance of five equal instalments of the Deferred Units) as at 30 September 2008.<br />
(8) Deferred Units, comprising the remaining balance of five instalments, will be issued <strong>to</strong> SCDPL in satisfaction of<br />
deferred payment consideration for the purchase of the properties. The Deferred Units will be issued in six equal<br />
instalments, with the first instalment assumed <strong>to</strong> be issued in June 2008 (i.e. the date falling 42 months after 9<br />
December 2004, being the completion of the sale and purchase of the initial portfolio of properties) and the rest<br />
semi-annually thereafter.<br />
(9) This is based on income available for distribution over <strong>to</strong>tal issued and issuable units (including the remaining<br />
balance of the five equal instalments of the Deferred Units) as at 30 September 2008.<br />
7. DETAILS OF THE ISSUE OF CONVERTIBLE BONDS<br />
7.1 Overview of the Issue of Convertible Bonds<br />
To finance the balance of the Total Acquisition Cost 28 (which will not be financed by the issue of<br />
the Consideration Units <strong>to</strong> the Vendor), the Manager proposes <strong>to</strong> issue Convertible Bonds with<br />
an aggregate principal amount of up <strong>to</strong> S$450.0 million <strong>to</strong> institutional and accredited<br />
inves<strong>to</strong>rs 29 . Based on market conditions, the Manager may instead decide that it is in the best<br />
interests of the <strong>Unitholders</strong> <strong>to</strong> finance such balance fully by drawing down the Debt Financing.<br />
If the Manager decides <strong>to</strong> issue the Convertible Bonds, the Manager shall issue the Convertible<br />
Bonds by no later than the date of Completion. The Manager shall issue the Convertible Bonds<br />
only if it determines that doing so would be in the best interests of the <strong>Unitholders</strong>, having regard<br />
<strong>to</strong> market conditions.<br />
The Convertible Bonds will bear interest from the Issue Date at a rate of 2.0% - 4.0% per annum,<br />
payable semi-annually in arrears and will be convertible in<strong>to</strong> Conversion Units, during the<br />
Conversion Period or, at the option of <strong>Suntec</strong> <strong>REIT</strong>, redeemed for cash in accordance with the<br />
terms and conditions of the Convertible Bonds.<br />
The Conversion Price, which shall be in the range between 25% and 50% (both figures inclusive)<br />
over the closing Unit price on the last business day prior <strong>to</strong> launch of the Issue of Convertible<br />
Bonds, will be determined between the Manager and the Joint Financial Advisers, Underwriters<br />
and Bookrunners closer <strong>to</strong> the date of commencement of the Issue of Convertible Bonds, having<br />
regard <strong>to</strong> market conditions. As such, the actual number of Conversion Units <strong>to</strong> be issued<br />
pursuant <strong>to</strong> full conversion of the Convertible Bonds will depend on the aggregate principal<br />
amount and the conversion price. The illustrative conversion price of S$2.33 is based on a 25%<br />
premium over an illustrative price of S$1.86 per Unit, being the last closing price on the Latest<br />
Practicable Date. The illustrative conversion price of S$2.79 is based on a 50% premium over<br />
an illustrative price of S$1.86 per Unit, being the last closing price on the Latest Practicable Date.<br />
At the lowest illustrative conversion price of S$2.33, the Convertible Bonds issued will be fully<br />
converted in<strong>to</strong> approximately 193.1 million Conversion Units representing approximately 13.5%<br />
of <strong>Suntec</strong> <strong>REIT</strong> existing Units as of 30 June 2007. At the highest illustrative conversion price of<br />
S$2.79, the Convertible Bonds issued will be fully converted in<strong>to</strong> approximately 161.3 million<br />
Conversion Units representing approximately 11.3% of <strong>Suntec</strong> <strong>REIT</strong> existing Units as of 30 June<br />
2007.<br />
28<br />
29<br />
Excluding the acquisition fee of S$9.4 million (being 1.0% of the Agreed Consideration), payable <strong>to</strong> the Manager pursuant<br />
<strong>to</strong> Clause 15.2 of the Trust Deed (exclusive of GST).<br />
Pursuant <strong>to</strong> Section 274 and 275 of the Securities and Futures Act (Cap 289), and in offshore transactions pursuant <strong>to</strong><br />
Regulation S under the U.S. Securities Act.<br />
35
For illustrative purposes only, based on an aggregate principal amount of S$450.0 million and a<br />
conversion price of S$2.51 30 (the mid-point in the illustrative conversion price range of S$2.33<br />
<strong>to</strong> S$2.79) for each Conversion Unit, assuming no adjustments <strong>to</strong> the conversion price, up <strong>to</strong><br />
179.3 million Conversion Units will be issued by the Manager pursuant <strong>to</strong> full conversion of the<br />
Convertible Bonds.<br />
A summary of the principal terms of the Convertible Bonds is set out at Appendix B of this<br />
<strong>Circular</strong>.<br />
By approving the Issue of Convertible Bonds, the <strong>Unitholders</strong> are deemed <strong>to</strong> have<br />
approved the terms of the Convertible Bonds, <strong>to</strong>gether with the terms which are<br />
incidental or ancillary <strong>to</strong> such terms, and the issue of Conversion Units upon conversion<br />
of the Convertible Bonds.<br />
7.2 Estimated Proceeds<br />
The quantum of the aggregate principal amount under the Issue of Convertible Bonds is up <strong>to</strong><br />
S$450.0 million so as <strong>to</strong> part-finance the Total Acquisition Cost.<br />
Based on an illustrative aggregate principal amount of S$450.0 million and the conversion price<br />
of S$2.51 30 (the mid-point in the illustrative conversion price range of S$2.33 <strong>to</strong> S$2.79) for each<br />
Conversion Unit, assuming no adjustments <strong>to</strong> the conversion price, up <strong>to</strong> 179.3 million<br />
Conversion Units will be issued and the estimated gross proceeds from the Issue of Convertible<br />
Bonds is expected <strong>to</strong> be up <strong>to</strong> S$450.0 million.<br />
7.3 Costs of the Debt Financing and the Issue of Convertible Bonds<br />
If the Manager proceeds with the Debt Financing and/or the Issue of Convertible Bonds, based<br />
on an illustrative aggregate principal amount of up <strong>to</strong> S$450.0 million for the Convertible Bonds,<br />
the Manager estimates that <strong>Suntec</strong> <strong>REIT</strong> will have <strong>to</strong> bear underwriting, management and selling<br />
commissions, incentive fees and financial advisory fees and related expenses payable <strong>to</strong> the<br />
Joint Financial Advisers, Underwriters and Bookrunners and professional and other fees and<br />
expenses in relation <strong>to</strong> the Debt Financing and the Issue of Convertible Bonds, amounting <strong>to</strong> up<br />
<strong>to</strong> approximately S$19.8 million 31 (inclusive of GST).<br />
7.4 Use of Proceeds<br />
The Manager proposes <strong>to</strong> use the net proceeds from the Issue of Convertible Bonds <strong>to</strong><br />
part-finance the Total Acquisition Cost 32 .<br />
7.5 Subscription by the Joint Financial Advisers, Underwriters and Bookrunners<br />
The Joint Financial Advisers, Underwriters and Bookrunners will subscribe or procure<br />
subscribers for the Convertible Bonds, subject <strong>to</strong> the terms of a subscription agreement <strong>to</strong> be<br />
entered in<strong>to</strong> between the Manager, the Trustee, and the Joint Financial Advisers, Underwriters<br />
and Bookrunners.<br />
30<br />
31<br />
32<br />
The illustrative conversion price of S$2.33 is based on a 25% premium over an illustrative price of S$1.86 per Unit, (being<br />
the last closing price on the Latest Practicable Date). The illustrative conversion price of S$2.79 is based on a 50% premium<br />
over an illustrative price of S$1.86 per Unit, (being the last closing price on the Latest Practicable Date).<br />
The actual figure will depend on the final gross proceeds raised under the Issue of Convertible Bonds.<br />
Excluding the acquisition fee of S$9.4 million (being 1.0% of the Agreed Consideration), payable <strong>to</strong> the Manager pursuant<br />
<strong>to</strong> Clause 15.2 of the Trust Deed (exclusive of GST).<br />
36
8. THE PROPOSED ISSUE OF CONSIDERATION UNITS TO THE VENDOR<br />
8.1 Overview of the Issue of Consideration Units <strong>to</strong> the Vendor<br />
The Acquisition involves the proposed issue of such number of new Units <strong>to</strong> the Vendor of an<br />
aggregate value of S$94.15 million as partial consideration for the Acquisition. The issue price<br />
for the Consideration Units will be equal <strong>to</strong> the volume weighted average price per Unit for all<br />
trades on the SGX-ST, in the ordinary course of trading, for the last 10 Market Days prior <strong>to</strong> (and<br />
excluding) the date of Completion. For illustrative purposes, assuming that the issue price for the<br />
Consideration Units is equal <strong>to</strong> S$1.86, 50,615,887 Consideration Units will be issued <strong>to</strong> the<br />
Vendor.<br />
8.2 Requirement for <strong>Unitholders</strong>’ Approval for the Issue of Consideration Units <strong>to</strong> the Vendor<br />
The Trust Deed provides that for as long as the Manager is the manager of <strong>Suntec</strong> <strong>REIT</strong> and<br />
Cheung Kong and/or Mr Lim Hwee Chiang, John are controlling shareholders of the Manager,<br />
all transactions between <strong>Suntec</strong> <strong>REIT</strong> and (i) Cheung Kong, (ii) Mr Lim Hwee Chiang, John<br />
and/or (iii) an associate of Cheung Kong or Mr Lim Hwee Chiang, John shall be considered as<br />
interested person transactions.<br />
As the Vendor is a direct wholly-owned subsidiary of Cheung Kong and is therefore considered<br />
an associate of Cheung Kong. In addition, as the Manager is 30.0% indirectly owned by Cheung<br />
Kong, the Vendor is regarded as an associate of the Manager under the Listing Manual, and<br />
Cheung Kong is regarded as a controlling shareholder of the Manager. As such, the Acquisition<br />
will constitute an “interested person transaction” under Chapter 9 of the Listing Manual as well<br />
as an “interested party transaction” under the Property Fund Guidelines.<br />
8.3 Rationale for Issuing the Consideration Units <strong>to</strong> the Vendor<br />
The issue of Consideration Units <strong>to</strong> the Vendor, as a wholly-owned indirect subsidiary of Cheung<br />
Kong would align the interest of Cheung Kong with the <strong>Unitholders</strong> and demonstrate its<br />
commitment and support <strong>to</strong> <strong>Suntec</strong> <strong>REIT</strong>.<br />
8.4 Advice of the Independent Financial Adviser<br />
Having considered the fac<strong>to</strong>rs set out in the IFA Letter, and subject <strong>to</strong> the assumptions and<br />
qualifications set out therein, the IFA is of the opinion that the issue of the Consideration Units<br />
is on normal commercial terms and will not be prejudicial <strong>to</strong> the interests of <strong>Suntec</strong> <strong>REIT</strong> and its<br />
minority <strong>Unitholders</strong>.<br />
The IFA has therefore advised the Independent Direc<strong>to</strong>rs <strong>to</strong> recommend that <strong>Unitholders</strong> vote in<br />
favour of the issue of the Consideration Units.<br />
8.5 Temporary S<strong>to</strong>ck Counter<br />
<strong>Suntec</strong> <strong>REIT</strong>’s policy is <strong>to</strong> distribute its Distributable Income on a quarterly basis <strong>to</strong> <strong>Unitholders</strong>.<br />
In order <strong>to</strong> ensure fairness <strong>to</strong> holders of existing Units, the Consideration Units will only be<br />
entitled <strong>to</strong> participate in <strong>Suntec</strong> <strong>REIT</strong>’s Distributable Income for the period commencing from the<br />
date of the issue of the Consideration Units and thereafter. <strong>Suntec</strong> <strong>REIT</strong> will be announcing<br />
cumulative dividends in respect of the period from 1 July 2007 <strong>to</strong> the day immediately preceding<br />
the Issue Date.<br />
The Consideration Units will be issued under a temporary s<strong>to</strong>ck counter, which will be<br />
maintained for the period commencing from the Issue Date <strong>to</strong> Books Closure Date, which is<br />
expected <strong>to</strong> be 7 November 2007. After the Books Closure Date, both the Consideration Units<br />
37
and the existing Units will be aggregated and traded under the existing <strong>Suntec</strong> <strong>REIT</strong> s<strong>to</strong>ck<br />
counter on the Main Board of the SGX-ST on the next market day.<br />
The separate temporary s<strong>to</strong>ck counter for the Consideration Units is necessary <strong>to</strong> differentiate<br />
the entitlement of existing Units <strong>to</strong> distribution for the period from 1 Oc<strong>to</strong>ber 2007 <strong>to</strong> 31<br />
December 2007 versus the entitlement of the Consideration Units <strong>to</strong> distribution for the period<br />
commencing from the date of issue of the Consideration Units <strong>to</strong> 31 December 2007, in line with<br />
current market practices.<br />
Other than in respect of entitlement <strong>to</strong> dividends (which will be with effect from the Issue Date),<br />
the Consideration Units would otherwise rank pari passu in all respects with the existing Units.<br />
8.6 Status of the Consideration Units<br />
The Consideration Units <strong>to</strong> be issued will only be entitled <strong>to</strong> participate in <strong>Suntec</strong> <strong>REIT</strong>’s<br />
Distributable Income from the Issue Date onwards. From the Issue Date, the Consideration Units<br />
will rank pari passu in all respects with the existing Units, including the right <strong>to</strong> any distribution<br />
which may be paid for that distribution period, and all distributions thereafter.<br />
9. THE GENERAL MANDATE<br />
9.1 The General Mandate <strong>to</strong> issue Units and Convertible Securities<br />
The Manager seeks the approval of <strong>Unitholders</strong> for a general mandate under Rule 887 of the<br />
Listing Manual for the issue of new Units and/or convertible securities in FY2008 without the<br />
prior specific approval of <strong>Unitholders</strong> in a general meeting, provided that such number of new<br />
Units and convertible securities does not exceed 50.0% of the number of Units in issue at the<br />
end of FY2007, of which the aggregate number of additional new Units and convertible securities<br />
issued other than on a pro rata basis <strong>to</strong> <strong>Unitholders</strong> shall not be more than 20.0% of the number<br />
of Units in issue at the end of FY2007. Pursuant <strong>to</strong> the General Mandate, <strong>Suntec</strong> <strong>REIT</strong> may issue<br />
Units arising from the conversion of the convertible securities notwithstanding that the General<br />
Mandate may have ceased <strong>to</strong> be in force at the time the Units are <strong>to</strong> be issued.<br />
Where the terms of the issue of the convertible securities provide for adjustment <strong>to</strong> the number<br />
of warrants or other convertible securities, in the event of rights, bonus or other capitalisation<br />
issues, <strong>Suntec</strong> <strong>REIT</strong> may issue additional convertible securities notwithstanding that the<br />
General Mandate may have ceased <strong>to</strong> be in force at the time the convertible securities are<br />
issued.<br />
9.2 Rationale for the General Mandate<br />
Under Rule 887 of the Listing Manual, an issue of new Units (<strong>to</strong>gether with any other issue of<br />
Units in the same financial year) may not exceed more than 10.0% of the number of Units in<br />
issue without <strong>Unitholders</strong>’ approval.<br />
In the event that the Acquisition is approved, as the Acquisition will constitute an “interested party<br />
transaction” under the Property Funds Guidelines (see paragraph 4.3.2 for further details), the<br />
Property Funds Guidelines requires the acquisition fee of S$9.4 million (being 1.0% of the<br />
Agreed Consideration) payable <strong>to</strong> the Manager <strong>to</strong> be in the form of Units which shall not be sold<br />
within one year from their date of issuance. The Manager will be receiving part payment of its<br />
management fees in the form of Units <strong>to</strong> continue <strong>to</strong> align its interests with the <strong>Unitholders</strong>.<br />
The Manager is of the view that the General Mandate will provide <strong>Suntec</strong> <strong>REIT</strong> flexibility for<br />
further growth through the acquisition of new properties without the time and expense of<br />
convening extraordinary general meetings.<br />
38
The General Mandate will also allow <strong>Suntec</strong> <strong>REIT</strong> <strong>to</strong> raise funds through the issuance of Units<br />
and/or convertible securities more expeditiously and be more responsive in the acquisition of<br />
new properties in a competitive environment where timeliness in making bids and making<br />
payment for acquisitions will give <strong>Suntec</strong> <strong>REIT</strong> an advantage.<br />
Notwithstanding the General Mandate, <strong>Suntec</strong> <strong>REIT</strong> will nonetheless be required <strong>to</strong> make an<br />
announcement and/or convene a meeting of <strong>Unitholders</strong> should an acquisition result in the<br />
relevant thresholds in Chapter 9 of the Listing Manual relating <strong>to</strong> “interested person<br />
transactions”, the relevant thresholds in the Property Funds Guidelines relating <strong>to</strong> “interested<br />
party transactions” and/or the relevant thresholds in Chapter 10 of the Listing Manual relating <strong>to</strong><br />
“discloseable transactions” and “major transactions”.<br />
10. THE VALUATION OF REAL ESTATE SUPPLEMENT<br />
10.1 Valuation of Real Estate<br />
The Manager proposes <strong>to</strong> amend the trust deed for the purpose of clarifying that the valuation<br />
method for Real Estate (as defined therein) should be the same whether the Real Estate is held<br />
indirectly through Special Purpose Vehicles (as defined therein) or held directly by <strong>Suntec</strong> <strong>REIT</strong>,<br />
as there is no reason for the valuation method <strong>to</strong> differ in view of the fact that the role of Special<br />
Purpose Vehicles is <strong>to</strong> hold Real Estate. Although it is appropriate <strong>to</strong> align the valuation method<br />
of Real Estate held through Special Purpose Vehicles with the valuation method of Real Estate<br />
held directly by <strong>Suntec</strong> <strong>REIT</strong>, such alignment will have a corresponding effect on the basis on<br />
which the management fees are calculated.<br />
(See Appendix H of this <strong>Circular</strong> for the proposed form of the Valuation of Real Estate<br />
Supplement.)<br />
11. RECOMMENDATIONS<br />
11.1 On the Acquisition<br />
Based on the opinion of the IFA (as set out in the IFA Letter in Appendix F of this <strong>Circular</strong>), Mr<br />
Tan Kian Chew, Mrs Sng Sow-Mei (alias Poon Sow Mei) and Mr Lim Lee Meng, being the<br />
Independent Direc<strong>to</strong>rs, believe that the Acquisition and the entry in<strong>to</strong> the Share Purchase<br />
Agreement are based on normal commercial terms and would not be prejudicial <strong>to</strong> the interests<br />
of <strong>Suntec</strong> <strong>REIT</strong> and its <strong>Unitholders</strong>.<br />
Accordingly, the Independent Direc<strong>to</strong>rs recommend that <strong>Unitholders</strong> vote at the EGM in favour<br />
of the resolution <strong>to</strong> approve the Acquisition (Resolution 1).<br />
11.2 On the Issue of Convertible Bonds<br />
Given <strong>Suntec</strong> <strong>REIT</strong>’s relatively conservative Leverage Ratio and the interest cost savings, the<br />
Direc<strong>to</strong>rs consider the Issue of Convertible Bonds <strong>to</strong> be an efficient method of raising funds in<br />
relation <strong>to</strong> the Acquisition as it allows <strong>Suntec</strong> <strong>REIT</strong> <strong>to</strong> diversify its capital markets funding<br />
inves<strong>to</strong>r base and optimizing its capital structure.<br />
Accordingly, the Direc<strong>to</strong>rs recommend that <strong>Unitholders</strong> vote in favour of the resolution relating<br />
<strong>to</strong> the Issue of Convertible Bonds (Resolution 2).<br />
11.3 On the Issue of Consideration Units <strong>to</strong> the Vendor<br />
Based on the opinion of the IFA (as set out in the IFA Letter in Appendix F of this <strong>Circular</strong>), Mr<br />
Tan Kian Chew, Mrs Sng Sow-Mei (alias Poon Sow Mei) and Mr Lim Lee Meng, being the<br />
Independent Direc<strong>to</strong>rs, believe that the issue of Consideration Units is on normal commercial<br />
terms and would not be prejudicial <strong>to</strong> the interests of <strong>Suntec</strong> <strong>REIT</strong> and its <strong>Unitholders</strong>.<br />
39
Accordingly, the Independent Direc<strong>to</strong>rs recommend that <strong>Unitholders</strong> vote in favour of the<br />
resolution relating <strong>to</strong> the issue of Consideration Units <strong>to</strong> the Vendor (Resolution 3).<br />
11.4 On the General Mandate<br />
Having regard <strong>to</strong> the rationale for the General Mandate set out in paragraph 9.2 above, the<br />
Manager believes that the General Mandate would be beneficial <strong>to</strong>, and is in the interests of,<br />
<strong>Suntec</strong> <strong>REIT</strong>. Accordingly, the Manager recommends that <strong>Unitholders</strong> vote in favour of the<br />
resolution relating <strong>to</strong> the General Mandate (Resolution 4).<br />
11.5 On the Valuation of Real Estate Supplement<br />
Based on the rationale for the Valuation of Real Estate Supplement set out in paragraph 10<br />
above, the Independent Direc<strong>to</strong>rs are of the opinion that the Valuation of Real Estate<br />
Supplement would be on normal commercial terms and would not be prejudicial <strong>to</strong> the interests<br />
of <strong>Suntec</strong> <strong>REIT</strong> or its minority <strong>Unitholders</strong>.<br />
Accordingly, the Independent Direc<strong>to</strong>rs recommend that <strong>Unitholders</strong> vote in favour of the<br />
resolution relating <strong>to</strong> the Valuation of Real Estate Supplement (Resolution 5).<br />
12. EXTRAORDINARY GENERAL MEETING<br />
The EGM will be held at 2.30pm on 8 Oc<strong>to</strong>ber 2007 at Level 3, Room 325 and 326, <strong>Suntec</strong><br />
Singapore International Convention & Exhibition Centre, 1 Raffles Boulevard, <strong>Suntec</strong> City,<br />
Singapore 039593, for the purpose of considering and, if thought fit, passing with or without<br />
modification, the resolutions set out in the Notice of EGM of this <strong>Circular</strong>. The purpose of this<br />
<strong>Circular</strong> is <strong>to</strong> provide <strong>Unitholders</strong> with relevant information about each of these resolutions.<br />
Approval by way of an Ordinary Resolution of <strong>Unitholders</strong> is required in respect of the resolutions<br />
relating <strong>to</strong> the Acquisition (Resolution 1), the issue of Consideration Units (Resolution 3) and the<br />
General Mandate (Resolution 4) and by way of an Extraordinary Resolution in respect of each<br />
of the other two resolutions proposed <strong>to</strong> be passed at the EGM.<br />
A Deposi<strong>to</strong>r shall not be regarded as a Unitholder entitled <strong>to</strong> attend the EGM and <strong>to</strong> speak and<br />
vote thereat unless he is shown <strong>to</strong> have Units entered against his name in the Deposi<strong>to</strong>ry<br />
Register, as certified by CDP as at 48 hours before the EGM.<br />
<strong>Unitholders</strong> should note that:<br />
(a)<br />
(b)<br />
Notwithstanding that the resolution relating <strong>to</strong> the Issue of Convertible Bonds is<br />
passed, the Manager is not obliged <strong>to</strong>, and has at all times the discretion whether or<br />
not <strong>to</strong> proceed with the Issue of Convertible Bonds, having regard <strong>to</strong> market<br />
conditions; and<br />
the proceeds of the Issue of Convertible Bonds and Consideration Units are<br />
intended <strong>to</strong> part finance the Total Acquisition Cost 33 . The Manager will not proceed<br />
with the Issue of Convertible Bonds and Consideration Units in the event that<br />
<strong>Unitholders</strong>’ approval of the Acquisition is not obtained. As such, the Issue of<br />
Convertible Bonds and Consideration Units are subject <strong>to</strong> and conditional upon<br />
<strong>Unitholders</strong>’ approval of the Acquisition.<br />
13. PROHIBITION ON VOTING<br />
Rule 919 of the Listing Manual prohibits interested persons and their associates (as defined in<br />
the Listing Manual) from voting on a resolution in relation <strong>to</strong> a matter in respect of which such<br />
33<br />
Excluding the acquisition fee of S$9.4 million (being 1.0% of the Agreed Consideration), payable <strong>to</strong> the Manager pursuant<br />
<strong>to</strong> Clause 15.2 of the Trust Deed (exclusive of GST).<br />
40
persons are interested in at the EGM. The Manager, being an associate of Cheung Kong, is<br />
prohibited from voting on the proposed Acquisition (Resolution 1) and the proposed issue of<br />
Consideration Units (Resolution 3). The Manager has also undertaken <strong>to</strong> abstain from voting on<br />
the proposed Issue of Convertible Bonds (Resolution 2).<br />
Given that the Valuation of Real Estate Supplement (Resolution 5) directly affects the amount of<br />
payment receivable by the Manager in respect of the management fee under the Trust Deed,<br />
both the Manager and its associates are prohibited from voting on the resolution relating <strong>to</strong> the<br />
Valuation of Real Estate Supplement.<br />
14. ACTION TO BE TAKEN BY UNITHOLDERS<br />
<strong>Unitholders</strong> will find enclosed in this <strong>Circular</strong> the Notice of Extraordinary General Meeting and a<br />
Proxy Form.<br />
If a Unitholder is unable <strong>to</strong> attend the EGM and wishes <strong>to</strong> appoint a proxy <strong>to</strong> attend and vote on<br />
his behalf, he should complete, sign and return the enclosed Proxy Form in accordance with the<br />
instructions printed thereon as soon as possible and, in any event, so as <strong>to</strong> reach the registered<br />
office of the Manager at 9 Temasek Boulevard, #09-01 <strong>Suntec</strong> Tower Two, Singapore 038989 not<br />
later than 2.30pm on 6 Oc<strong>to</strong>ber 2007, being 48 hours before the time fixed for the EGM. The<br />
completion and return of the Proxy Form by a Unitholder will not prevent him from attending and<br />
voting in person at the EGM if he so wishes.<br />
Persons who have an interest in the approval of one or more of the resolutions must decline <strong>to</strong><br />
accept appointment as proxies unless the Unitholder concerned has specific instructions in his<br />
Proxy Form as <strong>to</strong> the manner in which his votes are <strong>to</strong> be cast in respect of such resolutions.<br />
15. DIRECTORS’ RESPONSIBILITY STATEMENT<br />
The Direc<strong>to</strong>rs collectively and individually accept responsibility for the accuracy of the<br />
information given in this <strong>Circular</strong> and confirm, having made all reasonable enquiries, that <strong>to</strong> the<br />
best of their knowledge and belief, the facts stated and opinions expressed in this <strong>Circular</strong> are<br />
fair and accurate in all material respects as at the date of this <strong>Circular</strong> and there are no material<br />
facts the omission of which would make any statement in this <strong>Circular</strong> misleading in any material<br />
respect. Where information has been extracted or reproduced from published or otherwise<br />
publicly available sources, the sole responsibility of the Direc<strong>to</strong>rs has been <strong>to</strong> ensure through<br />
reasonable enquiries that such information is accurately extracted from such sources or, as the<br />
case may be, reflected or reproduced in this <strong>Circular</strong>.<br />
The forecast consolidated financial information set out in paragraph 6 above and in Appendix<br />
C of this <strong>Circular</strong> have been stated by the Direc<strong>to</strong>rs after due and careful enquiry.<br />
16. JOINT FINANCIAL ADVISERS, UNDERWRITERS AND BOOKRUNNERS’ RESPONSIBILITY<br />
STATEMENT<br />
The Joint Financial Advisers, Underwriters and Bookrunners confirm that, having made all<br />
reasonable enquiries and <strong>to</strong> the best of their knowledge and belief, based on information made<br />
available <strong>to</strong> them by the Manager, the information about the Issue of Convertible Bonds<br />
contained in paragraph 7.1 and Appendix B of this <strong>Circular</strong> constitutes true disclosure of all<br />
material facts about the Issue of Convertible Bonds as at the date of this <strong>Circular</strong> and they are<br />
not aware of any material facts the omission of which would make any statement about the Issue<br />
of Convertible Bonds contained in the said paragraph and appendix misleading in any material<br />
respect as at the date of this <strong>Circular</strong>.<br />
41
17. CONSENTS<br />
Each of the Independent Accountants, the Independent Valuers and the IFA has given and has<br />
not withdrawn its written consent <strong>to</strong> the issue of this <strong>Circular</strong> with the inclusion of its name and,<br />
respectively, the Independent Accountants’ Report on the Profit Forecast, the Valuation<br />
Certificates and the IFA Letter, and all references there<strong>to</strong>, in the form and context in which they<br />
are included in this <strong>Circular</strong>.<br />
18. DOCUMENTS ON DISPLAY<br />
Copies of the following documents are available for inspection during normal business hours at<br />
the registered office of the Manager 34 at 9 Temasek Boulevard, #09-01 <strong>Suntec</strong> Tower Two,<br />
Singapore 038989 from the date of this <strong>Circular</strong> up <strong>to</strong> and including the date falling three months<br />
after the date of this <strong>Circular</strong>:<br />
• the full valuation report on One Raffles Quay issued by Knight Frank;<br />
• the full valuation report on One Raffles Quay issued by CBRE;<br />
• the Share Purchase Agreement;<br />
• the Supplemental Agreement;<br />
• the Restated Shareholders Agreement;<br />
• the ORQ Asset Management Agreement;<br />
• the Trust Deed;<br />
• the Independent Accountants’ Report on the Profit Forecast;<br />
• the IFA Letter;<br />
• the Audited Financial Statements; and<br />
• the written consents of each of the Independent Accountants, the Independent Valuers and<br />
the IFA.<br />
The Trust Deed will also be available for inspection at the registered office of the Manager for<br />
so long as <strong>Suntec</strong> <strong>REIT</strong> is in existence.<br />
Yours faithfully<br />
ARA Trust Management (<strong>Suntec</strong>) Limited<br />
(as manager of <strong>Suntec</strong> Real Estate Investment Trust)<br />
Company Registration No. 200410976R<br />
Chiu Kwok Hung, Justin<br />
Chairman and Direc<strong>to</strong>r<br />
34<br />
Prior appointment will be appreciated.<br />
42
GLOSSARY<br />
In this <strong>Circular</strong>, the following definitions apply throughout unless otherwise stated:<br />
% : Per centum or percentage<br />
Acquisition : The proposed acquisition of a one-third interest in One Raffles<br />
Quay through the acquisition of the entire issued share capital<br />
of Comina from the Vendor<br />
Acquisition Facilities : The revolving credit facilities of S$871 million put in place by<br />
the Manager, <strong>to</strong> be used, <strong>to</strong>gether with the existing credit<br />
facilities, <strong>to</strong> part-finance the Acquisition<br />
Agreed Consideration : The agreed consideration payable <strong>to</strong> the Vendor in connection<br />
with the Acquisition of S$941.5 million, negotiated on a willingbuyer<br />
and willing-seller basis<br />
Aggregate Leverage Ratio : The ratio of <strong>Suntec</strong> <strong>REIT</strong>’s borrowings and deferred payments<br />
(including deferred payments for assets whether <strong>to</strong> be settled<br />
in cash or Units) <strong>to</strong> the value of its Deposited Property<br />
Audited Financial<br />
Statements<br />
: The audited financial statements of <strong>Suntec</strong> <strong>REIT</strong> and its<br />
associates for the financial year ended 30 September 2006<br />
Boulevard : Boulevard Development Pte Ltd<br />
CBD : Central Business District<br />
CBRE : CB Richard Ellis (Pte) Ltd<br />
CDP : The Central Deposi<strong>to</strong>ry (Pte) Limited<br />
Cheung Kong : Cheung Kong (Holdings) Limited<br />
Chijmes : An Asia Pacific Culture Heritage Conservation development<br />
with two his<strong>to</strong>ric buildings, Caldwell House and CHIJMES Hall.<br />
The property is located at the crossroads of North Bridge Road<br />
and Bras Basah Road in the city centre<br />
Citi : Citigroup Global Markets Singapore Pte. Ltd.<br />
Comina : Comina Investment Limited<br />
Committed Occupancy : Occupancy rate based on current leases in respect of a<br />
property as at 30 June 2007 or leases with commencement<br />
dates after 30 June 2007, which as at 30 June 2007 has been<br />
entered in<strong>to</strong> or renewed by the tenant pursuant <strong>to</strong> a signed<br />
commitment <strong>to</strong> lease<br />
Completion : The completion of the Acquisition<br />
Consideration Units : The Units <strong>to</strong> be issued by the Manager <strong>to</strong> the Vendor in<br />
connection with the Acquisition<br />
Conversion Period : Has the meaning ascribed there<strong>to</strong> in Appendix B of this<br />
<strong>Circular</strong><br />
43
Conversion Price : Has the meaning ascribed there<strong>to</strong> in Appendix B of this<br />
<strong>Circular</strong><br />
Conversion Units : The Units <strong>to</strong> be issued upon conversion of the Convertible<br />
Bonds in accordance with the terms and conditions of the<br />
issue of the Convertible Bonds<br />
Convertible Bonds : Up <strong>to</strong> S$450.0 million aggregate principal amount of S$<br />
Denominated Convertible Bonds convertible in<strong>to</strong> Units<br />
CPF : Central Provident Fund<br />
Debt Financing : <strong>Suntec</strong> <strong>REIT</strong>’s existing and additional credit facilities and debt<br />
financing<br />
Deed of Income Support : The deed of income support dated 30 July 2007 between the<br />
Vendor, the Trustee and the Guaran<strong>to</strong>r, pursuant <strong>to</strong> which the<br />
Vendor will undertake, for the 54 months starting from<br />
Completion, <strong>to</strong> pay the Trustee quarterly instalments of up <strong>to</strong><br />
an aggregate amount of S$103.48 million (inclusive of GST)<br />
Deferred Units : The 207,002,170 Units <strong>to</strong> be issued <strong>to</strong> <strong>Suntec</strong> City<br />
Development Pte Ltd in part satisfaction of the purchase<br />
consideration for the properties comprised in <strong>Suntec</strong> <strong>REIT</strong>’s<br />
portfolio on the Listing Date. These Deferred Units will be<br />
issued in six equal instalments, the first of which is <strong>to</strong> be made<br />
on the date falling 42 months after the Listing Date and the rest<br />
semi-annually thereafter<br />
Deposited Property : The gross assets of <strong>Suntec</strong> <strong>REIT</strong>, including the Existing<br />
Properties and all its authorised investments held or deemed<br />
<strong>to</strong> be held upon the trusts under the Trust Deed<br />
Deutsche Bank : Deutsche Bank AG, Singapore Branch<br />
Direc<strong>to</strong>rs : The direc<strong>to</strong>rs of the Manager<br />
Distributable Income : <strong>Suntec</strong> <strong>REIT</strong>’s taxable income and tax-exempt income (if any)<br />
DPU : Distribution per Unit<br />
EGM : The extraordinary general meeting of <strong>Unitholders</strong> <strong>to</strong> be held at<br />
2.30 pm on 8 Oc<strong>to</strong>ber 2007 at Level 3, Room 325 and 326,<br />
<strong>Suntec</strong> Singapore International Convention & Exhibition<br />
Centre, 1 Raffles Boulevard, <strong>Suntec</strong> City, Singapore 039593 <strong>to</strong><br />
approve the matters set out in the Notice of Extraordinary<br />
General Meeting on pages I-1 <strong>to</strong> I-3 of this <strong>Circular</strong><br />
Enlarged Portfolio : Comprises the Existing Properties and the ORQ Interest<br />
Existing Properties : <strong>Suntec</strong> City Mall, <strong>Suntec</strong> City Office Towers, Park Mall and<br />
Chijmes (each an “Existing Property”)<br />
Extraordinary Resolution : A resolution proposed and passed as such by a majority<br />
consisting of 75.0% or more of the <strong>to</strong>tal number of votes cast<br />
for and against such resolution at a meeting of <strong>Unitholders</strong><br />
convened in accordance with the provisions of the Trust Deed<br />
44
Forecast Year : The financial year ending 30 September 2008<br />
Freyland : Freyland Pte Ltd<br />
FY2007 : The financial year ending 30 September 2007<br />
FY2008 : The financial year ending 30 September 2008<br />
General Mandate : The proposed general mandate <strong>to</strong> be given <strong>to</strong> the Manager for<br />
the issue of new Units and/or convertible securities in FY2008<br />
without the prior specific approval of <strong>Unitholders</strong> in a general<br />
meeting, provided that such number of new Units and<br />
convertible securities does not exceed 50.0% of the number of<br />
Units in issue at the end of FY2007, of which the aggregate<br />
number of new Units and convertible securities issued other<br />
than on a pro rata basis <strong>to</strong> <strong>Unitholders</strong> shall not be more than<br />
20.0% of the number of Units in issue at the end of FY2007<br />
Gross Lettable Area : Area in the strata lots in a building that is <strong>to</strong> be leased,<br />
including common areas such as common corridors, lift shafts,<br />
fire escape staircases and <strong>to</strong>ilets and excluding carpark<br />
Gross Rent : Means, in respect of <strong>Suntec</strong> <strong>REIT</strong>, base rental income (after<br />
rent rebates, refunds, credits or discounts and rebates for rent<br />
free periods and business tax (where applicable), but<br />
excluding turnover rent), service charge (which is a<br />
contribution paid by tenant(s) <strong>to</strong>wards covering the operating<br />
maintenance expenses of the relevant property) and licence<br />
fees (where applicable), and in the case of <strong>Suntec</strong> City Mall,<br />
promotion fund contribution payable by the tenants; and <strong>to</strong> the<br />
extent Gross Rent is in respect of ORQPL, means all rental<br />
income (after deduction of rent rebates, rent-free periods and<br />
adjustments, where applicable, but excluding turnover rent)<br />
and tenant service charges, if any which is contribution paid by<br />
tenants <strong>to</strong>wards property expenses, received by ORQPL from<br />
the operation of One Raffles Quay<br />
Gross Revenue : Means, in respect of <strong>Suntec</strong> <strong>REIT</strong>, (i) Gross Rent and (ii) other<br />
income earned from the relevant property or properties and <strong>to</strong><br />
the extent Gross Revenue is in respect of ORQPL, means all<br />
rents, premiums, license fees, service charges and other<br />
income or revenue derived from all rights of occupation or use<br />
of One Raffles Quay (comprising recoveries from tenants,<br />
licensees and concessionaires for utilities and other services<br />
and other income including, without limitation, car park<br />
revenues attributable <strong>to</strong> the operation of One Raffles Quay)<br />
and the proceeds of any payment under any insurance policy<br />
against loss of rent or other income from One Raffles Quay but<br />
excluding receipts of a capital nature and bad debts<br />
Group Company : ORQPL and each of its subsidiaries<br />
Guaran<strong>to</strong>r : Cheung Kong Investment Company Limited<br />
Hongkong Land<br />
International<br />
: Hongkong Land International Holdings Limited<br />
45
Hongkong Land : Hongkong Land Limited<br />
IFA : Ernst & Young Corporate Finance Pte Ltd<br />
IFA Letter : The letter issued by the IFA annexed as Appendix F of this<br />
<strong>Circular</strong><br />
Independent Accountants : KPMG<br />
Independent Direc<strong>to</strong>rs : The independent direc<strong>to</strong>rs of the Manager, being Mr Tan Kian<br />
Chew, Mrs Sng Sow-Mei (alias Poon Sow Mei) and Mr Lim Lee<br />
Meng<br />
Independent Valuers : CBRE and Knight Frank<br />
IPO Properties : <strong>Suntec</strong> City Mall and <strong>Suntec</strong> City Office Towers (as defined in<br />
the Prospectus)<br />
Issue Date : The date on which the Consideration Units are issued<br />
Issue of Convertible Bonds : The proposed placement of such number of Convertible Bonds<br />
so as <strong>to</strong> raise gross proceeds of up <strong>to</strong> approximately<br />
S$450,000,000 million in order <strong>to</strong> part-finance the Total<br />
Acquisition Cost 35<br />
Joint Financial Advisers,<br />
Underwriters and<br />
Bookrunners<br />
: Citi and Deutsche Bank<br />
Joynote : Joynote Ltd, an indirect wholly-owned subsidiary of Cheung<br />
Kong<br />
Joynote Loan : The outstanding shareholder’s loan made by Joynote <strong>to</strong><br />
ORQPL <strong>to</strong>gether with all accrued but unpaid interest thereon<br />
K-<strong>REIT</strong> Asia : A real estate investment trust constituted in the Republic of<br />
Singapore pursuant <strong>to</strong> a trust deed dated 28 November 2005<br />
(as amended)<br />
Keppel Land Properties : Keppel Land Properties Pte Ltd<br />
Knight Frank : Knight Frank Pte Ltd<br />
Latest Practicable Date : 13 September 2007, being the latest practicable date prior <strong>to</strong><br />
the printing of this <strong>Circular</strong><br />
Leverage Ratio : The ratio of <strong>Suntec</strong> <strong>REIT</strong>’s borrowings (excluding deferred<br />
payments for assets whether <strong>to</strong> be settled in cash or Units) <strong>to</strong><br />
the value of its Deposited Property<br />
Listing Date : 9 December 2004, being the date of admission of <strong>Suntec</strong> <strong>REIT</strong><br />
<strong>to</strong> the Official List of the SGX-ST<br />
Listing Manual : The Listing Manual of the SGX-ST<br />
Manager : ARA Trust Management (<strong>Suntec</strong>) Limited, as manager of<br />
<strong>Suntec</strong> <strong>REIT</strong><br />
35<br />
Excluding the acquisition fee of S$9.4 million (being 1.0% of the Agreed Consideration), payable <strong>to</strong> the Manager pursuant<br />
<strong>to</strong> Clause 15.2 of the Trust Deed (exclusive of GST).<br />
46
Market Day : A day on which the SGX-ST is open for trading in securities<br />
MAS : Monetary Authority of Singapore<br />
Maturity Date : Has the meaning ascribed there<strong>to</strong> in Appendix B of this<br />
<strong>Circular</strong><br />
MBFC : Marina Business and Financial Centre<br />
MCST : Management Corporation Strata Title Plan No. 2197, the<br />
management corporation of <strong>Suntec</strong> City established under<br />
Part IV of the Land Titles (Strata) Act<br />
MRT : Mass Rapid Transit<br />
NAV : Net asset value<br />
Net Leased Area : Net Lettable Area that is leased out as of 30 June 2007<br />
Net Lettable Area or NLA : Area in the strata lots in a building that is <strong>to</strong> be leased,<br />
excluding common areas such as common corridors, lift<br />
shafts, fire escape staircases and <strong>to</strong>ilets, and is usually the<br />
area in respect of which rent is payable<br />
North Tower : The 50-s<strong>to</strong>rey office <strong>to</strong>wer with approximately 765,902 sq ft<br />
Net Lettable Area of One Raffles Quay<br />
NPI or Net Property Income : Comprises Gross Revenue less property operating expenses<br />
NTA : Net tangible assets<br />
One Raffles Quay : The building known as One Raffles Quay erected on the whole<br />
of Lot 175C of Town Subdivision 30, and the whole of the<br />
subterranean space below Lot 175C of Town Subdivision 30<br />
known as Lot 80002A of Town Subdivision 30 for a term of 99<br />
years commencing from 13 June 2001<br />
Ordinary Resolution : A resolution proposed and passed as such by a majority being<br />
greater than 50.0% or more of the <strong>to</strong>tal number of votes cast<br />
for and against such resolution at a meeting of <strong>Unitholders</strong><br />
convened in accordance with the provisions of the Trust Deed<br />
ORQ Interest : An indirect one-third interest in One Raffles Quay through the<br />
acquisition of the entire share capital of Comina<br />
ORQ Asset Management<br />
Agreement<br />
: The asset management agreement dated 31 August 2007<br />
made between ORQPL and RQAM relating <strong>to</strong> the provision of<br />
asset management services in respect of One Raffles Quay<br />
ORQPL : One Raffles Quay Pte Ltd<br />
Park Mall : The residue of the leasehold estate in respect of the whole of<br />
Lot 259A of Town Subdivision 20 for a term of 99 years<br />
commencing from 2 June 1969 on the terms of the Head<br />
Lease, held under the Certificate of Title Volume 96 Folio 93,<br />
<strong>to</strong>gether with the building erected thereon and known as “Park<br />
Mall”, 9 Penang Road, Singapore 238459<br />
Platinum : Platinum AC1 Limited<br />
47
Property Funds Guidelines : The guidelines for property funds issued by the MAS as<br />
Appendix 2 <strong>to</strong> the Code on Collective Investment Schemes<br />
Property Value : The value of the properties or relevant property held by <strong>Suntec</strong><br />
<strong>REIT</strong>, with the initial value of each property being its initial<br />
acquisition cost (including any applicable stamp duty, tax and<br />
other related acquisition cost) and subsequently its valuation<br />
by an independent approved valuer obtained on an annual<br />
basis<br />
Prospectus : The prospectus dated 29 November 2004 issued by <strong>Suntec</strong><br />
<strong>REIT</strong> in connection with its initial public offering of Units<br />
Purchaser Loan : The loan that the Trustee shall extend <strong>to</strong> ORQPL <strong>to</strong> enable<br />
ORQPL <strong>to</strong> repay <strong>to</strong> Joynote the outstanding shareholder’s<br />
loan made by Joynote <strong>to</strong> ORQPL <strong>to</strong>gether with all accrued but<br />
unpaid interest thereon<br />
Real Estate : Shall have the meaning defined in the Trust Deed<br />
<strong>REIT</strong>s : Real estate investment trust<br />
Restated Shareholders’<br />
Agreement<br />
: The restated shareholders’ agreement which will govern the<br />
rights and duties between the shareholders of ORQPL upon<br />
the completion of either <strong>Suntec</strong> <strong>REIT</strong>’s or K-<strong>REIT</strong> Asia’s<br />
acquisition of ORQPL shares, whichever is earlier<br />
RQAM : Raffles Quay Asset Management Pte Ltd<br />
RQAM Restructuring : The transfer of the share capital of RQAM from ORQPL <strong>to</strong><br />
Charm Aim International Limited, K-<strong>REIT</strong> Asia Property<br />
Management Pte Ltd and Hongkong Land (Singapore) Pte Ltd<br />
S$ and cents : Singapore dollars and cents<br />
SCDPL : <strong>Suntec</strong> City Development Pte Ltd<br />
Securities Act : United States Securities Act of 1933, as amended<br />
SGX-ST : Singapore Exchange Securities Trading Limited<br />
Share Consideration : The amount equals <strong>to</strong> the Agreed Consideration less<br />
Purchaser Loan, subject <strong>to</strong> adjustments calculated based on<br />
one-third of the net asset value of ORQPL as at the date of<br />
Completion<br />
Share Purchase Agreement : The conditional share purchase agreement dated 30 July 2007<br />
made between the Trustee, the Vendor and the Guaran<strong>to</strong>r in<br />
connection with the acquisition of the Vendor’s shareholding in<br />
Comina<br />
Shareholders : Freyland, Comina and RBC Dexia Trust Services Singapore<br />
Limited (in its capacity as trustee for K-<strong>REIT</strong> Asia)<br />
48
Shareholders’ Agreement : The shareholders’ agreement dated 28 March 2001 made<br />
between Freyland, Comina, Boulevard, Hongkong Land<br />
International, CKH China Enterprises Limited, Keppel Land<br />
Properties and ORQPL governing the rights and duties<br />
between Freyland, Comina and Boulevard as shareholders of<br />
ORQPL<br />
SIC : Securities Industry Council<br />
South Tower : The 29-s<strong>to</strong>rey office <strong>to</strong>wer with approximately 565,659 sq ft of<br />
Net Lettable Area of One Raffles Quay<br />
Special Purpose Vehicle : Shall have the meaning defined in the Trust Deed<br />
sq ft : Square foot/feet<br />
sq m : Square metre(s)<br />
Substantial Unitholder : A person with an interest in one or more Units constituting not<br />
less than 5.0% of all Units in issue<br />
Sunshine : Sunshine Assets Limited<br />
<strong>Suntec</strong> City : <strong>Suntec</strong> City, a commercial development comprising <strong>Suntec</strong><br />
City Mall, five office <strong>to</strong>wers and the <strong>Suntec</strong> Singapore<br />
International Convention and Exhibition Centre<br />
<strong>Suntec</strong> City Mall : A three s<strong>to</strong>rey linear shaped mall and an eight s<strong>to</strong>rey shopping<br />
podium within <strong>Suntec</strong> City comprising 95 strata lots, all of<br />
which are owned by <strong>Suntec</strong> <strong>REIT</strong><br />
<strong>Suntec</strong> City Office Towers : The strata lots in the five office <strong>to</strong>wers in <strong>Suntec</strong> City which are<br />
owned by <strong>Suntec</strong> <strong>REIT</strong>, comprising:<br />
(a)<br />
(b)<br />
(b)<br />
(d)<br />
(e)<br />
10 strata lots in <strong>Suntec</strong> Tower One;<br />
3 strata lots in <strong>Suntec</strong> Tower Two;<br />
76 strata lots in <strong>Suntec</strong> Tower Three;<br />
all the 40 strata lots in <strong>Suntec</strong> Tower Four; and<br />
all the 15 strata lots in <strong>Suntec</strong> Tower Five<br />
<strong>Suntec</strong> <strong>REIT</strong> : <strong>Suntec</strong> Real Estate Investment Trust, a unit trust constituted<br />
on 1 November 2004 under the laws of the Republic of<br />
Singapore<br />
Supplemental Agreement : The supplemental agreement <strong>to</strong> the Share Purchase<br />
Agreement entered in<strong>to</strong> between the Trustee and the Vendor<br />
Takeover Code : The Singapore Code on Take-overs and Mergers issued by the<br />
MAS pursuant <strong>to</strong> Section 139(2) of the Securities and Futures<br />
Act, Chapter 289 of Singapore<br />
Total Acquisition Cost : Shall have the meaning ascribed <strong>to</strong> it in Clause 3.4<br />
49
Trading Day : A day when the SGX-ST is open for dealing business, provided<br />
that if no closing price is reported in respect of the relevant<br />
Units on the SGX-ST for one or more consecutive dealing days<br />
such day or days will be disregarded in any relevant<br />
calculation and shall be deemed not have existed when<br />
ascertaining any period of dealing days<br />
Trust Deed : The trust deed dated 1 November 2004 constituting <strong>Suntec</strong><br />
<strong>REIT</strong>, as supplemented by a first supplemental trust deed<br />
dated 25 January 2006, a second supplement trust deed dated<br />
20 April 2006 and a third supplement trust deed dated 30 July<br />
2007 made between the Trustee and the Manager, as<br />
amended, varied, or supplemented from time <strong>to</strong> time<br />
Trustee : HSBC Institutional Trust Services (Singapore) Limited, as<br />
trustee of <strong>Suntec</strong> <strong>REIT</strong><br />
Unit : A unit representing an undivided interest in <strong>Suntec</strong> <strong>REIT</strong><br />
Unitholder : A Deposi<strong>to</strong>r whose securities account with CDP is credited<br />
with Unit(s)<br />
Valuation Certificates : The valuation certificates on One Raffles Quay as attached as<br />
Appendix E of this <strong>Circular</strong><br />
Valuation of Real Estate<br />
Supplement<br />
: The proposed supplement <strong>to</strong> the Trust Deed in connection with<br />
clarifying that the method of valuation of Real Estate should be<br />
the same whether it is held indirectly through Special Purpose<br />
Vehicles or held directly by <strong>Suntec</strong> <strong>REIT</strong><br />
Vendor : Cavell Limited<br />
VWAP : The volume weighted average price per Unit for all trades on<br />
the SGX-ST, in the ordinary course of trading<br />
The terms “Deposi<strong>to</strong>r” and “Deposi<strong>to</strong>ry Register” shall have the meanings ascribed <strong>to</strong> them<br />
respectively in Section 130A of the Companies Act, Chapter 50 of Singapore.<br />
Words importing the singular shall, where applicable, include the plural and vice versa and words<br />
importing the masculine gender shall, where applicable, include the feminine and neuter genders.<br />
References <strong>to</strong> persons shall include corporations.<br />
Any reference in this <strong>Circular</strong> <strong>to</strong> any enactment is a reference <strong>to</strong> that enactment for the time being<br />
amended or re-enacted.<br />
Any reference <strong>to</strong> a time of day in this <strong>Circular</strong> shall be a reference <strong>to</strong> Singapore time unless otherwise<br />
stated.<br />
Any discrepancies in the tables, charts or diagrams between the listed figures and <strong>to</strong>tals thereof in this<br />
<strong>Circular</strong> are due <strong>to</strong> rounding. Where applicable, figures and percentages are rounded off <strong>to</strong> one decimal<br />
place, figures expressed in ‘000 are rounded off <strong>to</strong> the nearest thousand and measurements in square<br />
metres (“sq m”) are converted <strong>to</strong> square feet (“sq ft”) and vice versa based on the conversion rate of<br />
1 sq m = 10.764 sq ft.<br />
50
APPENDIX A<br />
ONE RAFFLES QUAY AND THE EXISTING PROPERTIES<br />
The following sections set out selected information in respect of One Raffles Quay and the Existing<br />
Properties. This <strong>Circular</strong> contains certain information with respect <strong>to</strong> the trade sec<strong>to</strong>rs of the tenants of<br />
One Raffles Quay and the Existing Properties. The Manager has determined the trade sec<strong>to</strong>rs in which<br />
these tenants are primarily involved based upon the Manager’s general understanding of the business<br />
activities conducted by these tenants in the premises occupied by them. The Manager’s knowledge of<br />
the business activities of these tenants is necessarily limited and these tenants may conduct business<br />
activities that are in addition <strong>to</strong>, or different from, those shown herein.<br />
1. ONE RAFFLES QUAY<br />
One Raffles Quay is a prime landmark commercial development located in Singapore’s CBD<br />
comprising a 50-s<strong>to</strong>rey office <strong>to</strong>wer (the “North Tower”), a 29-s<strong>to</strong>rey office <strong>to</strong>wer (the “South<br />
Tower”), an underground link <strong>to</strong> the Raffles Place MRT station, a sheltered plaza serving as a<br />
drop-off point and a hub car park with 713 car park lots.<br />
With its underground link <strong>to</strong> the Raffles Place MRT station, One Raffles Quay enjoys excellent<br />
connectivity and accessibility along the North-South and East-West MRT lines. In addition, One<br />
Raffles Quay is also well-positioned <strong>to</strong> capitalise on the future growth of the Marina Bay area,<br />
including the proposed Integrated Resort, Marina Business and Finance Centre and other<br />
commercial and recreational developments in the area, given its proximity <strong>to</strong> Marina Bay.<br />
One Raffles Quay has a large and diversified tenant base comprising 26 office tenants and five<br />
retail tenants as well as a Committed Occupancy of 100.0% for the North Tower and the South<br />
Tower (as at 30 June 2007). The major office tenants include ABN AMRO Asia Pacific Pte Ltd,<br />
Barclays PLC, Credit Suisse (Singapore) Limited, Deutsche Bank Aktiengesellschaft, Ernst &<br />
Young Services Pte Ltd and UBS AG.<br />
Given its prime location, excellent accessibility and quality asset, the Manager believes that the<br />
Acquisition provides <strong>Suntec</strong> <strong>REIT</strong> with a value-adding opportunity <strong>to</strong> generate sustainable growth<br />
for <strong>Unitholders</strong>.<br />
The table below sets out a summary of selected information on One Raffles Quay as at 30 June<br />
2007:<br />
Gross Lettable Area (sq ft) 1,339,407<br />
Net Lettable Area (sq ft) 1,335,576<br />
Number of Tenants (1) 31<br />
Car Park Lots (1) 713<br />
Title Leasehold estate of 99 years commencing from 13 June 2001<br />
Temporary Occupation Permits 24 April 2006 (South Tower) and 26 Oc<strong>to</strong>ber 2006 (North Tower)<br />
Valuation (S$ million) (2) 941.5<br />
Committed Occupancy (%) 100.0<br />
Notes:<br />
(1) Reflects a 100% interest in One Raffles Quay.<br />
(2) Reflects a one-third interest in One Raffles Quay.<br />
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Based on ORQ Interest<br />
Forecast Year<br />
(financial year ending 30 September 2008)<br />
(S$ million)<br />
Net Property Income (1) 39.6<br />
Note:<br />
(1) Includes dividend income, interest income and rental income support net of all taxes.<br />
1.1 Lease Expiry Profile for One Raffles Quay (as at 30 June 2007)<br />
The chart below illustrates the committed lease expiry profile of One Raffles Quay by Net Lettable<br />
Area.<br />
Year<br />
% of Total Net Lettable Area<br />
2007–2010 4.3<br />
2011 and beyond 95.7<br />
1.2 Trade Sec<strong>to</strong>r Analysis for One Raffles Quay (as at 30 June 2007)<br />
The chart below provides a breakdown by Net Leased Area of the different trade sec<strong>to</strong>rs<br />
represented in One Raffles Quay.<br />
Real Estate and Property<br />
Services,1.4%<br />
Trading,1.9%<br />
Others, 3.9%<br />
Banking, Insurance<br />
and Financial Services, 92.8%<br />
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2. EXISTING PROPERTIES<br />
The table below sets out selected information about the Existing Properties as at 30 June 2007.<br />
<strong>Suntec</strong> City Mall<br />
and <strong>Suntec</strong> City<br />
Office Towers Park Mall Chijmes<br />
Land Area (sq ft) 1,258,586 83,099 154,063<br />
Net Lettable Area (sq ft) 2,070,375 270,191 79,977<br />
Number of Tenants 470 120 29<br />
Parking Lots 3,073 (1) 346 97<br />
Title<br />
Purchase Price<br />
(S$ million)<br />
Valuation (S$ million)<br />
(as at 31 March 2007)<br />
Net Property Income<br />
(S$ million)<br />
Leasehold tenure<br />
of 99 years<br />
commencing from<br />
1 March 1989<br />
Leasehold tenure<br />
of 99 years<br />
commencing from<br />
2 June 1969<br />
Leasehold tenure<br />
of 99 years<br />
commencing from<br />
13 May 1991<br />
2,107 230 128<br />
3,470 266 135<br />
Forecast Year 135.7 12.6 7.0<br />
Committed Occupancy (%) 98.5 99.3 96.7<br />
Note:<br />
(1) All of the parking lots at <strong>Suntec</strong> City Mall and <strong>Suntec</strong> City Office Towers are owned by Management Corporation<br />
Strata Title Plan No. 2197, the management corporation of <strong>Suntec</strong> City established under Part IV of the Land Titles<br />
(Strata) Act (the “MCST”). The purchase price, valuation and income statistics do not relate in any manner <strong>to</strong> these<br />
parking lots.<br />
2.1 Lease Expiry Profile for the Existing Properties as at 30 June 2007<br />
The table below illustrates the lease expiry profile of the Existing Properties by Net Lettable Area.<br />
Year<br />
Expiry (as % of Total Net Lettable Area)<br />
2007 4.7%<br />
2008 29.8%<br />
2009 33.8%<br />
2010 26.0%<br />
2011 & Beyond 5.7%<br />
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2.2 Trade Sec<strong>to</strong>r Analysis for Existing Properties as at 30 June 2007<br />
The chart below provides a breakdown by Net Leased Area of the different trade sec<strong>to</strong>rs<br />
represented in the Existing Properties.<br />
Hypermarket, 6.0%<br />
Homeware and Home<br />
Furnishings, 4.3%<br />
Gifts and Speciality/Books/<br />
Hobbies/Toys, 1.9%<br />
Services/Educational, 3.3%<br />
Leisure and Entertainment/<br />
Sports and Fitness, 6.0%<br />
Real Estate and Property<br />
Services, 2.3%<br />
Trading, 6.9%<br />
Manufacturing, 1.5%<br />
Shipping and Freight<br />
Forwarding, 2.6%<br />
Others, 6.8%<br />
Government and<br />
Government-Linked Offices,<br />
5.6%<br />
Food and Beverage, 9.6%<br />
Legal, 1.1%<br />
Fashion, 5.4%<br />
Consultancy/Services,<br />
2.4%<br />
Electronics/Technology,<br />
1.6%<br />
Banking, Insurance and<br />
Financial Services, 15.4%<br />
Institutions/Schools, 1.8%<br />
Technology, Services and<br />
Consultancy, 15.5%<br />
3. ENLARGED PORTFOLIO (COMPRISING ONE RAFFLES QUAY AND THE EXISTING<br />
PROPERTIES)<br />
The table below sets out selected information about the Enlarged Portfolio.<br />
ORQ Interest Existing Properties Enlarged Portfolio<br />
Net Lettable Area (sq ft) 445,192 2,420,543 2,865,735<br />
Number of tenants (1) 31 619 650<br />
Parking Lots (1) 713 3,516 (2) 4,229<br />
Valuation (S$ million) 941.5 (3) 3,871 4,812.5<br />
Committed Occupancy (%) 100.0 98.5 98.7<br />
Forecast Year (financial year ending 30 September 2008)<br />
(S$ million)<br />
Net Property Income (4) 39.6 155.3 194.9<br />
Notes:<br />
(1) Reflects 100% interest in One Raffles Quay.<br />
(2) This figure includes the 3,073 parking lots at <strong>Suntec</strong> City Mall and <strong>Suntec</strong> City Office Towers, which are owned by<br />
MCST. The purchase price, valuation and income statistics do not relate in any manner <strong>to</strong> these parking lots.<br />
(3) Reflects a one-third interest in One Raffles Quay.<br />
(4) Includes dividend income, interest income and rental income support net of all taxes.<br />
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3.1 Lease Expiry Profile for the Enlarged Portfolio (as at 30 June 2007)<br />
The table below illustrates the committed lease expiry profile of the Existing Properties and One<br />
Raffles Quay by Net Lettable Area.<br />
Year<br />
Expiry (as % of Total Net Lettable Area)<br />
2007 3.0%<br />
2008 19.5%<br />
2009 21.8%<br />
2010 18.0%<br />
2011 & Beyond 37.7%<br />
3.2 Trade Sec<strong>to</strong>r Analysis for Enlarged Portfolio (as at 30 June 2007)<br />
The chart below provides a breakdown by Net Leased Area of the different trade sec<strong>to</strong>rs<br />
represented in the Existing Properties and the ORQ Interest.<br />
Leisure and Entertainment/<br />
Sports and Fitness, 3.8%<br />
Homeware and Home<br />
Furnishings, 2.7%<br />
Gifts and Speciality/Books/<br />
Hobbies/Toys, 1.2%<br />
Food and Beverage, 6.2%<br />
Legal, 1.3%<br />
Fashion, 3.5%<br />
Services/Educational, 2.1%<br />
Hypermarket,<br />
3.8%<br />
Real Estate and Property<br />
Services, 1.9%<br />
Trading, 4.4%<br />
Manufacturing, 1.0%<br />
Shipping and Freight<br />
Forwarding, 1.7%<br />
Others, 4.9%<br />
Government and<br />
Government-Linked Offices,<br />
3.6%<br />
Consultanc /Services,<br />
2.0%<br />
Electronics/Technology,<br />
1.0%<br />
Technology, Services and<br />
Consultancy, 9.9%<br />
Institutions/Schools, 1.0%<br />
Banking, Insurance and<br />
Financial Services, 44.0%<br />
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APPENDIX B<br />
PRINCIPAL TERMS OF THE CONVERTIBLE BONDS<br />
By approving the Issue of Convertible Bonds, <strong>Unitholders</strong> will be deemed <strong>to</strong> have also approved<br />
the principal terms of the Convertible Bonds as set out below, <strong>to</strong>gether with the terms which are<br />
incidental or ancillary <strong>to</strong> such terms.<br />
Issuer : <strong>Suntec</strong> <strong>REIT</strong><br />
Convertible Bonds : Up <strong>to</strong> S$450,000,000 aggregate principal amount of<br />
Convertible Bonds convertible in<strong>to</strong> Units.<br />
Issue Price : The Convertible Bonds will be issued at 100.0% of their<br />
aggregate principal amount.<br />
Method of Issue : Placement <strong>to</strong> institutional and other inves<strong>to</strong>rs pursuant <strong>to</strong><br />
sections 274 and 275 of the Securities and Futures Act,<br />
Chapter 289 of Singapore and in offshore transactions<br />
pursuant <strong>to</strong> Regulation S under the U.S. Securities Act.<br />
Interest : The Convertible Bonds will bear interest from the Issue Date at<br />
the rate of 2.0% – 4.0% per annum, payable semi-annually in<br />
arrears.<br />
Yield-<strong>to</strong>-Put/Maturity : 2.0% – 4.0% per annum, calculated on a semi-annual basis.<br />
Maturity Date : Up <strong>to</strong> 7 years from the date of issue of the Convertible Bonds.<br />
Status of the Convertible<br />
Bonds<br />
: The Convertible Bonds will constitute direct, unsubordinated,<br />
unconditional and unsecured obligations of the Issuer and will<br />
at all times rank pari passu and without any preference or<br />
priority among themselves. The payment obligations of the<br />
Issuer under the Convertible Bonds shall, save for such<br />
exceptions as may be provided by manda<strong>to</strong>ry provisions of<br />
applicable law, at all times rank at least equally with all of its<br />
other present and future direct, unsubordinated, unconditional<br />
and unsecured obligations other than subordinated obligations<br />
and priorities created by law.<br />
Conversion Period : Subject <strong>to</strong> certain conditions, the Convertible Bonds are<br />
convertible at any time on and after 41 days after the closing<br />
date <strong>to</strong> 10th day before Maturity Date or, if the Convertible<br />
Bonds shall have been called for redemption before a date <strong>to</strong><br />
be fixed, then up <strong>to</strong> a date no later than seven business days 1<br />
(at the place where the certificate evidencing such Bonds is<br />
deposited for conversion) prior <strong>to</strong> the date fixed for redemption<br />
thereof.<br />
Conversion Premium : 25% – 50% premium over the closing Unit price on the last<br />
business day prior <strong>to</strong> launch of the Issue of Convertible Bonds.<br />
1<br />
The term “business day” means, in relation <strong>to</strong> any place, a day (other than a Saturday or Sunday) on which commercial<br />
banks are open for general business in such place.<br />
B-1
Conversion Price : For illustrative purposes only, between S$2.33 and S$2.79,<br />
based on S$1.86, being the closing Unit price on the last<br />
business day prior <strong>to</strong> the Latest Practicable Date and<br />
assuming the Conversion Premium as described above.<br />
In lieu of delivery of some or all of the Conversion Units<br />
required <strong>to</strong> be delivered upon the exercise of a conversion<br />
right, the Issuer may elect <strong>to</strong> pay a cash settlement amount in<br />
respect of all or any portion of a holder’s Convertible Bonds<br />
deposited for conversion. The cash settlement amount is the<br />
product of (a) the number of Conversion Units in respect of<br />
which the Issuer has elected the cash settlement option and<br />
(b) the arithmetic average of the volume weighted average<br />
price of the Units for each day during the ten (10) Trading Days<br />
immediately following and excluding the date on which the<br />
Issuer elects the cash settlement option.<br />
Adjustments <strong>to</strong> the<br />
Conversion Price<br />
: The Conversion Price will be subject <strong>to</strong> adjustment for,<br />
amongst other things, consolidation or subdivision,<br />
capitalisation of profits or reserves, excess distribution, rights<br />
issues of units or options over units, rights issues of other<br />
securities, issues at less than current market price and<br />
modification of rights of conversion.<br />
Dividend Protection : The Conversion Price will be adjusted for Distributions in<br />
excess of a certain threshold <strong>to</strong> be decided prior <strong>to</strong> launch of<br />
the Convertible Bonds.<br />
Redemption of the<br />
Convertible Bonds<br />
: Unless previously redeemed, converted or purchased and<br />
cancelled, the Issuer will redeem each Convertible Bond at<br />
100% of its principal amount on the Maturity Date.<br />
Early Redemption Amount : An amount equal <strong>to</strong> 100% of the principal amount of the<br />
Convertible Bonds being redeemed.<br />
Issuer Call Option : Issuer may redeem some or all of the Convertible Bonds for<br />
the Early Redemption Amount plus accrued interest, on or<br />
after the first, second, third, fourth, fifth or sixth anniversary of<br />
the Convertible Bonds’ issue date, which is <strong>to</strong> be agreed, if the<br />
Closing Price of the Units is at least 130% of the Early<br />
Redemption Amount divided by the Conversion Ratio (as<br />
specified under the terms of the Convertible Bonds) for a<br />
period of 20 consecutive Trading Days falling within the period<br />
of 30 consecutive Trading Days immediately preceding the<br />
date of the notice of redemption.<br />
Inves<strong>to</strong>r Put Option : May be exercised on a date which is <strong>to</strong> be agreed, <strong>to</strong> be within<br />
(and including) year 1 <strong>to</strong> 6 during the life of the Convertible<br />
Bonds, at the Early Redemption Amount of the Convertible<br />
Bonds plus interest accrued <strong>to</strong> the date of redemption, <strong>to</strong> be<br />
decided prior <strong>to</strong> launch of the Convertible Bonds.<br />
Transfer of the Convertible<br />
Bonds<br />
: The Convertible Bonds will be traded on the SGX-ST in a<br />
minimum board lot size of S$250,000 for so long as the<br />
Convertible Bonds are listed on the SGX-ST.<br />
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Listing : Application will be made <strong>to</strong> the SGX-ST for permission <strong>to</strong> list<br />
the Convertible Bonds on the Main Board of the SGX-ST.<br />
Governing Law : The Convertible Bonds will be governed by, and construed in<br />
accordance with, English law.<br />
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APPENDIX C<br />
PROFIT FORECAST<br />
Statements contained in this section which are not his<strong>to</strong>rical facts may be forward-looking statements.<br />
Such statements are based on the assumptions set forth in this section and are subject <strong>to</strong> certain risks<br />
and uncertainties which could cause actual results <strong>to</strong> differ materially from those forecast. Under no<br />
circumstances should the inclusion of such information herein be regarded as a representation,<br />
warranty or prediction with respect <strong>to</strong> the accuracy of the underlying assumptions by the Manager or<br />
any other person nor that these results will be achieved or are likely <strong>to</strong> be achieved.<br />
The following tables set out <strong>Suntec</strong> <strong>REIT</strong>’s forecast consolidated statements of net income for the<br />
Forecast Year (financial year ending 30 September 2008). The forecast has been examined by the<br />
Independent Accountants and should be read <strong>to</strong>gether with their report contained in Appendix D of this<br />
<strong>Circular</strong> as well as the assumptions and sensitivity analysis set out below.<br />
The Profit Forecast has been prepared assuming a draw down of S$420.9 million under the Debt<br />
Financing, an issue of S$450.0 million of Convertible Bonds and an issue of S$94.1 million of<br />
Consideration Units. The forecast consolidated statement of <strong>to</strong>tal return and distribution per unit will<br />
vary depending on the amount of Debt Financing drawn down and Convertible Bonds issued.<br />
Forecast Consolidated Statement of Total Return<br />
Existing<br />
Properties (1)<br />
FY2008<br />
S$(’000)<br />
Enlarged<br />
Portfolio (2)<br />
FY2008<br />
S$(’000)<br />
Gross Revenue 212,064 212,064<br />
Property expenses (56,809) (56,809)<br />
Net property income 155,255 155,255<br />
Other income (3) — 27,741<br />
Finance income 10,950 23,795<br />
Finance expenses (41,480) (75,753)<br />
Net financing costs (30,530) (51,958)<br />
Asset management fees (18,829) (23,755)<br />
Trust expenses (2,282) (2,446)<br />
Net income before share of profit in jointly controlled entity 103,614 104,837<br />
Share of profit of jointly controlled entity — 4,051<br />
Net income before tax 103,614 108,888<br />
Income tax expense — (4,993)<br />
Total return for the year 103,614 103,895<br />
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Existing<br />
Properties (1)<br />
FY2008<br />
S$(’000)<br />
Enlarged<br />
Portfolio (2)<br />
FY2008<br />
S$(’000)<br />
Reconciliation from <strong>to</strong>tal return for the year <strong>to</strong> income available for distribution<br />
Net income before share of profit in jointly controlled entity 103,614 104,837<br />
Net tax adjustments (4) 18,917 29,046<br />
Taxable income 122,531 133,883<br />
Less: Income tax expense — (4,993)<br />
Add: Dividend income (5) — 4,051<br />
Income available for distribution 122,531 132,941<br />
Total issued and issuable units (’000) (excluding Deferred Units) (6) 1,472,456 1,530,263<br />
Distribution per unit based on the <strong>to</strong>tal number of units entitled <strong>to</strong><br />
distribution (cents) (excluding Deferred Units) (7) 8.32 8.69<br />
Total issued and issuable units (’000) (including Deferred Units) (8) 1,644,958 1,702,765<br />
Distribution per unit based on the <strong>to</strong>tal number of units entitled <strong>to</strong><br />
distribution (cents) (including Deferred Units) (9) 7.45 7.81<br />
Notes:<br />
(1) This relates <strong>to</strong> the forecast results of the Existing Properties for FY2008.<br />
(2) This relates <strong>to</strong> the forecast results of the Enlarged Portfolio for FY2008 assuming the completion of the Acquisition on 1<br />
Oc<strong>to</strong>ber 2007.<br />
(3) This relates <strong>to</strong> the income support derived from the Deed of Income Support from the Vendor.<br />
(4) These comprise mainly asset management fees payable in units, amortization of transaction costs, non-deductible interest<br />
expense, trustee fees and fit-out subsidies granted <strong>to</strong> tenants.<br />
(5) This relates <strong>to</strong> dividend income <strong>to</strong> be received by <strong>Suntec</strong> <strong>REIT</strong> from Comina.<br />
(6) This includes of the Manager’s forecast of Units <strong>to</strong> be issued as partial satisfaction of asset management fee incurred for<br />
FY2008 and the first instalment of the Deferred Units assumed <strong>to</strong> be issued in June 2008 (i.e. the date falling 42 months<br />
after 9 December 2004, being the completion of the sale and purchase of the initial portfolio of properties) and the rest<br />
semi-annually thereafter.<br />
(7) This is based on income available for distribution over <strong>to</strong>tal issued and issuable units (excluding the remaining balance of<br />
five equal instalments of the Deferred Units) as at 30 September 2008.<br />
(8) Deferred Units, comprising the remaining balance of five instalments, will be issued <strong>to</strong> SCDPL in satisfaction of deferred<br />
payment consideration for the purchase of the properties. The Deferred Units will be issued in six equal instalments, with<br />
the first instalment assumed <strong>to</strong> be issued in June 2008 (i.e. the date falling 42 months after 9 December 2004, being the<br />
completion of the sale and purchase of the initial portfolio of properties) and the rest semi-annually thereafter.<br />
(9) This is based on income available for distribution over <strong>to</strong>tal issued and issuable units (including the remaining balance of<br />
the five equal instalments of the Deferred Units) as at 30 September 2008.<br />
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Assumptions — Existing Properties and Enlarged Portfolio<br />
The major assumptions made in preparing the forecast consolidated statement of <strong>to</strong>tal return and<br />
distribution statement for the Existing Properties and the Enlarged Portfolio are set out below. The<br />
Manager considers these assumptions <strong>to</strong> be appropriate and reasonable as at the date of this <strong>Circular</strong>.<br />
(I)<br />
Gross Revenue<br />
Gross Revenue comprises (i) Gross Rent; and (ii) other income earned from the Existing<br />
Properties. A summary of the assumptions which have been used in calculating the Gross<br />
Revenue is set out below:<br />
(a)<br />
Gross Rent<br />
Gross Rent consists of base rental income (after any rent rebates, where applicable, but<br />
excluding turnover rent), service charge and, for tenants of <strong>Suntec</strong> City Mall, promotion fund<br />
contributions. Rents paid under <strong>Suntec</strong> <strong>REIT</strong>’s lease agreements are generally fixed for the<br />
tenure of the lease period.<br />
(i)<br />
Base rental income<br />
The base rental income is based on the rents payable by the tenants under their leases<br />
(after rent rebates, where applicable, but excluding turnover rent). For the Existing<br />
Properties, the Manager has forecast that the base rental income will be S$170.7 million<br />
for the Forecast Year.<br />
(ii)<br />
Service charge and promotion fund contributions<br />
The service charge is a contribution paid by tenants <strong>to</strong>wards the Property Expenses of the<br />
Existing Properties, while the promotion fund contribution is a contribution only by the<br />
tenants of <strong>Suntec</strong> City Mall <strong>to</strong>wards the advertising and promotional expenditure of <strong>Suntec</strong><br />
City Mall <strong>to</strong> attract shoppers. For the Existing Properties, the Manager has forecast that the<br />
<strong>to</strong>tal service charge and promotion fund contribution will be S$32.8 million for the Forecast<br />
Year.<br />
The percentage of forecast Gross Rent (excluding turnover rent) attributable <strong>to</strong> committed<br />
leases (including letters of offer which are <strong>to</strong> be followed up with tenancy agreements <strong>to</strong> be<br />
signed by parties) for the Existing Properties as at 31 March 2007, is as follows:<br />
Forecast Year<br />
(financial year ending<br />
30 September 2008)<br />
Gross Rent attributable <strong>to</strong> committed leases (as a percentage<br />
of <strong>to</strong>tal Gross Rent, excluding turnover rent)<br />
63.5%<br />
In order <strong>to</strong> forecast the Gross Rent, the Manager has, in the first instance, used rent<br />
payable under the committed leases. For the Existing Properties, the Manager has forecast<br />
that the Gross Rent will be S$203.5 million for the Forecast Year.<br />
Following the expiry of a committed lease during the period from 1 Oc<strong>to</strong>ber 2007 <strong>to</strong> 30<br />
September 2008, the Manager has used the following process <strong>to</strong> forecast the Gross Rent<br />
for the period following such expiry:<br />
• The Manager has assessed the market rent for each portion of lettable area as at 31<br />
March 2007. The market rent is the rent which the Manager believes could be<br />
achieved if each lease was renegotiated as at 31 March 2007 and is estimated with<br />
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eference <strong>to</strong> (i) Gross Rent payable pursuant <strong>to</strong> comparable leases for tenancies that<br />
have recently been negotiated, (ii) the effect of competing retail and office properties,<br />
(iii) assumed tenant retention rates on lease expiry, (iv) likely market conditions, (v)<br />
inflation levels and (vi) tenant demand levels.<br />
• If a committed lease expires in the financial year ending 30 September 2008, the<br />
Manager has assumed that the rental rates payable under the new lease (or lease<br />
renewal) will be the market rent, increased by the projected growth rate in accordance<br />
with the methodology set out in paragraph (c) below, or the actual rent committed (if<br />
the lease agreement or letter of offer has been entered in<strong>to</strong>).<br />
(b)<br />
Other Income<br />
Other income includes income earned from the operations of the car park at Park Mall, income<br />
from existing licence agreements, income from air-conditioning, water and electricity charges <strong>to</strong><br />
tenants, rental of atrium space, turnover rent, if any, and other miscellaneous income.<br />
The assessment of other income earned for the Forecast Year is based on existing agreements,<br />
current income collections and the Manager’s assessment of the other income <strong>to</strong> be generated<br />
by the Existing Properties. In order <strong>to</strong> project other income for the Forecast Year, the Manager<br />
has forecast that other income will be S$8.6 million, having taken in<strong>to</strong> consideration the his<strong>to</strong>rical<br />
trend of such income achieved.<br />
(c)<br />
Rental Growth Rates<br />
The table below summaries the rental growth rates assumed for the forecast for the Existing<br />
Properties. These growth assumptions reflect the Manager’s assessment of the rental growth<br />
rates, after having regard <strong>to</strong> (i) the estimated rate of consumer price inflation in Singapore; (ii)<br />
the outlook for the general economy including gross domestic product growth rates; (iii) the<br />
demand level for tenancies in the Existing Properties; and (iv) the outlook for retail sales in<br />
Singapore.<br />
The rental growth rates have been used <strong>to</strong> forecast the Gross Rent payable under the new<br />
leases (or lease renewals) signed in the Forecast Year. The rental growth rates set out below are<br />
annual compounded figures.<br />
Existing Properties<br />
Office<br />
Retail<br />
Forecast Year<br />
(financial year ending<br />
30 September 2008)<br />
18.4%<br />
9.7%<br />
(d)<br />
Lease renewals and vacancy allowances<br />
Office<br />
For leases expiring between 1 Oc<strong>to</strong>ber 2007 and 30 September 2008, where the actual vacancy<br />
periods are already known pursuant <strong>to</strong> commitments <strong>to</strong> lease which are in place as at 31 March<br />
2007, the actual vacancy periods have been used in the forecast.<br />
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For the other leases expiring between 1 Oc<strong>to</strong>ber 2007 and 30 September 2008, it has been<br />
assumed that leases representing 63.0% of the Gross Rent derived from such leases expiring<br />
in FY 2008 will be renewed and will not experience any vacancy period. It has been assumed<br />
that leases representing the remaining 37.0% of the Gross Rent (excluding turnover rent)<br />
derived from the other leases expiring between 1 Oc<strong>to</strong>ber 2007 and 30 September 2008 will<br />
experience an average three-month vacancy period before rent becomes payable under a new<br />
lease.<br />
Retail<br />
For leases expiring between 1 Oc<strong>to</strong>ber 2007 and 30 September 2008, where the actual vacancy<br />
periods are already known pursuant <strong>to</strong> commitments <strong>to</strong> lease which are in place as at 31 March<br />
2007, the actual vacancy periods have been used in the forecast.<br />
For the other leases expiring between 1 Oc<strong>to</strong>ber 2007 and 30 September 2008, it has been<br />
assumed that leases representing 84.0% of the Gross Rent derived from such leases expiring in<br />
FY 2008 will be renewed and will not experience any vacancy period. It has been assumed that<br />
leases representing the remaining 16.0% of the Gross Rent (excluding turnover rent) derived from<br />
the other leases expiring between 1 Oc<strong>to</strong>ber 2007 and 30 September 2008 will experience an<br />
average three-month vacancy period before rent becomes payable under a new lease.<br />
(II)<br />
(a)<br />
Property Expenses for the Existing Properties<br />
Maintenance Charges<br />
Since <strong>Suntec</strong> City Office Towers and <strong>Suntec</strong> City Mall are part of a strata-titled development, the<br />
Management Corporation is responsible for the repair, maintenance and operations of the<br />
common property of <strong>Suntec</strong> City, and the owners of the strata-titled units are required <strong>to</strong> make<br />
contributions <strong>to</strong> the Management Corporation based on their respective share values in <strong>Suntec</strong><br />
City.<br />
It has been assumed that the existing contribution rate of S$21.80 per share value per month<br />
payable by the subsidiary proprie<strong>to</strong>rs of <strong>Suntec</strong> City would be maintained for the Forecast Year.<br />
(b)<br />
Property Management Fee<br />
The Property Manager is entitled <strong>to</strong> the following fees in relation <strong>to</strong> the Existing Properties:<br />
Existing Properties<br />
<strong>Suntec</strong> City Office Towers/<br />
<strong>Suntec</strong> City Mall<br />
Property Management Fee Assumption<br />
(i)<br />
for Gross Revenue of up <strong>to</strong> S$100.0 million for the 12-month<br />
financial period, a fee of 2.5% per annum of their Gross<br />
Revenue;<br />
(ii)<br />
if the Gross Revenue exceeds S$100.0 million for a 12-month<br />
financial period, an additional fee of 3.0% per annum of the<br />
portion of the Gross Revenue above S$100.0 million and up <strong>to</strong><br />
S$130.0 million; and<br />
Park Mall<br />
Chijmes<br />
(iii)<br />
if the Gross Revenue exceeds S$130.0 million for a 12-month<br />
financial period, a further fee of 3.5% per annum of the portion<br />
of the Gross Revenue above S$130.0 million.<br />
2.5% per annum of Gross Revenue<br />
3.0% per annum of Net Property Income<br />
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(c)<br />
(d)<br />
Property Tax<br />
It has been assumed that property tax for the Existing Properties will be 10.0% of the base rental<br />
income, car park and other income.<br />
Other Property Expenses<br />
Other property expenses comprise advertisement and publicity expenses, landlord’s fitting out<br />
costs, legal costs relating <strong>to</strong> bad debt recovery and lease renewals, insurance for business<br />
interruption, reimbursable expenses <strong>to</strong> the Property Manager, bad and doubtful debts as well as<br />
other miscellaneous expenses. Advertisement and publicity expenses for <strong>Suntec</strong> City Mall are<br />
based on the promotional charges collected from retail tenants under their lease agreements.<br />
An individual assessment has been made for each of the Existing Properties for the Forecast<br />
Year on the basis of actual his<strong>to</strong>rical operating costs and the Manager’s plans.<br />
(III)<br />
Other income — Income Support<br />
The income support will be utilized <strong>to</strong> contribute any shortfall in One Raffles Quay’s income such<br />
that the expected Net Property Income yield after income tax based on the forecast is 4.2%<br />
during the period of 54 months commencing on the date of Completion.<br />
The amount of income support, net of taxes, for the Forecast Year is S$22.7 million for the period<br />
from 1 Oc<strong>to</strong>ber 2007 <strong>to</strong> 30 September 2008.<br />
The income support will be paid quarterly.<br />
(IV)<br />
Finance Income<br />
Finance income relates <strong>to</strong> interest income and the shareholder’s loan extended <strong>to</strong> ORQPL.<br />
The Manager has assumed that a shareholder’s loan of S$367 million will be extended <strong>to</strong><br />
ORQPL throughout the Forecast Year and that the shareholder’s loan will be subject <strong>to</strong> an<br />
interest rate of the 3-month swap offer rate plus a margin of 0.75%. An effective interest rate of<br />
3.50% per annum has been assumed for the Forecast Year.<br />
(V)<br />
Finance Expense<br />
<strong>Suntec</strong> <strong>REIT</strong> has a S$700.0 million term loan facility with Platinum AC1 Limited and a S$500.0<br />
million term loan facility with Sunshine Assets Limited, both of which are special purpose<br />
companies held by RBC Dexia Trust Services Singapore Limited and HSBC Institutional Trust<br />
Services (Singapore) Limited respectively.<br />
In addition, <strong>Suntec</strong> <strong>REIT</strong> has a S$50.0 million revolving credit facility with United Overseas Bank<br />
Limited and a S$150.0 million revolving credit facility from Citibank N.A., Singapore Branch.<br />
The Manager has also entered in<strong>to</strong> interest rate swaps of varying tenures <strong>to</strong> fix the interest rate.<br />
The Manager intends <strong>to</strong> finance the Acquisition by borrowing S$870.9 million in the form of a<br />
drawdown from Debt Financing and/or Convertible Bonds. The Manager has assumed that the<br />
Acquisition will be financed by a drawdown of S$420.9 million from the Debt Financing and an<br />
issue of S$450.0 million of Convertible Bonds. In addition, the Manager has assumed that the<br />
interest on the Debt Financing of S$420.9 million drawn down and the Convertible Bonds will be<br />
subject <strong>to</strong> an effective rate of 3.50% and 3.00% per annum (including margin) respectively. The<br />
assumed average interest rate for existing debt is 3.33% per annum (including margin) and that<br />
for the existing and new debt incurred for the Acquisition will be at an average interest rate of<br />
3.62% per annum (including margin) for the Forecast Year.<br />
C-6
For the Forecast Year, it has been assumed that there is no change in the fair value of the<br />
derivatives undertaken by <strong>Suntec</strong> <strong>REIT</strong>.<br />
(VI)<br />
Asset Management Fees<br />
Pursuant <strong>to</strong> the Trust Deed, the Manager is entitled <strong>to</strong> a Base Fee of 0.3% per annum of the<br />
value of its Deposited Property and a Performance Fee of 4.5% per annum of <strong>Suntec</strong> <strong>REIT</strong>’s Net<br />
Property Income.<br />
In line with market practice for listed real estate investment trusts in Singapore, the Manager has<br />
agreed <strong>to</strong> receive 80.0% of its management fees in the form of Units and the balance in cash.<br />
The portion of management fees payable in the form of Units shall be payable quarterly in<br />
arrears and the portion of management fees payable in cash shall be payable monthly in arrears.<br />
The number of units issued <strong>to</strong> the Manager will be based on the market price (as determined<br />
pursuant <strong>to</strong> the Trust Deed) of the Units at the time of payment. For the Forecast Year, units<br />
issued <strong>to</strong> the Manager in payment of the Management Fee are assumed <strong>to</strong> be issued at an issue<br />
price of S$1.85 per unit.<br />
(VII)<br />
Acquisition Fees<br />
An acquisition fee of 1.0% of the acquisition price is payable in units <strong>to</strong> the Manager in relation<br />
<strong>to</strong> the Acquisition.<br />
(VIII)<br />
Trust Expenses<br />
Trust expenses comprise <strong>Suntec</strong> <strong>REIT</strong>’s recurring operating expenses such as the Trustee’s<br />
fees, annual listing fees, registration fees, accounting, audit and tax advisory fees, valuation<br />
fees, costs associated with the preparation and distribution of reports <strong>to</strong> <strong>Unitholders</strong>, inves<strong>to</strong>r<br />
communication costs and other miscellaneous expenses.<br />
The Trustee’s fee is presently charged on a scaled basis of up <strong>to</strong> 0.03% per annum of the value<br />
of its Deposited Property, subject <strong>to</strong> a minimum of S$9,000 per month, excluding out of pocket<br />
expenses and GST. The fee is accrued daily and paid monthly in arrears in accordance with the<br />
Trust Deed.<br />
(IX)<br />
Share of Profit in Jointly Controlled Entity<br />
<strong>Suntec</strong> <strong>REIT</strong> will acquire an indirect one-third interest in One Raffles Quay through the<br />
acquisition of the entire share capital of Comina Investment Limited.<br />
The major assumptions made in preparing the forecast results of One Raffles Quay and dividend<br />
declared by One Raffles Quay <strong>to</strong> its shareholders for the Forecast Year are set out below. The<br />
Manager considers these assumptions <strong>to</strong> be appropriate and reasonable as at the date of this<br />
<strong>Circular</strong>.<br />
(A)<br />
Gross revenue<br />
Gross revenue comprises (i) gross rent earned from the leasing of offices in One Raffles Quay<br />
and (ii) car park income. A summary of the assumptions which have been used in calculating the<br />
gross revenue is set out below:<br />
(a)<br />
Gross rent<br />
Gross rent consists of base rental income (after any rent rebates, where applicable, but<br />
excluding turnover rent) and service charge payable by tenants.<br />
C-7
The percentage of projected gross rent (excluding turnover rent) attributable <strong>to</strong> committed<br />
leases (including letters of offer which are <strong>to</strong> be followed up with tenancy agreements <strong>to</strong> be<br />
signed by parties) for One Raffles Quay as at 31 March 2007, is as follows:<br />
Forecast Year<br />
(financial year ending<br />
30 September 2008)<br />
Gross rent attributable <strong>to</strong> committed leases<br />
(as a percentage of <strong>to</strong>tal gross rent, excluding turnover rent)<br />
95.7%<br />
In order <strong>to</strong> forecast the gross rent, the Manager has:<br />
(i)<br />
in the first instance, used rent payable under the committed leases; and<br />
(ii) assumed that there is no change in the gross rent for the period from 1 Oc<strong>to</strong>ber 2007<br />
<strong>to</strong> 30 September 2008 notwithstanding the expiry of a committed lease during this<br />
period.<br />
(b)<br />
Car Park Income<br />
Car park income includes income earned from the operations of the car park at One Raffles<br />
Quay. For the Forecast Year, the car park income is assumed <strong>to</strong> grow by 14.6% per annum<br />
from the full year 2007.<br />
(c)<br />
Lease renewals and vacancy allowances<br />
For leases expiring between 1 Oc<strong>to</strong>ber 2007 and 30 September 2008, it has been assumed<br />
that leases representing 100.0% of the gross rent derived from such leases expiring in FY<br />
2008 will not be renewed and will experience a one-month vacancy period before rent<br />
becomes payable under a new lease.<br />
(B)<br />
Property Operating Expenses<br />
(a)<br />
Maintenance Charges<br />
The Manager has assumed that approximately S$4.4 million will be incurred as<br />
maintenance charges for the Forecast Year, after taking in<strong>to</strong> consideration the actual<br />
his<strong>to</strong>rical operating costs and the service contracts which were committed as at 31 March<br />
2007.<br />
(b)<br />
One Raffles Quay Property Management Fee<br />
The property management fee is based on 3.0% per annum of gross revenue of One<br />
Raffles Quay.<br />
(c)<br />
Property Tax<br />
It has been assumed that property tax is 10.0% of the base rental income and car park<br />
income for One Raffles Quay and that no property tax rebate will be given by the tax<br />
authorities.<br />
C-8
(d)<br />
Other Property Expenses<br />
Other property expenses include operating expenses associated with the Property<br />
Manager, leasing commissions, marketing expenses, professional fees, depreciation and<br />
other miscellaneous expenses. In order <strong>to</strong> forecast the other property expenses for the<br />
Forecast Year, the Manager <strong>to</strong>ok in<strong>to</strong> consideration the actual his<strong>to</strong>rical operating costs<br />
and the Manager’s plans.<br />
(C)<br />
Borrowing Costs<br />
The joint owners of One Raffles Quay have each extended shareholders’ loan in proportion <strong>to</strong><br />
shareholding percentage for the funding requirements of One Raffles Quay.<br />
The Manager has assumed that a shareholder’s loan of S$367 million will be extended <strong>to</strong><br />
ORQPL by <strong>Suntec</strong> <strong>REIT</strong> throughout the Forecast Year and that the shareholder’s loan will be<br />
subject <strong>to</strong> an interest rate of 3-month swap offer rate plus a margin of 0.75%. An effective interest<br />
rate of 3.50% per annum has been assumed for the Forecast Year.<br />
(D)<br />
Capital Expenditure<br />
No allowance for projected capital expenditure has been included for the Forecast Year.<br />
(E)<br />
Consideration Units <strong>to</strong> be issued<br />
Consideration Units of 50,615,887 are assumed <strong>to</strong> be issued as partial consideration for the<br />
Acquisition. The issue price of the Consideration Units will be equal <strong>to</strong> the volume weighted<br />
average price per Unit for all trades on the SGX-ST, in the ordinary course of trading, for the last<br />
10 Market Days prior <strong>to</strong> (and excluding) the date of Completion. For illustrative purposes, the<br />
Manager has assumed the volume weighted average price for the last 10 Market Days prior <strong>to</strong><br />
(and excluding) the date of Completion <strong>to</strong> be S$1.86 for the purpose of calculating the number<br />
of Consideration Units.<br />
(F)<br />
Investment Properties<br />
The carrying value for One Raffles Quay is assumed <strong>to</strong> be S$941.5 million (based on the<br />
valuation as at 2 July 2007). It has been assumed that there is no change in the valuation of One<br />
Raffles Quay during the Forecast Year.<br />
(G)<br />
Other Assumptions<br />
The following additional assumptions have been made in preparing the forecast for One Raffles<br />
Quay for the Forecast Year:<br />
• that One Raffles Quay adopts significant accounting policies that are consistent with<br />
<strong>Suntec</strong> <strong>REIT</strong> (a summary of the significant accounting policies of <strong>Suntec</strong> <strong>REIT</strong> may be<br />
found in <strong>Suntec</strong> <strong>REIT</strong>’s annual report for the financial year ended 30 September 2006).<br />
• that there has been no significant change in applicable accounting policies or other<br />
financial reporting requirements that may have a material effect on the forecast results of<br />
One Raffles Quay and dividend declared by One Raffles Quay.<br />
• that there will be no change in taxation legislation or other applicable legislation.<br />
• that all leases and licences are enforceable and will be performed in accordance with their<br />
terms (with allowances for bad and doubtful debts); and<br />
• that 100.0% of the net profit of One Raffles Quay is declared as dividend by One Raffles<br />
Quay <strong>to</strong> its shareholders in the Forecast Year.<br />
C-9
(X)<br />
Income Tax Expense<br />
The forecast income tax expense comprises the tax of 18% on the income support of S$27.7<br />
million receivable by <strong>Suntec</strong> <strong>REIT</strong> for the Forecast Year.<br />
(XI)<br />
Capital Expenditure<br />
An allowance for projected capital expenditure on the Existing Properties has been included for<br />
the Forecast Year, based on the Manager’s budget for expansions and upgrading. It has been<br />
assumed that capital expenditure will be funded by available working capital and bank<br />
borrowings. Capital expenditure incurred is capitalized as part of the Deposited Property and has<br />
no impact on the <strong>to</strong>tal return statement and distribution other than affecting the interest incurred<br />
on the bank borrowings, the Management Fee that the Manager is entitled <strong>to</strong> and the Trustee’s<br />
fees.<br />
Forecast Year<br />
(financial year ending<br />
30 September 2008)<br />
(S$ million)<br />
Regular capital expenditure 1.2<br />
Expansion and upgrading 30.0<br />
Total capital expenditure 31.2<br />
(XII)<br />
Investment Properties<br />
For the Forecast Year, the Manager has made an assumption that the value of the Existing<br />
Properties is S$3.87 billion (based on the aggregate valuations as at 31 March 2007). It has<br />
been assumed that the property values will increase by the amount of capital expenditure<br />
projected in paragraph (XI) above during the Forecast Year. This assumption is made when<br />
estimating the property value and the value of the Deposited Property for the purposes of<br />
forecasting the base component of the asset management fees and Trustee’s fees respectively.<br />
(XIII)<br />
Accounting Standards<br />
The Manager has assumed no change in applicable accounting standards or other financial<br />
reporting requirements that may have a material effect on the forecast statement of <strong>to</strong>tal return<br />
and distribution statement. A summary of the significant accounting policies of <strong>Suntec</strong> <strong>REIT</strong> may<br />
be found in <strong>Suntec</strong> <strong>REIT</strong>’s annual report for the financial year ended 30 September 2006.<br />
(XIV) Other Assumptions<br />
The Manager has made the following additional assumptions in preparing the forecast for the<br />
Forecast Year:<br />
• that no adjustments are made <strong>to</strong> the Agreed Consideration of S$941.5 million on<br />
completion of the purchase pursuant <strong>to</strong> the terms of the Share Purchase Agreement;<br />
• that the property portfolio remains unchanged throughout the periods;<br />
• that no further capital will be raised during the periods;<br />
• that there will be no change in taxation legislation or other applicable legislation except for<br />
the corporate tax rate assumed at 18% as this is subject <strong>to</strong> the approval of Parliament;<br />
• that there will be no change <strong>to</strong> the Tax Ruling dated 15 June 2004 from the Inland Revenue<br />
Authority of Singapore, <strong>to</strong> give effect <strong>to</strong> the application of the provision of Section 43(2) of<br />
the Income Tax Act, Chapter 134 <strong>to</strong> impose tax on the holders of Units (“<strong>Unitholders</strong>”) on<br />
the Taxable Income of <strong>Suntec</strong> <strong>REIT</strong> instead of the Trust (the tax transparency treatment);<br />
C-10
• that all leases and licences are enforceable and will be performed in accordance with their<br />
terms (with allowances for bad and doubtful debts); and<br />
• that 100.0% of the income available for distribution will be distributed.<br />
Sensitivity Analysis<br />
Changes in interest rates for the straight debt financing impact the financing costs, and therefore the<br />
distributable income of <strong>Suntec</strong> <strong>REIT</strong>. The impact of variations in interest rate on DPU is set out below<br />
assuming S$450.0 million Convertible Bonds are issued, S$420.9 million is drawn down under the Debt<br />
Financing and S$94.1 million of Consideration Units are issued, <strong>to</strong> finance the Acquisition.<br />
(See the various Scenarios on pages 16, 17 and 18 for further details.)<br />
Interest Rate<br />
DPU (cents)<br />
(Excluding<br />
Deferred Units) (1)<br />
DPU (cents)<br />
(Including<br />
Deferred Units) (2)<br />
DPU Accretion<br />
(Excluding<br />
Deferred Units) (1)<br />
DPU Accretion<br />
(Including<br />
Deferred Units) (2)<br />
3.50% 8.69 7.81 4.4% 4.8%<br />
3.60% 8.66 7.78 4.1% 4.4%<br />
3.70% 8.63 7.76 3.7% 4.2%<br />
3.80% 8.60 7.73 3.4% 3.8%<br />
3.90% 8.58 7.71 3.1% 3.5%<br />
4.00% 8.55 7.68 2.8% 3.1%<br />
Notes:<br />
(1) The DPU computed has taken in<strong>to</strong> consideration the first instalment of the Deferred Units assumed <strong>to</strong> be issued in June<br />
2008 but has excluded the balance of the five instalments of the Deferred Units <strong>to</strong> be issued after 30 September 2008.<br />
(2) The DPU computed has taken in<strong>to</strong> consideration all the Deferred Units.<br />
(3) Assumes that the interest rate for <strong>Suntec</strong> <strong>REIT</strong>’s existing debt remains unchanged at 3.33% per annum.<br />
C-11
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APPENDIX D<br />
INDEPENDENT ACCOUNTANTS’ REPORT ON THE PROFIT FORECAST<br />
The Board of Direc<strong>to</strong>rs<br />
ARA Trust Management (<strong>Suntec</strong>) Limited<br />
(in its capacity as Manager of <strong>Suntec</strong> Real Estate Investment Trust)<br />
9 Temasek Boulevard<br />
#09-01 <strong>Suntec</strong> Tower Two<br />
Singapore 038989<br />
18 September 2007<br />
Dear Sirs<br />
Letter from the Independent Accountants on the Profit Forecast for the Year Ending 30<br />
September 2008<br />
This letter has been prepared for inclusion in the <strong>Circular</strong> (the “<strong>Circular</strong>”) <strong>to</strong> be issued in connection with<br />
the proposed debt financing and/or issue of convertible bonds in <strong>Suntec</strong> Real Estate Investment Trust<br />
(“<strong>Suntec</strong> <strong>REIT</strong>”) for the purpose of raising funds <strong>to</strong> part finance the proposed acquisition of a one-third<br />
interest in One Raffles Quay through the acquisition of the entire issued share capital of Comina<br />
Investment Limited.<br />
The direc<strong>to</strong>rs of ARA Trust Management (<strong>Suntec</strong>) Limited (the “Direc<strong>to</strong>rs”) are responsible for the<br />
preparation and presentation of the forecast consolidated statements of <strong>to</strong>tal return for the year ending<br />
30 September 2008 (the “Profit Forecast”) as set out on page C-1 of the <strong>Circular</strong>, which have been<br />
prepared on the basis of the assumptions set out on pages C-3 <strong>to</strong> C-11 of the <strong>Circular</strong> (the<br />
“Assumptions”).<br />
We have examined the Profit Forecast of <strong>Suntec</strong> <strong>REIT</strong> for the year ending 30 September 2008 as set<br />
out on page C-1 of the <strong>Circular</strong> in accordance with Singapore Standard on Assurance Engagements<br />
(“SSAE”) 3400 The Examination of Prospective Financial Information. The Direc<strong>to</strong>rs are solely<br />
responsible for the Profit Forecast including the Assumptions on which they are based.<br />
Profit Forecast<br />
Based on our examination of the evidence supporting the Assumptions, nothing has come <strong>to</strong> our<br />
attention which causes us <strong>to</strong> believe that the Assumptions do not provide a reasonable basis for the<br />
Profit Forecast. Further, in our opinion the Profit Forecast, so far as the accounting policies and<br />
calculations are concerned, is properly prepared on the basis of the Assumptions, is consistent with the<br />
accounting policies normally adopted by <strong>Suntec</strong> <strong>REIT</strong>, and is presented in accordance with the relevant<br />
presentation principles of Recommended Accounting Practice 7 Reporting Framework for Unit Trusts<br />
(but not all the required disclosures for the purpose of this letter) issued by the Institute of Certified<br />
Public Accountants of Singapore, which is the framework <strong>to</strong> be adopted by <strong>Suntec</strong> <strong>REIT</strong> in the<br />
preparation of its financial statements.<br />
D-1
Events and circumstances frequently do not occur as expected. Even if the events anticipated under<br />
the hypothetical assumptions occur, actual results are still likely <strong>to</strong> be different from the Profit Forecast<br />
since other anticipated events frequently do not occur as expected and the variation may be material.<br />
The actual results may therefore differ materially from that forecast. For the reasons set out above, we<br />
do not express any opinion as <strong>to</strong> the possibility of achievement of the Profit Forecast.<br />
Attention is drawn, in particular, <strong>to</strong> the sensitivity analysis of the Direc<strong>to</strong>rs’ Profit Forecast set out on<br />
page C-11 of the <strong>Circular</strong>.<br />
Yours faithfully<br />
KPMG<br />
Certified Public Accountants<br />
(Partner-in-charge: Lo Mun Wai)<br />
Singapore<br />
D-2
APPENDIX E<br />
VALUATION CERTIFICATES<br />
E-1
E-2
E-3
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E-4
APPENDIX F<br />
INDEPENDENT FINANCIAL ADVISER’S LETTER<br />
LETTER FROM ERNST & YOUNG CORPORATE FINANCE PTE LTD TO<br />
THE INDEPENDENT DIRECTORS OF ARA TRUST MANAGEMENT (SUNTEC)<br />
LIMITED IN RESPECT OF THE ACQUISITION<br />
18 September 2007<br />
The Independent Direc<strong>to</strong>rs of ARA Trust Management (<strong>Suntec</strong>) Limited (as manager of <strong>Suntec</strong><br />
Real Estate Investment Trust)<br />
Dear Sirs<br />
THE PROPOSED ACQUISITION BY SUNTEC REAL ESTATE INVESTMENT TRUST (“SUNTEC<br />
<strong>REIT</strong>”) OF ONE-THIRD INTEREST IN ONE RAFFLES QUAY THROUGH THE ACQUISITION OF<br />
THE ENTIRE ISSUED SHARE CAPITAL OF COMINA INVESTMENT LIMITED (“COMINA”) FROM<br />
CAVELL LIMITED (THE “VENDOR”) (THE “ACQUISITION”)<br />
For the purpose of this letter, capitalised terms not otherwise defined shall have the meaning given <strong>to</strong><br />
them in the circular dated 18 September 2007 <strong>to</strong> the unitholders of <strong>Suntec</strong> <strong>REIT</strong>.<br />
1. INTRODUCTION<br />
Ernst & Young Corporate Finance Pte Ltd (“EYCF”) has been appointed as the independent<br />
financial adviser <strong>to</strong> the direc<strong>to</strong>rs of ARA Trust Management (<strong>Suntec</strong>) Limited who are considered<br />
independent for the purposes of the Acquisition (the “Independent Direc<strong>to</strong>rs”). This letter has<br />
been prepared for inclusion in the circular <strong>to</strong> <strong>Unitholders</strong> dated 18 September 2007 in connection<br />
with, inter alia, the Acquisition (the “<strong>Circular</strong>”).<br />
On 30 July 2007, the board of direc<strong>to</strong>rs of ARA Trust Management (<strong>Suntec</strong>) Limited, as manager<br />
(the “Manager”) of <strong>Suntec</strong> <strong>REIT</strong>, announced that HSBC Institutional Trust Services (Singapore)<br />
Limited, as trustee of <strong>Suntec</strong> <strong>REIT</strong> (the “Trustee”), had entered in<strong>to</strong> a conditional share purchase<br />
agreement (the “Share Purchase Agreement”) with the Vendor and Cheung Kong Investment<br />
Company Limited as guaran<strong>to</strong>r of the Vendor’s obligations under the Share Purchase<br />
Agreement (“Cheung Kong” or the “Guaran<strong>to</strong>r”), for the acquisition by <strong>Suntec</strong> <strong>REIT</strong> of a one-third<br />
interest in One Raffles Quay through the acquisition of the entire issued share capital of Comina.<br />
Under the terms of the Share Purchase Agreement, the agreed consideration payable <strong>to</strong> the<br />
Vendor of S$941.5 million (the “Agreed Consideration”) shall be satisfied by the payment of the<br />
Share Consideration by the Trustee <strong>to</strong> the Vendor and the extending of the Purchaser Loan by<br />
the Trustee <strong>to</strong> One Raffles Quay Pte Ltd (“ORQPL”).<br />
Comina is a special purpose holding company holding one-third of the issued share capital of<br />
ORQPL, the developer and owner of One Raffles Quay. As at the date of the announcement, the<br />
issued share capital of ORQPL is held in equal proportions (i.e., one-third each) by Freyland Pte<br />
Ltd (“Freyland”), Boulevard Development Pte Ltd (“Boulevard”) and Comina. Freyland and<br />
Boulevard are the wholly-owned subsidiaries of Hongkong Land International Holdings Limited<br />
and Keppel Land Properties Pte Ltd, respectively.<br />
The Trust Deed provides that for as long as the Manager is the manager of <strong>Suntec</strong> <strong>REIT</strong> and<br />
Cheung Kong and/or Mr Lim Hwee Chiang, John are controlling shareholders (as defined in the<br />
Listing Manual of the SGX-ST, the “Listing Manual”) of the Manager, all transactions between<br />
<strong>Suntec</strong> <strong>REIT</strong> and (i) Cheung Kong, (ii) Mr Lim Hwee Chiang, John and/or (iii) an associate of<br />
F-1
Cheung Kong or Mr Lim Hwee Chiang, John shall be considered as interested person<br />
transactions under the Listing Manual.<br />
The Vendor is a direct wholly-owned subsidiary of Cheung Kong and is therefore considered an<br />
associate of Cheung Kong. In addition, as the Manager is 30.0% indirectly owned by Cheung<br />
Kong, the Vendor is regarded as an associate of the Manager under the Listing Manual, and<br />
Cheung Kong is regarded as a controlling shareholder of the Manager. In addition, the Chairman<br />
of the Manager, Mr Chiu Kwok Hung, Justin, is also an executive direc<strong>to</strong>r of Cheung Kong.<br />
As such, the Acquisition will constitute an “interested person transaction” under Chapter 9 of the<br />
Listing Manual as well as an “interested party transaction” under the Property Fund Guidelines,<br />
in respect of which the approval of <strong>Unitholders</strong> is required (see “Interested Person Transaction<br />
and Interested Party Transaction” as set out in section 4.3.2 of the Letter <strong>to</strong> <strong>Unitholders</strong> in the<br />
<strong>Circular</strong> for details).<br />
The Agreed Consideration of S$941.5 million was negotiated on a willing-buyer and willing-seller<br />
basis, and shall be satisfied by:<br />
(i)<br />
(ii)<br />
payment of the Share Consideration by the Trustee <strong>to</strong> the Vendor; and<br />
the extending of the Purchaser Loan by the Trustee <strong>to</strong> ORQPL.<br />
The Trustee shall extend the Purchaser Loan <strong>to</strong> ORQPL on the completion of the Acquisition (the<br />
“Completion”) <strong>to</strong> enable ORQPL <strong>to</strong> repay <strong>to</strong> Joynote Ltd (“Joynote”) the outstanding<br />
shareholders’ loan made by Joynote <strong>to</strong> ORQPL <strong>to</strong>gether with all accrued but unpaid interest<br />
thereon (the “Joynote Loan”).<br />
The Share Consideration will be paid on Completion, which shall be no later than 31 Oc<strong>to</strong>ber<br />
2007 or such other date as the Trustee and the Vendor may mutually agree in writing.<br />
2. TERMS OF REFERENCE<br />
EYCF has been appointed by the Independent Direc<strong>to</strong>rs <strong>to</strong> advise them on whether the<br />
Acquisition (<strong>to</strong>gether with the entry in<strong>to</strong> the Share Purchase Agreement) is on normal<br />
commercial terms and not prejudicial <strong>to</strong> the interests of <strong>Suntec</strong> <strong>REIT</strong> and the minority<br />
<strong>Unitholders</strong>.<br />
Our views as set forth in this letter are based on the prevailing market, economic and financial<br />
conditions, and our analysis of the information provided in the <strong>Circular</strong> as well as information<br />
provided <strong>to</strong> us by the Manager, as of the Latest Practicable Date. Accordingly, this opinion shall<br />
not take in<strong>to</strong> account any event or condition which occur after the Latest Practicable Date.<br />
We are not and were not involved in any aspect of the negotiations pertaining <strong>to</strong> the Acquisition,<br />
nor were we involved in the deliberations leading up <strong>to</strong> the decision by the Direc<strong>to</strong>rs <strong>to</strong> enter in<strong>to</strong><br />
the Acquisition.<br />
We have confined our evaluation and analysis of the Acquisition <strong>to</strong> the financial terms thereof.<br />
It is not within our terms of reference <strong>to</strong> evaluate or comment on the rationale for, strategic or<br />
commercial merits and/or risks of, the Acquisition, and <strong>to</strong> comment on the financial merits and/or<br />
risks of the Acquisition where the assessment of such financial merits and/or risks involves our<br />
reviewing of non-publicly available financial information of <strong>Suntec</strong> <strong>REIT</strong> or the Manager, <strong>to</strong> which<br />
we have no access and with which we have not been furnished. It is also not within our terms<br />
of reference <strong>to</strong> compare the relative merits of the Acquisition vis-à-vis any alternative transaction<br />
previously considered by <strong>Suntec</strong> <strong>REIT</strong> or transactions that <strong>Suntec</strong> <strong>REIT</strong> may consider in the<br />
future, and as such, we do not express an opinion thereon. The assessment of the commercial<br />
and financial merits and/or risks of the Acquisition are solely the responsibility of the Direc<strong>to</strong>rs,<br />
although we may draw upon their views in arriving at our opinion.<br />
F-2
The scope of our appointment does not require us <strong>to</strong> express, and we do not express, a view on<br />
the growth prospects of <strong>Suntec</strong> City Mall, <strong>Suntec</strong> City Office Towers, Park Mall and Chijmes<br />
(<strong>to</strong>gether, the “Existing Properties”), <strong>Suntec</strong> <strong>REIT</strong>, and/or the Existing Properties and the ORQ<br />
interest (the “Enlarged Portfolio”). We are, therefore, not expressing any view herein as <strong>to</strong> the<br />
prices at which the Units of <strong>Suntec</strong> <strong>REIT</strong> may trade or on the future financial performance of<br />
<strong>Suntec</strong> <strong>REIT</strong>, and/or the Enlarged Portfolio upon completion of the Acquisition. We will not<br />
comment on the expected future performance or prospects of <strong>Suntec</strong> <strong>REIT</strong>, or the Enlarged<br />
Portfolio.<br />
In the course of our evaluation of the Acquisition, we have held discussions with the Direc<strong>to</strong>rs<br />
and management of the Manager. We have also examined and relied on publicly available<br />
information in respect of <strong>Suntec</strong> <strong>REIT</strong> collated by us as well as information concerning the<br />
<strong>Suntec</strong> <strong>REIT</strong> provided <strong>to</strong> us, including information in the <strong>Circular</strong>, and the valuation reports by<br />
the independent property valuers commissioned by the Manager and the Trustee, being Knight<br />
Frank Pte Ltd (“Knight Frank”) and CB Richard Ellis (Pte) Ltd (“CBRE”) respectively (the<br />
“Independent Valuers”). We have not independently verified such information furnished by the<br />
Direc<strong>to</strong>rs and the management of the Manager or any representation or assurance made by<br />
them, whether written or verbal, and accordingly cannot and do not warrant or accept<br />
responsibility for the accuracy or completeness of such information, representation or<br />
assurance. Nevertheless, the Direc<strong>to</strong>rs have confirmed <strong>to</strong> us that <strong>to</strong> the best of their knowledge<br />
and belief, the information provided <strong>to</strong> us (whether written or verbal) as well as the information<br />
contained herein and in the <strong>Circular</strong> constitutes a full and true disclosure, in all material respects,<br />
of all material facts on the Acquisition and there is no material information the omission of which<br />
would make any of the information contained herein or in the <strong>Circular</strong> inaccurate, incomplete or<br />
misleading in any material respect. We have also made reasonable enquiries and used our<br />
judgment in assessing such information and have found no reason <strong>to</strong> doubt the reliability of such<br />
information. We have further assumed that all statements of fact, belief, opinion and intention<br />
made by the Direc<strong>to</strong>rs in the <strong>Circular</strong> have been reasonably made after due and careful enquiry.<br />
We have not conducted a physical inspection of the properties or facilities of <strong>Suntec</strong> <strong>REIT</strong> or One<br />
Raffles Quay. We have not made an independent valuation or appraisal of the assets and<br />
liabilities of either <strong>Suntec</strong> <strong>REIT</strong> or One Raffles Quay but we have been provided with the<br />
valuation reports by the Independent Valuers. We have not conducted a comprehensive review<br />
of the business, operations and financial condition of <strong>Suntec</strong> <strong>REIT</strong> and One Raffles Quay.<br />
Our opinion is delivered solely for the use and benefit of the Independent Direc<strong>to</strong>rs in connection<br />
with and for the purpose of their consideration of the Acquisition, and the recommendations<br />
made by them <strong>to</strong> <strong>Unitholders</strong> shall remain the responsibility of the Independent Direc<strong>to</strong>rs. Our<br />
opinion should not be relied on as a recommendation <strong>to</strong> any Unitholder as <strong>to</strong> how such<br />
Unitholder should vote on the Acquisition or any matter related there<strong>to</strong>. Each Unitholder may<br />
have different investment objectives and considerations and should seek specific professional<br />
advice.<br />
3. SALIENT INFORMATION ON THE ACQUISITION<br />
Salient information on the Acquisition, including the terms and conditions thereon, is set out in<br />
the <strong>Circular</strong>. Summarised extracts are presented in this letter.<br />
3.1 The Share Purchase Agreement<br />
The information on the Share Purchase Agreement is set out in section 3.2 of the <strong>Circular</strong>.<br />
We note that the Agreed Consideration payable <strong>to</strong> the Vendor of S$941.5 million was negotiated<br />
on a willing-buyer and willing-seller basis, and shall be satisfied by:<br />
(i)<br />
(ii)<br />
the payment of the Share Consideration by the Trustee <strong>to</strong> the Vendor; and<br />
the extending of the Purchaser Loan by the Trustee <strong>to</strong> ORQPL.<br />
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The Trustee shall extend the Purchaser Loan <strong>to</strong> ORQPL on Completion <strong>to</strong> enable ORQPL <strong>to</strong><br />
repay the Joynote Loan.<br />
The Share Consideration will be paid on Completion, which shall be no later than 31 Oc<strong>to</strong>ber<br />
2007 or such other date as the Trustee and the Vendor may mutually agree in writing.<br />
The Manager and the Trustee have each commissioned the Independent Valuers <strong>to</strong> value the<br />
one-third interest in One Raffles Quay. Knight Frank, in its valuation certificate, stated that the<br />
aggregate open market value of the one-third interest in One Raffles Quay as at 2 July 2007 was<br />
S$941.5 million. CBRE, in its valuation certificate, stated that the aggregate open market value<br />
of the one-third interest in One Raffles Quay as at 2 July 2007 was S$941.5 million. The<br />
Independent Valuers arrived at their respective valuations by using discounted cash flow<br />
analysis and capitalisation approach. In addition <strong>to</strong> this method, Knight Frank also used the<br />
comparable sales method as a reference for its valuation of the one-third interest in One Raffles<br />
Quay.<br />
In connection with the Acquisition, on 11 September 2007, the Trustee has entered in<strong>to</strong> a<br />
supplemental agreement <strong>to</strong> the Share Purchase Agreement in respect of the entire issued share<br />
capital of Comina (the “Supplemental Agreement”).<br />
Under the terms of the Supplemental Agreement, the consideration for the acquisition of the<br />
entire issued share capital shall be satisfied by (i) allotment and issue of the Consideration Units<br />
in <strong>Suntec</strong> <strong>REIT</strong>, and (ii) payment in cash, by <strong>Suntec</strong> <strong>REIT</strong> <strong>to</strong> the Vendor.<br />
<strong>Suntec</strong> <strong>REIT</strong> will allot and issue such number of Consideration Units <strong>to</strong> the Vendor of an<br />
aggregate value of S$94.15 million. The issue price for the Consideration Units will be equal <strong>to</strong><br />
the volume weighted average price per unit for all trades on the SGX-ST, in the ordinary course<br />
of trading, for the last 10 Market Days prior <strong>to</strong> the completion of the Acquisition.<br />
3.2 Restated Shareholders’ Agreement<br />
The information on the Restated Shareholders’ Agreement is set out in section 3.3 of the<br />
<strong>Circular</strong>.<br />
We note that by approving the Acquisition, the <strong>Unitholders</strong> will be deemed <strong>to</strong> have also approved<br />
the Restated Shareholders’ Agreement as set out in the <strong>Circular</strong>.<br />
Freyland, Comina and RBC Dexia Trust Services Singapore Limited (in its capacity as trustee for<br />
K-<strong>REIT</strong> Asia) (collectively, the “Shareholders”) and Hongkong Land International, the Trustee,<br />
and ORQPL will enter in<strong>to</strong> the Restated Shareholders’ Agreement, which shall provide, inter alia,<br />
that the aforesaid parties shall use their best endeavours <strong>to</strong> procure that the requirements for<br />
funding, capital expenditure and working capital are funded in the following order of priority:<br />
(i)<br />
(ii)<br />
(iii)<br />
by raising maximum external financing from banks, financial institutions, insurance<br />
corporations and other institutional lenders on the most favourable terms reasonably<br />
obtainable, without any mortgage or other forms of security, secured principally by<br />
guarantees from each Shareholder or its associated company given on a several basis in<br />
proportion <strong>to</strong> each Shareholder’s shareholding percentage;<br />
by shareholder’s loans from each Shareholder or its associated company or by subscribing<br />
for any debt securities issued by ORQPL <strong>to</strong> each Shareholder in proportion <strong>to</strong> its<br />
shareholding percentage; and<br />
by subscription of share capital by each Shareholder in proportion <strong>to</strong> its shareholding<br />
percentage.<br />
F-4
Under the Restated Shareholders’ Agreement, each Shareholder also agree <strong>to</strong> fund in<br />
proportion equal <strong>to</strong> its shareholding percentage, by way of shareholder’s loans and subscription<br />
of share capital or debt securities issued by ORQPL all funding requirements of ORQPL which<br />
are not financed by external financiers <strong>to</strong> enable ORQPL <strong>to</strong> meet its financial obligations for the<br />
carrying on of business.<br />
Also under the Restated Shareholders’ Agreement, the following matters, inter alia, shall require<br />
the unanimous approval:<br />
(i)<br />
(ii)<br />
(iii)<br />
(iv)<br />
(v)<br />
(vi)<br />
(vii)<br />
the approval of the annual operating plan and capital budget of ORQPL and each of its<br />
subsidiary (the “Group Company”) and any change thereof and the approval of any<br />
standard operating procedures and any change thereof;<br />
the sale or other disposition of any asset or property of a Group Company (other than in<br />
respect of One Raffles Quay);<br />
the disposal or assignment of the whole or any part of One Raffles Quay and the terms on<br />
which such disposal or assignment is <strong>to</strong> be carried out, including, without limitation, the<br />
price for the whole or that part of One Raffles Quay being disposed of or assigned;<br />
any contract between a Group Company and (i) any of its shareholder, direc<strong>to</strong>r or officer,<br />
(ii) any shareholder, direc<strong>to</strong>r or officer of any other Group Company, or (iii) an associated<br />
company of such Group Company’s shareholder, direc<strong>to</strong>r or officer, which has a value or<br />
involves sums in excess of S$100,000 other than the ORQ Asset Management Agreement<br />
(as defined in the <strong>Circular</strong>);<br />
the appointment, remuneration, compensation or removal of any senior company<br />
employees and the remuneration and compensation of all direc<strong>to</strong>rs;<br />
the appointment of any committee of the board of direc<strong>to</strong>rs of ORQPL and delegating of<br />
any of the powers of the board of direc<strong>to</strong>rs of ORQPL <strong>to</strong> any such committee;<br />
the approval and revision of leasing strategy for the lease of One Raffles Quay units and<br />
the range of rental rate(s); and<br />
(viii) the entry by ORQPL in<strong>to</strong> any partnership, joint venture, co-operation agreement, joint<br />
development agreement, or merger or consolidation, with any other party.<br />
Subject <strong>to</strong> the approval by unanimous resolution of the shareholders of ORQPL, the board shall<br />
appoint an executive committee <strong>to</strong> review, evaluate and make decisions on matters relating <strong>to</strong><br />
the management of One Raffles Quay.<br />
The Trustee is also guaranteeing the due and punctual performance and observance of Comina<br />
of all its obligations, commitments and undertakings under and/or pursuant <strong>to</strong> the Restated<br />
Shareholders’ Agreement.<br />
3.3 Estimated Acquisition Cost<br />
We note that the current estimated Total Acquisition Cost is approximately S$954.6 million,<br />
comprising:<br />
(i)<br />
(ii)<br />
(iii)<br />
the Agreed Consideration of S$941.5 million, which represents the aggregate value of the<br />
Share Consideration, as described in section 3.2 of the <strong>Circular</strong> and the Purchaser Loan;<br />
the acquisition fee of S$9.4 million (being 1.0% of the Agreed Consideration), payable <strong>to</strong><br />
the Manager pursuant <strong>to</strong> Clause 15.2 of the Trust Deed (exclusive of GST); and<br />
the estimated professional and other fees and expenses incurred in connection with the<br />
Acquisition of approximately S$3.7 million (inclusive of GST).<br />
F-5
The acquisition fee payable <strong>to</strong> the Manager will be in the form of Units which shall not be sold<br />
within one year from their date of issuance.<br />
In addition <strong>to</strong> the above, the costs in relation <strong>to</strong> the Debt Financing and the Issue of Convertible<br />
Bonds, are approximately S$19.8 million (inclusive of GST).<br />
3.4 Conditions Precedent for Completion<br />
We note that under the Share Purchase Agreement, the Completion is subject <strong>to</strong> and conditional<br />
upon, inter alia, the following conditions precedent:<br />
(i)<br />
(ii)<br />
(iii)<br />
the RQAM Restructuring, the repayment of all sums owing by RQAM <strong>to</strong> ORQPL and the<br />
termination of the letter of financial support dated 18 May 2007 given by ORQPL in favour<br />
of the board of direc<strong>to</strong>rs of RQAM;<br />
the Acquisition having been approved by the unitholders of <strong>Suntec</strong> <strong>REIT</strong> at a general<br />
meeting of <strong>Suntec</strong> <strong>REIT</strong>; and<br />
ARA Trust Management (<strong>Suntec</strong>) Limited being the manager of <strong>Suntec</strong> <strong>REIT</strong> on<br />
Completion.<br />
3.5 Asset Management Agreement<br />
We note that the asset management services in relation <strong>to</strong> One Raffles Quay are currently being<br />
carried out by RQAM. Pursuant <strong>to</strong> the RQAM Restructuring, which was completed on 31 August<br />
2007, the entire share capital of RQAM has been transferred by ORQPL <strong>to</strong> Charm Aim<br />
International Limited, K-<strong>REIT</strong> Asia Property Management Pte Ltd and Hongkong Land<br />
(Singapore) Pte Ltd in equal proportions.<br />
The existing asset management agreement between ORQPL and RQAM in relation <strong>to</strong> the<br />
management of One Raffles Quay has been terminated and the new asset management<br />
agreement (the “ORQ Asset Management Agreement”) has superseded the original asset<br />
management agreement in its entirety.<br />
RQAM is responsible for providing the following services under the ORQ Asset Management<br />
Agreement:<br />
(i)<br />
(ii)<br />
(iii)<br />
(iv)<br />
(v)<br />
(vi)<br />
(vii)<br />
building management;<br />
lease administration;<br />
financial management;<br />
formal reporting;<br />
secretarial services;<br />
accounting services; and<br />
administrative services.<br />
In consideration of the due performance by RQAM of the aforesaid services, ORQPL shall pay<br />
RQAM:<br />
(i)<br />
(ii)<br />
a management fee equal <strong>to</strong> three (3) per cent of the Gross Revenue from One Raffles<br />
Quay;<br />
in relation <strong>to</strong> each lease entered in<strong>to</strong> by a tenant, a marketing fee equivalent <strong>to</strong>:<br />
(a)<br />
two months’ Gross Rent in the event that such lease is for a term of five years or<br />
more; or<br />
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(iii)<br />
(iv)<br />
(b)<br />
(c)<br />
one month’s Gross Rent in the event that such lease is for a term of two years or<br />
more, but less than five years; or<br />
one half month’s Gross Rent in the event that such lease is for a term of less than two<br />
years;<br />
in relation <strong>to</strong> renewal of leases, a marketing fee equivalent <strong>to</strong> one-quarter month’s Gross<br />
Rent; and<br />
in relation <strong>to</strong> leases with rent review provision, a marketing fee equivalent <strong>to</strong> one-quarter<br />
month’s Gross Rent based on the reviewed rent on each of the rent review.<br />
3.6 Deed of Income Support<br />
We note that by approving the Acquisition, the <strong>Unitholders</strong> will be deemed <strong>to</strong> have also approved<br />
the arrangement in the Deed of Income Support as described in the <strong>Circular</strong>.<br />
We note that as One Raffles Quay is a recently completed development, a substantial number<br />
of major tenancies were leased at rents which are significantly below current market rental rates.<br />
As such, the Deed of Income Support that the Trustee has entered in<strong>to</strong> with the Vendor and the<br />
Guaran<strong>to</strong>r would enable <strong>Suntec</strong> <strong>REIT</strong> <strong>to</strong> strengthen its distributable income for the benefit of the<br />
<strong>Unitholders</strong>.<br />
Under the Deed of Income Support, the Vendor has undertaken, starting from Completion, <strong>to</strong> pay<br />
<strong>to</strong> <strong>Suntec</strong> <strong>REIT</strong> quarterly instalments for 54 months up <strong>to</strong> an aggregate amount of S$103.48<br />
million (inclusive of GST). The Vendor’s commitment under the Deed of Income Support is<br />
guaranteed by the Guaran<strong>to</strong>r. Both CBRE and Knight Frank have taken in<strong>to</strong> account these<br />
payments under the Deed of Income Support in their valuation of the one-third interest in One<br />
Raffles Quay.<br />
4. INFORMATION ON ONE RAFFLES QUAY<br />
A detailed description of One Raffles Quay is set out in Appendix A of the <strong>Circular</strong>. We<br />
recommend that the Independent Direc<strong>to</strong>rs advise <strong>Unitholders</strong> <strong>to</strong> read the section of the <strong>Circular</strong><br />
very carefully.<br />
(i)<br />
Overview<br />
One Raffles Quay, a prime landmark commercial development, is located on Lot 175C of<br />
Town Subdivision 30 and Lot 80002A of Town Subdivision 30 and comprises (as at 30 June<br />
2007):<br />
(a)<br />
(b)<br />
(c)<br />
(d)<br />
(e)<br />
the North Tower, a 50-s<strong>to</strong>rey office <strong>to</strong>wer with approximately 765,902 sq ft (71,154 sq<br />
m) of Net Lettable Area;<br />
the South Tower, a 29-s<strong>to</strong>rey office <strong>to</strong>wer with approximately 565,659 sq ft (52,551 sq<br />
m) of Net Lettable Area;<br />
approximately 4,015 sq ft (373 sq m) of Net Lettable Area for retail outlets and cafes<br />
along an underground link connecting the North Tower <strong>to</strong> the Raffles Place MRT<br />
station;<br />
a sheltered plaza serving as a drop-off point; and<br />
a hub car park with 713 car park lots.<br />
F-7
5. METHOD OF FINANCING<br />
5.1 The Financing Plan<br />
The Manager proposes <strong>to</strong> satisfy the Total Acquisition Cost of S$954.6 million and the costs in<br />
relation <strong>to</strong> the financing of approximately S$19.8 million,<br />
(i)<br />
(ii)<br />
partly through the issue of Consideration Units of an aggregate value of S$94.15 million <strong>to</strong><br />
the Vendor,<br />
partly through the issue of Units <strong>to</strong> the Manager in satisfaction of the acquisition fee of<br />
S$9.4 million (being 1.0% of the Agreed Consideration), payable <strong>to</strong> the Manager pursuant<br />
<strong>to</strong> Clause 15.2 of the Trust Deed (exclusive of GST);<br />
and partly with the proceeds of either (ii)(a) the drawdown of Debt Financing for the balance of<br />
approximately S$870.9 million, which <strong>Suntec</strong> <strong>REIT</strong> is expected <strong>to</strong> obtain for the purposes of the<br />
Acquisition, or (b) the drawdown of the Debt Financing and the Issue of Convertible Bonds, in<br />
such proportion as the Manager in its discretion, deems appropriate, <strong>to</strong> collectively raise the<br />
balance of S$870.9 million.<br />
Based on market conditions, the Manager will determine the amount of financing <strong>to</strong> be raised<br />
from the Debt Financing and the Issue of Convertible Bonds. The Manager may decide <strong>to</strong><br />
finance the Total Acquisition Cost by the issue of Consideration Units and a draw down of the<br />
Debt Financing, if the Manager determines this <strong>to</strong> be in the best interests of the <strong>Unitholders</strong>.<br />
5.2 <strong>Suntec</strong> <strong>REIT</strong>’s Existing and Additional Credit Facilities<br />
<strong>Suntec</strong> <strong>REIT</strong> has a S$700.0 million term loan facility with Platinum AC1 Limited (“Platinum”) and<br />
a S$500.0 million term loan facility with Sunshine Assets Limited (“Sunshine”), both of which are<br />
special purpose companies held by RBC Dexia Trust Services Singapore Limited and HSBC<br />
Institutional Trust Services (Singapore) Limited, respectively. As at the Latest Practicable Date,<br />
the term loan facility with Platinum is fully drawn and S$215.0 million has been drawn down from<br />
the term loan facility with Sunshine in five tranches. To fund their loans <strong>to</strong> <strong>Suntec</strong> <strong>REIT</strong>, Platinum<br />
issued floating rate notes with an aggregate face value of S$700.0 million which are rated AAA<br />
by Fitch Inc. and Aaa by Moody’s Inves<strong>to</strong>rs Service, while Sunshine issued a mixture of fixed and<br />
floating rate notes with an aggregate face value of S$215.0 million, all of which are rated Baa2<br />
by Moody’s Inves<strong>to</strong>rs Service.<br />
In addition, <strong>Suntec</strong> <strong>REIT</strong> has a S$50.0 million revolving credit facility with United Overseas Bank<br />
Limited, of which S$7.5 million has been drawn down, and a S$150.0 million revolving credit<br />
facility with Citibank Singapore Ltd, which has not been drawn down.<br />
The Manager has also put in place additional revolving credit facilities of S$871.0 million, (the<br />
“Acquisition Facilities”) which will be used <strong>to</strong>gether with the existing credit facilities, <strong>to</strong><br />
part-finance the Acquisition.<br />
5.3 Convertible Bonds<br />
To finance the balance of the Total Acquisition Cost (which will not be financed by the issue of<br />
the Consideration Units <strong>to</strong> the Vendor), the Manager proposes <strong>to</strong> issue Convertible Bonds with<br />
an aggregate principal amount of up <strong>to</strong> S$450.0 million <strong>to</strong> institutional and accredited inves<strong>to</strong>rs.<br />
Based on market conditions, the Manager may instead decide that it is in the best interests of<br />
the <strong>Unitholders</strong> <strong>to</strong> finance such balance fully by drawing down the Debt Financing. If the<br />
Manager decides <strong>to</strong> issue the Convertible Bonds, the Manager shall issue the Convertible Bonds<br />
by no later than the date of Completion. The Manager shall issue the Convertible Bonds only if<br />
it determines that doing so would be in the best interest of the <strong>Unitholders</strong>, having regard <strong>to</strong><br />
market conditions.<br />
F-8
The Manager shall issue the Convertible Bonds only if it determines that doing so would be in<br />
the best interests of the <strong>Unitholders</strong>, having regard <strong>to</strong> market conditions.<br />
The Convertible Bonds will bear interest from the Issue Date at a rate of 2.0% — 4.0% per<br />
annum, payable semi-annually in arrears and will be convertible in<strong>to</strong> Conversion Units, during<br />
the Conversion Period or, at the option of <strong>Suntec</strong> <strong>REIT</strong>, redeemed for cash in accordance with<br />
the terms and conditions of the Convertible Bonds.<br />
The Conversion Price, which shall be in the range between 25% and 50% (both figures inclusive)<br />
over the closing Unit price on the last business day prior <strong>to</strong> launch of the Issue of Convertible<br />
Bonds, will be determined between the Manager and the Joint Financial Advisers, Underwriters<br />
and Bookrunners closer <strong>to</strong> the date of commencement of the Issue of Convertible Bonds, having<br />
regard <strong>to</strong> market conditions. As such, the actual number of Conversion Units <strong>to</strong> be issued<br />
pursuant <strong>to</strong> full conversion of the Convertible Bonds will depend on the aggregate principal<br />
amount and the conversion price. The illustrative conversion price of S$2.33 is based on a 25%<br />
premium over an illustrative price of S$1.86 per Unit, being the last closing price on the Latest<br />
Practicable Date. The illustrative conversion price of S$2.79 is based on a 50% premium over<br />
an illustrative price of S$1.86 per Unit, being the last closing price on the Latest Practicable Date.<br />
At the lowest illustrative conversion price of S$2.33, the Convertible Bonds issued will be fully<br />
converted in<strong>to</strong> approximately 193.1 million Conversion Units representing approximately 13.5%<br />
of <strong>Suntec</strong> <strong>REIT</strong> existing Units as of 30 June 2007. At the highest illustrative conversion price of<br />
S$2.79, the Convertible Bonds issued will be fully converted in<strong>to</strong> approximately 161.3 million<br />
Conversion Units representing approximately 11.3% of <strong>Suntec</strong> <strong>REIT</strong> existing Units as of 30 June<br />
2007.<br />
For illustrative purposes only, based on an aggregate principal amount of S$450.0 million and a<br />
conversion price of S$2.51 (the mid-point in the illustrative conversion price range of S$2.33 <strong>to</strong><br />
S$2.79) for each Conversion Unit, assuming no adjustments <strong>to</strong> the Conversion Price, up <strong>to</strong><br />
179.3 million Conversion Units will be issued by the Manager pursuant <strong>to</strong> full conversion of the<br />
Convertible Bonds.<br />
A summary of the principal terms of the Convertible Bonds is set out in Appendix B of the<br />
<strong>Circular</strong>.<br />
We note that by approving the Issue of Convertible Bonds, the <strong>Unitholders</strong> are deemed <strong>to</strong> have<br />
approved the terms of the Convertible Bonds, <strong>to</strong>gether with the terms which are incidental or<br />
ancillary <strong>to</strong> such terms, and the issue of Conversion Units upon conversion of the Convertible<br />
Bonds.<br />
5.4 <strong>Suntec</strong> <strong>REIT</strong>’s Leverage<br />
We note that as at 30 June 2007 (being the date of the latest unaudited financial statements of<br />
<strong>Suntec</strong> <strong>REIT</strong>), <strong>Suntec</strong> <strong>REIT</strong> has a Leverage Ratio of approximately 23.3%.<br />
Upon Completion, based on <strong>Suntec</strong> <strong>REIT</strong>’s Deposited Property of approximately S$4,866.3<br />
million (which takes in<strong>to</strong> account the Deposited Property of the Existing Properties as at 30 June<br />
2007), the drawdown of Debt Financing and/or the Issue of Convertible Bonds are expected <strong>to</strong><br />
increase <strong>Suntec</strong> <strong>REIT</strong>’s Leverage Ratio from approximately 23.3% <strong>to</strong> approximately 36.6%.<br />
F-9
5.5 The Proposed Issue of Consideration Units in Payment <strong>to</strong> the Vendor<br />
We note that the Acquisition involves the proposed issue of such number of new Units <strong>to</strong> the<br />
Vendor of an aggregate value of S$94.15 million as partial consideration for the Acquisition. The<br />
issue price for the Consideration Units will be equal <strong>to</strong> the volume weighted average price per<br />
Unit for all trades on the SGX-ST, in the ordinary course of trading, for the last 10 Market Days<br />
prior <strong>to</strong> (and excluding) the date of Completion. For illustrative purposes, assuming that the issue<br />
price for the Consideration Units is equal <strong>to</strong> S$1.86, 50,615,887 Consideration Units will be<br />
issued <strong>to</strong> the Vendor.<br />
6. EVALUATION OF THE ACQUISITION<br />
In evaluating whether the Acquisition is on normal commercial terms and prejudicial <strong>to</strong> the<br />
interests of the <strong>Unitholders</strong>, we have considered, inter alia, the following fac<strong>to</strong>rs:–<br />
(i)<br />
(ii)<br />
(iii)<br />
(iv)<br />
(v)<br />
(vi)<br />
(vii)<br />
The rationale for the Acquisition;<br />
Forecast of Net Property Income for the ORQ Interest;<br />
Forecast DPU;<br />
Pro Forma NAV;<br />
Valuation of the one-third interest in One Raffles Quay prepared by the Independent<br />
Valuers;<br />
Comparison with Relevant Transactions;<br />
Issue of Consideration Units <strong>to</strong> the Vendor; and<br />
(viii) Other relevant fac<strong>to</strong>rs.<br />
6.1 The rationale for the Acquisition<br />
We note that as stated in the <strong>Circular</strong>, the Manager believes that the Acquisition will bring the<br />
following key benefits <strong>to</strong> <strong>Unitholders</strong>:<br />
(i)<br />
Yield Accretion<br />
The Manager believes that the Acquisition will improve the earnings and distributions<br />
enjoyed by <strong>Unitholders</strong>. Based on the Manager’s forecast and taking in<strong>to</strong> account the<br />
Agreed Consideration of S$941.5 million, the forecast consolidated Net Property Income<br />
yield for the ORQ Interest is approximately 4.2% for the Forecast Year. This is higher than<br />
the annualised Net Property Income yield of approximately 3.6% for the Existing Properties<br />
for the nine months ended 30 June 2007.<br />
The Acquisition, combined with the Debt Financing, the proposed Issue of Convertible<br />
Bonds, and the issuance of Consideration Units will result in distribution per Unit (“DPU”)<br />
accretion of 0.37 cents (an increase of approximately 4.4%) which will increase <strong>Suntec</strong><br />
<strong>REIT</strong>’s DPU from 8.32 cents <strong>to</strong> 8.69 cents for the Forecast Year.<br />
(ii)<br />
The Acquisition Fits the Manager’s Investment Strategy<br />
The Acquisition fits the Manager’s principal investment strategy for <strong>Suntec</strong> <strong>REIT</strong> <strong>to</strong> invest<br />
in quality income-producing assets which are primarily used for retail and/or office<br />
purposes. The Manager’s acquisition growth strategy is underpinned by its key financial<br />
objective <strong>to</strong> provide <strong>Unitholders</strong> with a competitive rate of return for their investment by<br />
ensuring regular and stable distributions <strong>to</strong> <strong>Unitholders</strong> and long-term growth in<br />
distributions and net asset value per Unit.<br />
F-10
One Raffles Quay has a large and diversified tenant base and is highly accessible as a<br />
result of its direct connectivity <strong>to</strong> the Raffles Place MRT station, one of Singapore’s four<br />
major MRT interchange stations. With a Committed Occupancy of 100.0% as at 30 June<br />
2007, the Manager believes that One Raffles Quay will enjoy a stable and sustainable<br />
income stream. The Manager believes that One Raffles Quay will be a valuable addition <strong>to</strong><br />
<strong>Suntec</strong> <strong>REIT</strong>’s existing portfolio of major commercial developments in Singapore.<br />
(iii)<br />
(iv)<br />
(v)<br />
Prime Landmark Office Development<br />
The Manager believes that One Raffles Quay is a quality asset which will enhance <strong>Suntec</strong><br />
<strong>REIT</strong>’s existing portfolio of properties. One Raffles Quay enjoys several key competitive<br />
strengths including:<br />
(a)<br />
(b)<br />
(c)<br />
(d)<br />
its strategic location in the heart of Singapore’s Central Business District (“CBD”) and<br />
close <strong>to</strong> Singapore’s new Marina Business and Financial Centre (“MBFC”);<br />
its excellent connectivity and accessibility with its direct link <strong>to</strong> one of Singapore’s four<br />
major MRT interchange stations, Raffles Place MRT, offering seamless sheltered<br />
commuting <strong>to</strong> One Raffles Quay’s visi<strong>to</strong>rs and tenants;<br />
a strong tenant base including ABN AMRO Asia Pacific Pte Ltd, Barclays PLC, Credit<br />
Suisse (Singapore) Limited, Deutsche Bank Aktiengesellschaft, Ernst & Young<br />
Services Pte Ltd and UBS AG; and<br />
its large floor plates allowing for the subdivision and consolidation of office units for<br />
maximum efficiency and flexibility, and state-of-the-art building services and<br />
management systems <strong>to</strong> cater <strong>to</strong> the needs of global financial tenants.<br />
Foothold in the Development of the Marina Bay Area<br />
Centrally located on prime waterfront space in Singapore’s new financial district, One<br />
Raffles Quay is well-positioned <strong>to</strong> capitalise on the future growth of the area. The proposed<br />
integrated resort, MBFC and other commercial, residential and recreational developments<br />
at Marina Bay will contribute <strong>to</strong> making the area a vibrant and sought-after location for<br />
professionals <strong>to</strong> live, work and play. Upon Completion, <strong>Suntec</strong> <strong>REIT</strong> will be well-positioned<br />
<strong>to</strong> capture growth opportunities from the development of Marina Bay.<br />
Greater Exposure <strong>to</strong> the Grade ‘A’ Office Market<br />
The demand for office space in quality commercial buildings in the CBD has shown marked<br />
improvement in the past year, underpinned by a strong economy and rapid expansion of<br />
Singapore’s financial services sec<strong>to</strong>r. With the current tight availability of office space<br />
coupled with strong demand, this improvement is expected <strong>to</strong> continue.<br />
The Acquisition will increase <strong>Suntec</strong> <strong>REIT</strong>’s office portfolio <strong>to</strong> 1.8 million sq ft, providing<br />
increased exposure <strong>to</strong> the strengthening Singapore office market. Furthermore, as One<br />
Raffles Quay is a recently completed development, a substantial number of major<br />
tenancies were leased at rents which are significantly below current market rental rates. As<br />
such, the office space in One Raffles Quay offers potential for rental growth opportunities<br />
upon renewal or replacement.<br />
(vi)<br />
Income Diversification<br />
The Acquisition is expected <strong>to</strong> benefit <strong>Unitholders</strong> by improving income diversification and<br />
reducing the reliance of <strong>Suntec</strong> <strong>REIT</strong>’s income stream on any single property. With the<br />
enlarged portfolio post the Acquisition, the reliance on the income contribution from <strong>Suntec</strong><br />
City Mall and <strong>Suntec</strong> City Office Towers will be reduced. The Manager expects that the<br />
contribution <strong>to</strong> <strong>Suntec</strong> <strong>REIT</strong>’s Net Property Income by <strong>Suntec</strong> City Mall and <strong>Suntec</strong> City<br />
F-11
Office Towers within <strong>Suntec</strong> <strong>REIT</strong>’s property portfolio for the Forecast Year will decrease<br />
from approximately 87.4%, prior <strong>to</strong> Completion, <strong>to</strong> approximately 69.6%.<br />
(vii)<br />
Improved Quality and Diversity of Tenant Base<br />
The Acquisition is expected <strong>to</strong> further enhance the tenancy profile of <strong>Suntec</strong> <strong>REIT</strong>’s office<br />
tenant base with the addition of major anchor office tenants such as ABN AMRO Asia<br />
Pacific Pte Ltd, Barclays PLC, Credit Suisse (Singapore) Limited, Deutsche Bank<br />
Aktiengesellschaft, Ernst & Young Services Pte Ltd and other major financial institutions,<br />
<strong>to</strong> <strong>Suntec</strong> <strong>REIT</strong>’s group of core blue chip tenants.<br />
(viii) Greater Trading Liquidity and Flexibility<br />
The Conversion Units, when issued, are expected <strong>to</strong> increase the free float of Units on the<br />
SGX-ST. This could lead <strong>to</strong> an increase of <strong>Suntec</strong> <strong>REIT</strong>’s weighting in certain benchmark<br />
equity indices. <strong>Unitholders</strong> will be able <strong>to</strong> benefit from the expected improvement in trading<br />
liquidity.<br />
(ix)<br />
Rare Opportunity <strong>to</strong> Own an Iconic Building<br />
One Raffles Quay is a landmark building designed by the internationally renowned<br />
architectural firm Kohn Pedersen Fox Associates of New York. The Acquisition presents a<br />
rare opportunity for <strong>Suntec</strong> <strong>REIT</strong> <strong>to</strong> partner with large property companies, Hongkong Land<br />
International’s parent entity, Hongkong Land Limited and K-<strong>REIT</strong> Asia, in owning a<br />
prestigious iconic prime grade ‘A’ office development with long term growth potential.<br />
6.2 Forecast of Net Property Income for the ORQ Interest<br />
The following table presents, in summary, certain selected financial information in relation <strong>to</strong> the<br />
Acquisition, assuming that the Acquisition is completed on 1 Oc<strong>to</strong>ber 2007 and one-third of the<br />
income from One Raffles Quay accrues <strong>to</strong> <strong>Suntec</strong> <strong>REIT</strong> through ORQPL and Comina from 1<br />
Oc<strong>to</strong>ber 2007:<br />
ORQ Interest<br />
Forecast Year<br />
(Financial Year ending 30 September 2008)<br />
Net Property Income (1) (S$ million) 39.6<br />
Net Property Income Yield (2) (%) 4.2<br />
Notes:<br />
(1) Includes dividend income, interest income and rental income support (net of all taxes) that <strong>Suntec</strong> <strong>REIT</strong> will derive<br />
from its one-third interest in ORQPL.<br />
(2) Net Property Income yield for One Raffles Quay is calculated as <strong>Suntec</strong> <strong>REIT</strong>’s one-third share of Net Property<br />
Income from One Raffles Quay over the Agreed Consideration of approximately S$941.5 million.<br />
We note that this is higher than the annualised Net Property Income yield of approximately 3.6%<br />
for the Existing Properties for the nine months ended 30 June 2007.<br />
The detailed Profit Forecast in relation <strong>to</strong> the Acquisition and the assumptions for the forecast<br />
information included in the table above are set out in Appendix C of the <strong>Circular</strong>.<br />
6.3 Forecast DPU<br />
To illustrate the overall yield accretion resulting from the Acquisition, taking in<strong>to</strong> account that<br />
Consideration Units, and assuming the drawdown of the Debt Financing and the proposed Issue<br />
of Convertible Bonds, the tables below show <strong>Suntec</strong> <strong>REIT</strong>’s forecast DPU in relation <strong>to</strong>:<br />
(i)<br />
the Existing Properties; and<br />
F-12
(ii)<br />
the Enlarged Portfolio,<br />
including the pro forma impact in the situation where the Deferred Units had been entirely issued<br />
on 9 December 2004, the date of admission of <strong>Suntec</strong> <strong>REIT</strong> <strong>to</strong> the Official List of the SGX-ST<br />
(the “Listing Date”) and the Forecast Year:<br />
(i)<br />
(ii)<br />
based on (a) an illustrative conversion price of S$2.33 <strong>to</strong> S$2.79 for the Convertible Bonds<br />
and (b) an aggregate principal amount of up <strong>to</strong> S$450,000,000 for the Convertible Bonds<br />
(which increases <strong>Suntec</strong> <strong>REIT</strong>’s Leverage Ratio from 23.3% as at 30 June 2007 (see<br />
paragraph 5.3 in the <strong>Circular</strong> for further details) <strong>to</strong> approximately 36.6%); and<br />
in the following scenarios:<br />
(a)<br />
(b)<br />
Scenario A: assuming that the Conversion Units had been issued at the beginning of<br />
the Forecast Year; and<br />
Scenario B: assuming that the Conversion Units have not been issued.<br />
For instance, under Scenario A and based on an illustrative conversion price of S$2.51 (the<br />
mid-point in the illustrative conversion price range of S$2.33 <strong>to</strong> S$2.79) for the Convertible<br />
Bonds, the Acquisition, combined with the proposed Debt Financing, will provide a DPU<br />
accretion of 0.25 cents (an increase of approximately 3.0%) which will increase <strong>Suntec</strong><br />
<strong>REIT</strong>’s DPU from 8.32 cents <strong>to</strong> 8.57 cents for the Forecast Year. At the lowest illustrative<br />
conversion price of S$2.33, the Convertible Bonds issued will be fully converted in<strong>to</strong><br />
approximately 193.1 million Conversion Units representing approximately 13.5% of <strong>Suntec</strong><br />
<strong>REIT</strong> existing Units as of 30 June 2007. At the highest illustrative conversion price of<br />
S$2.79, the Convertible Bonds issued will be fully converted in<strong>to</strong> approximately 161.3<br />
million Conversion Units representing approximately 11.3% of <strong>Suntec</strong> <strong>REIT</strong> existing Units<br />
as of 30 June 2007.<br />
Under Scenario B and based on an illustrative coupon rate of 3.00% and a conversion<br />
premium of 35% for the Convertible Bonds, the Acquisition, combined with the proposed<br />
Debt Financing, will provide a DPU accretion of 0.37 cents (an increase of approximately<br />
4.4%) which will increase <strong>Suntec</strong> <strong>REIT</strong>’s DPU from 8.32 cents <strong>to</strong> 8.69 cents for the<br />
Forecast Year.<br />
Based on market conditions, the Manager will determine the amount of financing <strong>to</strong> be<br />
raised from the Debt Financing and the Issue of Convertible Bonds. The Manager may<br />
decide <strong>to</strong> finance the Total Acquisition Cost by the issue of Consideration Units and a draw<br />
down of the Debt Financing, if the Manager determines this <strong>to</strong> be in the best interests of<br />
the <strong>Unitholders</strong>.<br />
The table in Scenario C is presented for the purposes of illustrating the pro forma impact<br />
in the event that the Total Acquisition Cost is financed by the issue of Consideration Units<br />
and a draw down of the Debt Financing. Under Scenario C, based on an illustrative interest<br />
rate of 3.5%, the Acquisition, if funded by the issue of Consideration Units and a drawdown<br />
from the Debt Financing, will provide a DPU accretion of 0.22 cents (an increase of<br />
approximately 2.6%, which will increase <strong>Suntec</strong> <strong>REIT</strong>’s DPU from 8.32 cents <strong>to</strong> 8.54 cents<br />
for the Forecast Year).<br />
The forecast on the tables presented on the following pages must be read <strong>to</strong>gether with the<br />
detailed Profit Forecast as well as the accompanying assumptions and sensitivity analysis<br />
in Appendix C of the <strong>Circular</strong>, and the report of the Independent Accountants on the Profit<br />
Forecast in Appendix D of the <strong>Circular</strong>.<br />
F-13
Scenario A: Forecast DPU (Assuming that (i) the <strong>Suntec</strong> <strong>REIT</strong>’s Leverage Ratio is<br />
increased <strong>to</strong> approximately 27.4% (1) after the Completion of the Acquisition, (ii) the issue<br />
of Consideration Units at the beginning of the Forecast Year, and (iii) the Conversion<br />
Units had been issued at the beginning of the Forecast Year)<br />
Illustrative<br />
Conversion<br />
Price for the<br />
Convertible<br />
Bonds (3)<br />
25%<br />
(S$2.33)<br />
30%<br />
(S$2.42)<br />
35%<br />
(S$2.51)<br />
40%<br />
(S$2.60)<br />
45%<br />
(S$2.70)<br />
50%<br />
(S$2.79)<br />
Forecast Year<br />
(Financial Year ending 30 September 2008) (2)<br />
No Deferred Units Issued<br />
Existing<br />
Properties (4)<br />
Enlarged<br />
Portfolio<br />
Assuming Deferred Units<br />
Had Been Issued<br />
Existing<br />
Properties (4)<br />
Enlarged<br />
Portfolio<br />
DPU (cents) 8.32 8.49 7.45 7.72<br />
DPU increase over<br />
Existing Properties (%)<br />
— 2.0 — 3.6<br />
DPU (cents) 8.32 8.53 7.45 7.75<br />
DPU increase over<br />
Existing Properties (%)<br />
— 2.5 — 4.0<br />
DPU (cents) 8.32 8.57 7.45 7.78<br />
DPU increase over<br />
Existing Properties (%)<br />
— 3.0 — 4.4<br />
DPU (cents) 8.32 8.60 7.45 7.81<br />
DPU increase over<br />
Existing Properties (%)<br />
— 3.4 — 4.8<br />
DPU (cents) 8.32 8.63 7.45 7.83<br />
DPU increase over<br />
Existing Properties (%)<br />
— 3.7 — 5.1<br />
DPU (cents) 8.32 8.66 7.45 7.86<br />
DPU increase over<br />
Existing Properties (%)<br />
— 4.1 — 5.5<br />
Notes:<br />
(1) Based on <strong>Suntec</strong> <strong>REIT</strong>’s Leverage Ratio as at 30 June 2007 (being the date of the latest unaudited financial<br />
statements of <strong>Suntec</strong> <strong>REIT</strong>) and taking in<strong>to</strong> account of the impact of the Debt Financing drawndown <strong>to</strong> fund the<br />
Acquisition and the Acquisition on Deposited Property. It is assumed that the Acquisition is financed by a drawdown<br />
of S$420.9 million under the Debt Financing, an issue of S$450 million of Convertible Bonds, and an issue of<br />
S$94.1 million of Consideration Units.<br />
(2) The forecast DPU will vary <strong>to</strong> the extent that the Conversion Units are issued on a date other than 1 Oc<strong>to</strong>ber 2007.<br />
(3) Based on a conversion premium range of 25% <strong>to</strong> 50% over an illustrative price of S$1.86 per Unit, being the last<br />
closing price on the Latest Practicable Date.<br />
(4) DPU includes the first instalment of Deferred Units representing 34.5 million Units.<br />
F-14
Scenario B: Forecast DPU (Assuming that (i) the <strong>Suntec</strong> <strong>REIT</strong>’s Leverage Ratio is<br />
increased <strong>to</strong> approximately 36.6% (1) after the Completion of the Acquisition, and (ii) the<br />
issue of Consideration Units at the beginning of the Forecast Year and (iii) the Conversion<br />
Units have not been issued during the Forecast Year)<br />
Illustrative<br />
Coupon Rate<br />
for the<br />
Convertible<br />
Bonds (%)<br />
2.00<br />
2.25<br />
2.50<br />
2.75<br />
3.00<br />
3.25<br />
3.50<br />
3.75<br />
4.00<br />
Forecast Year<br />
(Financial Year ending 30 September 2008)<br />
No Deferred Units Issued<br />
Existing<br />
Properties (2)<br />
Enlarged<br />
Portfolio<br />
Assuming Deferred Units<br />
Had Been Issued<br />
Existing<br />
Properties (2)<br />
Enlarged<br />
Portfolio<br />
DPU (cents) 8.32 8.98 7.45 8.07<br />
DPU increase over<br />
Existing Properties (%)<br />
— 7.9 — 8.3<br />
DPU (cents) 8.32 8.91 7.45 8.01<br />
DPU increase over<br />
Existing Properties (%)<br />
— 7.1 — 7.5<br />
DPU (cents) 8.32 8.83 7.45 7.94<br />
DPU increase over<br />
Existing Properties (%)<br />
— 6.1 — 6.6<br />
DPU (cents) 8.32 8.76 7.45 7.87<br />
DPU increase over<br />
Existing Properties (%)<br />
— 5.3 — 5.6<br />
DPU (cents) 8.32 8.69 7.45 7.81<br />
DPU increase over<br />
Existing Properties (%)<br />
— 4.4 — 4.8<br />
DPU (cents) 8.32 8.61 7.45 7.74<br />
DPU increase over<br />
Existing Properties (%)<br />
— 3.5 — 3.9<br />
DPU (cents) 8.32 8.54 7.45 7.67<br />
DPU increase over<br />
Existing Properties (%)<br />
— 2.6 — 3.0<br />
DPU (cents) 8.32 8.47 7.45 7.61<br />
DPU increase over<br />
Existing Properties (%)<br />
— 1.8 — 2.1<br />
DPU (cents) 8.32 8.39 7.45 7.54<br />
DPU increase over<br />
Existing Properties (%)<br />
— 0.8 — 1.2<br />
Notes:<br />
(1) Based on <strong>Suntec</strong> <strong>REIT</strong>’s Leverage Ratio as at 30 June 2007 (being the date of the latest unaudited financial<br />
statements of <strong>Suntec</strong> <strong>REIT</strong>) and taking in<strong>to</strong> account of the impact of the Debt Financing drawndown <strong>to</strong> fund the<br />
Acquisitionon borrowings and the Acquisition on Deposited Property. It is assumed that the Acquisition is financed<br />
by a drawdown of S$420.9 million under the Debt Financing, an issue of S$450 million of Convertible Bonds, and<br />
an issue of S$94.1 million of Consideration Units.<br />
(2) DPU includes the first instalment of Deferred Units representing 34.5 million Units.<br />
F-15
Scenario C: Forecast DPU (Assuming that (i) the <strong>Suntec</strong> <strong>REIT</strong>’s Leverage Ratio is<br />
increased <strong>to</strong> approximately 36.6% (1) after the Completion of the Acquisition, (ii) the issue<br />
of Consideration Units at the beginning of the Forecast Year and (iii) the draw down of<br />
Debt Financing at the beginning of the Forecast Year)<br />
Interest Rate<br />
3.50%<br />
3.60%<br />
3.70%<br />
3.80%<br />
3.90%<br />
4.00%<br />
Forecast Year<br />
(Financial Year ending 30 September 2008)<br />
No Deferred Units Issued<br />
Existing<br />
Properties (2)<br />
Enlarged<br />
Portfolio<br />
Assuming Deferred Units<br />
Had Been Issued<br />
Existing<br />
Properties (2)<br />
Enlarged<br />
Portfolio<br />
DPU (cents) 8.32 8.54 7.45 7.67<br />
DPU increase over<br />
Existing Properties (%)<br />
— 2.6 — 3.0<br />
DPU (cents) 8.32 8.48 7.45 7.62<br />
DPU increase over<br />
Existing Properties (%)<br />
— 1.9 — 2.3<br />
DPU (cents) 8.32 8.43 7.45 7.57<br />
DPU increase over<br />
Existing Properties (%)<br />
— 1.3 — 1.6<br />
DPU (cents) 8.32 8.37 7.45 7.52<br />
DPU increase over<br />
Existing Properties (%)<br />
— 0.6 — 0.9<br />
DPU (cents) 8.32 8.31 7.45 7.47<br />
DPU increase over<br />
Existing Properties (%)<br />
— –0.1 — 0.3<br />
DPU (cents) 8.32 8.26 7.45 7.42<br />
DPU increase over<br />
Existing Properties (%)<br />
— –0.7 — –0.4<br />
Notes:<br />
(1) Based on <strong>Suntec</strong> <strong>REIT</strong>’s Leverage Ratio as at 30 June 2007 (being the date of the latest unaudited financial<br />
statements of <strong>Suntec</strong> <strong>REIT</strong>) and taking in<strong>to</strong> account of the impact of the Debt Financing drawndown <strong>to</strong> fund the<br />
Acquisition and the Acquisition on Deposited Property. It is assumed that the Acquisition is financed by a drawdown<br />
of S$870.9 million under the Debt Financing, and an issue of S$94.1 million of Consideration Units.<br />
(2) DPU includes the first instalment of Deferred Units representing 34.5 million Units.<br />
F-16
6.4 Pro Forma NAV<br />
The pro forma financial effects of the Acquisition on the NAV per Unit presented below are strictly<br />
for illustrative purposes and were prepared based on the audited financial statements of <strong>Suntec</strong><br />
<strong>REIT</strong> for the financial year ended 30 September 2006 as well as the unaudited monthly<br />
management accounts of ORQPL for the financial period from 1 Oc<strong>to</strong>ber 2005 <strong>to</strong> 30 September<br />
2006.<br />
The pro forma financial effects of the Acquisition on the NAV per Unit as at 30 September 2006,<br />
as if the Acquisition was completed on 30 September 2006, are as follows:<br />
Existing Properties<br />
Enlarged Portfolio<br />
NAV (S$’000) 2,138,204 (1) 2,241,290 (2)<br />
Issued Units (’000) (Assuming that all Deferred Units<br />
were issued on the Listing Date)<br />
NAV per Unit (S$) (Assuming that all Deferred Units<br />
were issued on the Listing Date)<br />
NAV (’000) (Assuming that the Convertible Bonds were<br />
fully converted on 30 September 2006)<br />
Issued Units (’000) (Assuming that all Deferred Units<br />
were issued on the Listing Date and the Convertible<br />
Bonds were fully converted on 30 September 2006)<br />
NAV per Unit (cents) (Assuming that all Deferred Units<br />
were issued on the Listing Date and the Convertible<br />
Bonds were fully converted on 30 September 2006)<br />
1,509,141 (3) 1,564,819 (4)<br />
1.417 1.432<br />
NA 2,679,396 (5)<br />
NA 1,744,030 (6)<br />
NA 1.536<br />
Notes:<br />
(1) Based on the audited financial statements of <strong>Suntec</strong> <strong>REIT</strong> for the year ended 30 September 2006 and adjusted for<br />
the distribution in November 2006 in relation <strong>to</strong> <strong>Suntec</strong> <strong>REIT</strong>’s Distributable Income for the quarter ended 30<br />
September 2006.<br />
(2) Based on the audited financial statements of <strong>Suntec</strong> <strong>REIT</strong> for the year ended 30 September 2006 and adjusted for<br />
the distribution in November 2006 in relation <strong>to</strong> <strong>Suntec</strong> <strong>REIT</strong>’s Distributable income for the quarter ended 30<br />
September 2006 and based on the assumption that the Acquisition and the Issue of the Convertible Bonds were<br />
completed on 30 September 2006.<br />
(3) Comprises of 1,299,937,526 of issued Units as at 30 September 2006, 2,201,468 Units issued in Oc<strong>to</strong>ber 2006 as<br />
partial satisfaction of asset management fees incurred for the quarter ended 30 September 2006 and 207,002,170<br />
Deferred Units.<br />
(4) Comprises the Units set out in Note 3 and 5,230,308 Units assumed <strong>to</strong> be issued as satisfaction of the acquisition<br />
fee payable <strong>to</strong> the Manager for the Acquisition at an illustrative price of S$1.86 per Unit, and 50,615,887<br />
Consideration Units assumed <strong>to</strong> be issued as partial consideration for the Acquisition at an illustrative price of<br />
S$1.86 per Unit.<br />
(5) Based on the assumption that the Acquisition and the Issue of the Convertible Bonds were completed on 30<br />
September 2006 and the Convertible Bonds were fully converted on the same day.<br />
(6) Comprises the Units set out in Note 4 and 179,211,470 Conversion Units assumed <strong>to</strong> be issued on 30 September<br />
2006.<br />
As illustrated above, the NAV per Unit of the Enlarged Portfolio of <strong>Suntec</strong> <strong>REIT</strong> as at 30<br />
September 2006 assuming that all Deferred Units were issued on the Listing Date and the Bonds<br />
were fully converted on 1 Oc<strong>to</strong>ber 2005 would be would be S$ 1.536. This represents an<br />
increase of 12.26 cents in the NAV per Unit of <strong>Suntec</strong> <strong>REIT</strong> as at 30 September 2006.<br />
F-17
6.5 Valuation of one-third interest in One Raffles Quay prepared by the Independent Valuers<br />
The Manager and the Trustee have each commissioned an independent property valuer, Knight<br />
Frank and CBRE respectively, <strong>to</strong> value the one-third interest in One Raffles Quay.<br />
The salient points of the Independent Valuers’ report are as follows:<br />
(i)<br />
the basis of valuation used is “open market value” and “market value” by Knight Frank and<br />
CBRE respectively, the definitions of which appear <strong>to</strong> be broadly consistent among the both<br />
valuations by the Independent Valuers.<br />
According <strong>to</strong> the valuation report by Knight Frank, “open market value” is the best price at<br />
which the sale of an interest in property might reasonably be expected <strong>to</strong> have been<br />
completed unconditionally for cash consideration on the date of valuation, assuming:<br />
(a) a willing, but not anxious, buyer and seller;<br />
(b) that prior <strong>to</strong> the date of valuation there had been a reasonable period (having regard<br />
<strong>to</strong> the nature of the property and the state of the market), for the proper marketing of<br />
the interest, for the agreement of price and terms and for the completion of the sale;<br />
(c) that the state of the market, level of values and other circumstances were, on any<br />
earlier assumed date of exchange of contracts, the same as on the date of valuation;<br />
and<br />
(d) that no account is taken of any additional bid by a purchaser with a ‘special interest’.<br />
According <strong>to</strong> the valuation report by CBRE, “market value” is the estimated amount for<br />
which an asset should exchange on the date of valuation between a willing buyer and a<br />
willing seller in an arm’s length transaction, after proper marketing, wherein the parties had<br />
each acted knowledgeably, prudently and without compulsion and also the following basis:<br />
“the price at which the property might reasonably be expected <strong>to</strong> be sold at the date of the<br />
valuation assuming:<br />
(a) a willing, but not anxious, buyer and seller;<br />
(b) a reasonable period within which <strong>to</strong> negotiate the sale, having regard <strong>to</strong> the nature<br />
and situation of the property and the state of the market for property of the same kind;<br />
(c) that the property will be reasonably exposed <strong>to</strong> the market;<br />
(d) that no account is taken of the value or other advantage or benefit, additional <strong>to</strong><br />
market value, <strong>to</strong> the buyer incidental <strong>to</strong> ownership of the property being valued;<br />
(e) that the seller has sufficient resources <strong>to</strong> allow a reasonable period for the exposure<br />
of the property for sale; and<br />
(f) that the seller has sufficient resources <strong>to</strong> negotiate an agreement for the sale of the<br />
property.”<br />
(ii)<br />
(iii)<br />
(iv)<br />
Knight Frank arrived at their valuations using the investment method and discounted cash<br />
flow analysis;<br />
CBRE arrived at their valuations by using the capitalisation analysis and discounted cash<br />
flow analysis;<br />
it is the view of the Independent Valuers that the average rent of the existing tenancies<br />
entered in<strong>to</strong> appears <strong>to</strong> be below that of the current market rent of office space in the<br />
vicinity. In light of this, the Vendor will be providing the Deed of Income Support which<br />
would enable the rent payable over these tenancies <strong>to</strong> be within the acceptable market rent<br />
levels. The Independent Valuers have taken in<strong>to</strong> account these payments under the Deed<br />
of Income Support in their valuation of the one-third interest in One Raffles Quay; and<br />
F-18
(v)<br />
both Knight Frank and CBRE stated that the open market value of the one-third interest in<br />
One Raffles Quay as at 2 July 2007 is S$941.5 million.<br />
The valuation certificates of Knight Frank and CBRE are set out in Appendix E of the <strong>Circular</strong>.<br />
We note that the Agreed Consideration is identical <strong>to</strong> the valuation by both Knight Frank and<br />
CBRE.<br />
6.6 COMPARISON WITH RELEVANT TRANSACTIONS<br />
6.6.1 Yield comparisons<br />
The following are a selection of relevant past transactions carried out in Singapore by <strong>REIT</strong>s and<br />
a company listed on the SGX-ST and their relevant property yields as compared <strong>to</strong> that of the<br />
Acquisition:<br />
Property Name<br />
Name of Acquirer<br />
Purchase<br />
Price<br />
Market<br />
Valuation<br />
Date of<br />
Market<br />
Valuation<br />
Net Property Income (1) Property Yields (2)<br />
His<strong>to</strong>rical (3) Forecast (4) His<strong>to</strong>rical (5) Forecast (6)<br />
(S$ Million) (S$ Million) (S$ Million) (S$ Million) (%) (%)<br />
Transactions entered in<strong>to</strong> by <strong>REIT</strong>s<br />
Office Properties<br />
Bugis Junction Towers K-<strong>REIT</strong> Asia 159.5 159.5 Nov 2005 8.3 8.7 5.2% 5.5%<br />
Keppel Towers and GE Tower K-<strong>REIT</strong> Asia 353.5 353.5 Nov 2005 8.0 9.9 2.3% 2.8%<br />
Prudential Tower Property K-<strong>REIT</strong> Asia 117.7 117.7 Nov 2005 4.5 3.4 3.8% 2.9%<br />
55 Market Street Allco <strong>REIT</strong> (7) 72.5 72.5 May 2006 NA NA NA 5.0%<br />
High 5.2% 5.5%<br />
Low 2.3% 2.8%<br />
Average 3.8% 4.0%<br />
Integrated Property Developments (8)<br />
Ngee Ann City MMP <strong>REIT</strong> (9) 640.0 640.0 Feb 2005 31.7 30.3 5.0% 4.7%<br />
Wisma Atria MMP <strong>REIT</strong> (9) 663.0 663.0 Feb 2005 34.1 33.3 5.1% 5.0%<br />
China Square Central Allco <strong>REIT</strong> (7) 390.0 390.0 Dec 2005 9.7 17.6 2.5% 4.5%<br />
Raffles City CMT (10) /CCT (11) 2,166.0 2,166.0 Mar 2006 NA 106.3 NA 4.9%<br />
Park Mall <strong>Suntec</strong> <strong>REIT</strong> (12) 230.0 230.0 NA NA NA NA 5.0%<br />
High 5.1% 5.0%<br />
Low 2.5% 4.5%<br />
Average 4.2% 4.9%<br />
Transaction entered in<strong>to</strong> by entities other than <strong>REIT</strong>s<br />
One Phillip Street Auric Pacific (13) 37.6 37.6 Feb 2006 0.848 NA 2.3% NA<br />
One Raffles Quay <strong>Suntec</strong> <strong>REIT</strong> (12) 941.5 (14) 941.5 (15) Jul 2007 NA 39.6 (16) NA 4.2 (17)<br />
Source: SGX-ST announcements, circulars <strong>to</strong> shareholders, listing prospectus and corporate annual reports.<br />
Notes:<br />
(1) Net property income generally refers <strong>to</strong> a property’s gross revenue (including gross rent, car park income and other<br />
income earned such as rental of atrium space) less property expenses (including property tax, property<br />
management fees, maintenance, general and administrative, advertising and publicity expenses) and is before<br />
financing and taxes. In the table above, net property income of the relevant properties has been extracted from<br />
publicly available sources and we have not independently verified such information.<br />
(2) Property yield is computed based on the purchase price of the relevant property.<br />
(3) His<strong>to</strong>rical net property income presented in the table above is the pro forma net property income of the relevant<br />
property for the financial year immediately preceding the year of completion of its acquisition as disclosed in public<br />
documents. The pro forma net property income is the net property income of the relevant property following<br />
adjustments made <strong>to</strong>, inter alia, reflect the structure of the real estate investment trusts. Details of adjustments<br />
made in computation of the pro forma net property income of the relevant properties are set out in the relevant<br />
public documents.<br />
F-19
(4) Forecast net property income presented in the table above is presented on an annualised basis, by extrapolating<br />
the forecast net property income of the relevant property for the forecast period. Forecast period for: (a) CMT’s<br />
acquisitions of Bugis Junction is the two months period from 1 November 2005 <strong>to</strong> 31 December 2005; (b) K-<strong>REIT</strong><br />
Asia’s acquisitions of Keppel Towers and GE Tower, Prudential Tower and Bugis Junction Tower is the twelve<br />
months period from 1 January 2006 <strong>to</strong> 31 December 2006; (c) for MMP <strong>REIT</strong>’s acquisition of Wisma Atria and Ngee<br />
Ann City is six months period from 1 July 2005 <strong>to</strong> 31 December 2005; and (d) for Raffles City is four months period<br />
from 1 September 2006 <strong>to</strong> 31 December 2006; (e) for China Square Central is ten months period from 1 March<br />
2006 <strong>to</strong> 31 December 2006.<br />
(5) His<strong>to</strong>rical property yield is computed as the his<strong>to</strong>rical net property income divided by the purchase price of the<br />
relevant property.<br />
(6) Forecast property yield is computed as the forecast net property income divided by the purchase price of the<br />
relevant property, with the exception 55 Market Street and Chijmes for which the forecast property yield has been<br />
extracted from Allco <strong>REIT</strong>’s and <strong>Suntec</strong> <strong>REIT</strong>’s announcements of 5 June 2006 and 1 December 2005 respectively<br />
on the SGX-ST.<br />
(7) “Allco <strong>REIT</strong>” refers <strong>to</strong> Allco Commercial Real Estate Investment Trust<br />
(8) Integrated Property Developments refers <strong>to</strong> mixed use developments which have part of their net lettable area<br />
divided in<strong>to</strong> retail and office space.<br />
(9) “MMP <strong>REIT</strong>” refers <strong>to</strong> Macquarie MEAG Prime Real Estate Investment Trust<br />
(10) “CMT” refer <strong>to</strong> CapitaMall Trust<br />
(11) “CCT” refer <strong>to</strong> CapitaCommercial Trust<br />
(12) “<strong>Suntec</strong> <strong>REIT</strong>” refers <strong>to</strong> <strong>Suntec</strong> Real Estate Investment Trust<br />
(13) “Auric Pacific” refers <strong>to</strong> Auric Pacific Limited.<br />
(14) The purchase price for the Acquisition refers <strong>to</strong> the Agreed Consideration paid by <strong>Suntec</strong> <strong>REIT</strong>.<br />
(15) Market valuation for the Acquisition refers <strong>to</strong> the valuations conducted by Knight Frank and CBRE, the Independent<br />
Valuers each commissioned by the Manager and the Trustee respectively, <strong>to</strong> value the one-third interest in One<br />
Raffles Quay.<br />
(16) Forecast net property income for the Acquisition after Deed of Income Support.<br />
(17) Forecast property yield for the Acquisition has been computed as <strong>Suntec</strong> <strong>REIT</strong>’s share of the forecast net property<br />
income of One Raffles Quay divided by the Agreed Consideration paid by <strong>Suntec</strong> <strong>REIT</strong> for one-third interest in One<br />
Raffles Quay.<br />
(18) “NA” herein denotes not available due <strong>to</strong> insufficient publicly available information.<br />
The data presented above is for illustration purposes only. The properties which are the subject<br />
of the relevant past transactions above may differ from One Raffles Quay in terms of title, net<br />
lettable area, location, accessibility, composition of tenants, market risks, track record, future<br />
prospects and other relevant criteria and such differences may be significant. Further, the<br />
relevant past transactions may have taken place at different times and under different<br />
circumstances and such differences may be significant.<br />
We note that the relevant past transactions were undertaken with purchase prices either<br />
identical <strong>to</strong> or very close <strong>to</strong> the market valuations provided by third party experts. In this respect,<br />
the Acquisition is in line with market practice.<br />
Our general observations from the table above are as follows:<br />
(i)<br />
(ii)<br />
the Acquisition’s forecast property yield of 4.2% is within the range of the Office Properties’<br />
forecast property yield of 2.8% <strong>to</strong> 5.5%, and is higher than the simple average of the office<br />
properties’ forecast property yield of 4.0%; and<br />
the Acquisition’s forecast property yield of 4.2% is below the range of the Integrated<br />
Property Developments’ forecast property yield of between 4.5% and 5.0%.<br />
We note from the CBRE Second Quarter Market View Report, prime office yields in Singapore<br />
for the second quarter of 2007 were at 4.10%.<br />
F-20
6.6.2 Price Comparison<br />
K-<strong>REIT</strong> Asia has announced on 30 July 2007 that its trustee had entered in<strong>to</strong> a conditional share<br />
purchase agreement with Boulevard for the acquisition of one-third of the issued share capital<br />
of ORQPL for an agreed consideration of S$941.5 million.<br />
6.7 Issue of Consideration Units <strong>to</strong> the Vendor<br />
We note from the <strong>Circular</strong> that the issue of Consideration Units <strong>to</strong> the Vendor, as a wholly-owned<br />
indirect subsidiary of Cheung Kong, would align the interest of Cheung Kong with the<br />
<strong>Unitholders</strong> and demonstrate its commitment and support <strong>to</strong> <strong>Suntec</strong> <strong>REIT</strong>.<br />
We note that the issue price for the Consideration Units will be equal <strong>to</strong> the volume weighted<br />
average price per Unit for all trades on the SGX-ST, in the ordinary course of trading, for the last<br />
10 Market Days prior <strong>to</strong> Completion.<br />
The following are examples of similar offerings of units made by <strong>REIT</strong>s listed on the SGX-ST in<br />
connection with acquisitions made by such <strong>REIT</strong>s:<br />
Company Name<br />
Date of<br />
<strong>Circular</strong> Type of Transaction Issue Price (S$) Basis of the Issue Price<br />
Ascendas Real<br />
Estate Investment<br />
Trust<br />
Sep 2005<br />
Preferential offering and<br />
placement of<br />
approximately S$200<br />
million in relation <strong>to</strong> the<br />
equity fund raising for the<br />
acquisition of 12<br />
properties<br />
Preferential Offering and<br />
Placement:<br />
S$2.10 – S$2.15<br />
Discount of not more<br />
than 5% <strong>to</strong> the volume<br />
weighted average price<br />
for trades done for a full<br />
market day on the day of<br />
the signing of placement<br />
agreement.<br />
Ascott Residence<br />
Trust<br />
Mar 2007<br />
Preferential offering and<br />
placement of<br />
approximately S$199<br />
million in relation <strong>to</strong> the<br />
equity fund raising for the<br />
acquisition of properties<br />
in Australia, Japan,<br />
Philippines and Vietnam<br />
Preferential Offering:<br />
S$1.83 – S$1.88<br />
Placement:<br />
S$1.85 – S$1.90<br />
Discount of not more<br />
than 10% <strong>to</strong> the<br />
weighted average price<br />
for trades done for the<br />
full market day<br />
immediately preceding<br />
the lodgement of the<br />
offer information<br />
statement.<br />
CapitalCommercial<br />
Trust<br />
Aug 2006<br />
Preferential offering and<br />
placement of<br />
approximately S$800<br />
million in relation <strong>to</strong> the<br />
equity fund raising for the<br />
acquisition of Raffles City<br />
(as defined in the circular<br />
dated 15 Aug 2006)<br />
Preferential Offering:<br />
S$1.60 – S$1.67<br />
Placement:<br />
S$1.61 – S$1.68<br />
For the placement issue<br />
price, a discount of not<br />
more than 10% <strong>to</strong> the<br />
weighted average price<br />
for trades done for the<br />
full market day<br />
immediately preceding<br />
the lodgement of the<br />
offer information<br />
statement. For the<br />
preferential offering, a<br />
further discount of up <strong>to</strong><br />
1% in addition <strong>to</strong> the<br />
discount at for the<br />
placement issue price.<br />
F-21
Company Name<br />
Date of<br />
<strong>Circular</strong> Type of Transaction Issue Price (S$) Basis of the Issue Price<br />
Fortune Real<br />
Estate Investment<br />
Trust<br />
May 2005<br />
Preferential offering and<br />
placement of<br />
approximately HK$1.9<br />
billion in relation <strong>to</strong> the<br />
equity fund raising for the<br />
acquisition of 6<br />
properties (namely, City<br />
One Shatin, Waldorf<br />
Garden, Tsing Yi Square,<br />
Centre de Laguna, Lido<br />
Garden, and Rhine<br />
Garden)<br />
Preferential Offering:<br />
S$1.60 – S$1.67<br />
Placement:<br />
S$1.61 – S$1.68<br />
Discount of not more<br />
than 5% <strong>to</strong> the volume<br />
weighted average price<br />
for trades done for a full<br />
market day on the day of<br />
the signing of placement<br />
agreement.<br />
Mapletree<br />
Logistics Trust<br />
Dec 2005<br />
Issuance of units as part<br />
of the purchase<br />
consideration, and<br />
preferential offering and<br />
placement of<br />
approximately S$130<br />
million in relation <strong>to</strong> the<br />
equity fund raising for the<br />
acquisition of Hong Kong<br />
IPT Properties (as<br />
defined in the circular<br />
dated 22 Dec 2005)<br />
Preferential Offering and<br />
Placement:<br />
S$0.945 – S$0.96<br />
Consideration Units:<br />
Same issue price as the<br />
placement issue price<br />
Discount of not more<br />
than 5% <strong>to</strong> the volume<br />
weighted average price<br />
for trades done for a full<br />
market day on the day of<br />
the signing of placement<br />
agreement.<br />
Source: SGX-ST circulars <strong>to</strong> shareholders, and listing prospectus.<br />
For all the above offerings, the issue price are at discounts of approximately 5% <strong>to</strong> 10% <strong>to</strong> the<br />
volume-weighted average unit price for one full market day at relevant points in time. We note<br />
that the issue price of Consideration Units would be equal <strong>to</strong> the volume weighted average price<br />
per Unit for the last 10 Market Days prior <strong>to</strong> Completion without the imposition of a discount. In<br />
addition, deriving the average unit price over a period of 10 Market Days may serve <strong>to</strong> even out<br />
the effects of unit price volatility.<br />
6.8 OTHER RELEVANT FACTORS<br />
6.8.1 Occupancy Levels of One Raffles Quay<br />
According <strong>to</strong> the Urban Redevelopment Authority (“URA”) Statistics as stated in URA’s<br />
news release dated 27 July 2007, the island wide occupancy rates (2nd Quarter 2007)<br />
for Category 1 office space was 95%.<br />
As compared <strong>to</strong> that, One Raffles Quay has a 100% occupancy rate for the North Tower,<br />
South Tower and the retail space as at the Latest Practicable Date.<br />
6.8.2 Rental Top up by the Vendor<br />
We note that, as One Raffles Quay is a recently completed development, a substantial<br />
number of major tenancies were leased at rents which are significantly below current<br />
market rental rates. In order <strong>to</strong> ensure a stable level of cash flow, the Trustee has<br />
entered in<strong>to</strong> a Deed of Income Support with the Vendor and the Guaran<strong>to</strong>r. Under the<br />
Deed of Income Support, the Vendor has undertaken, starting from Completion, <strong>to</strong> pay<br />
<strong>to</strong> the Trustee quarterly instalments for 54 months up <strong>to</strong> an aggregate amount of<br />
S$103.48 million (inclusive of GST). The Vendor’s commitment under the Deed of<br />
Income Support is guaranteed by the Guaran<strong>to</strong>r.<br />
F-22
6.8.3 Income Support<br />
When period of Income Support ends, certain existing leases may still be at current<br />
rates. It is assumed that these will be renewed at the market rate prevailing at their<br />
respective expiry dates<br />
7. CONCLUSION<br />
In arriving at our opinion on the Acquisition, we have deliberated on the fac<strong>to</strong>rs which we<br />
consider <strong>to</strong> be pertinent and <strong>to</strong> have a bearing on our assessment including, inter alia, the<br />
following:<br />
(i)<br />
(ii)<br />
the rationale for the Acquisition and the issue of the Consideration Shares as highlighted<br />
in the <strong>Circular</strong>;<br />
the Acquisition, financed via a combination of equity and debt will result in DPU accretion<br />
in the scenarios set out as follows for the Forecast Year:<br />
(a)<br />
(b)<br />
(c)<br />
Under Scenario A and based on an illustrative conversion price of S$2.51 (the<br />
mid-point in the illustrative conversion price range of S$2.33 <strong>to</strong> S$2.79) for the<br />
Convertible Bonds, the Acquisition, combined with the proposed debt financing, will<br />
provide a DPU accretion of 0.25 cents (an increase of approximately 3.0%) which will<br />
increase <strong>Suntec</strong> <strong>REIT</strong>’s DPU from 8.32 cents <strong>to</strong> 8.57 cents for the Forecast Year;<br />
Under Scenario B and based on an illustrative coupon rate of 3.00% and a conversion<br />
premium of 35% for the Convertible Bonds, the Acquisition, combined with the<br />
proposed debt financing, will provide a DPU accretion of 0.37 cents (an increase of<br />
approximately 4.4%) which will increase <strong>Suntec</strong> <strong>REIT</strong>’s DPU from 8.32 cents <strong>to</strong> 8.69<br />
cents for the Forecast Year; and<br />
Under Scenario C, based on an illustrative interest rate of 3.5%, the Acquisition, if<br />
funded by the issue of Consideration Units and a drawdown from the Debt Financing,<br />
will provide a DPU accretion of 0.22 cents (an increase of approximately 2.6%, which<br />
will increase <strong>Suntec</strong> <strong>REIT</strong>’s DPU from 8.32 cents <strong>to</strong> 8.54 cents for the Forecast Year.<br />
(iii) the increase in pro forma NAV per Unit of the Enlarged Portfolio of <strong>Suntec</strong> <strong>REIT</strong> as at 30<br />
September 2006 (assuming that all Deferred Units were issued on the Listing Date and the<br />
Bonds were fully converted on 1 Oc<strong>to</strong>ber 2005) of 12.26 cents;<br />
(iv)<br />
(v)<br />
(vi)<br />
(vii)<br />
the Agreed Consideration of S$941.5 million being equivalent <strong>to</strong> the valuation in the<br />
one-third interest in One Raffles Quay by the Independent Valuers;<br />
based on the Manager’s forecast and taking in<strong>to</strong> account the Agreed Consideration of<br />
S$941.5 million, the forecast consolidated Net Property Income yield is approximately<br />
4.2% for the Forecast Year. We note that this is higher than the Net Property Income yield<br />
of approximately 3.6% for the Existing Properties for the nine months ended 30 June 2007;<br />
One Raffles Quay is an office property. The Acquisition’s forecast property yield of 4.2% is<br />
within the range of the Office Properties’ forecast property yield of 2.8% <strong>to</strong> 5.5%, and is<br />
higher than the simple average of the Office Properties’ forecast property yield of 4.0%.<br />
However, the Acquisition’s forecast property yield of 4.2% is below the range of the<br />
Integrated Property Developments’ forecast property yield of between 4.5% and 5.0% but<br />
this should be assessed in light of One Raffles Quay being an office property as opposed<br />
<strong>to</strong> an integrated property development;<br />
the issue price of the Consideration Units being equal <strong>to</strong> the volume weighted average<br />
price per Unit for all trades on the SGX-ST, in the ordinary course of trading, for the last 10<br />
Market Days prior <strong>to</strong> Completion;<br />
F-23
(viii) the announcement by K-<strong>REIT</strong> Asia on 30 July 2007 that its trustee had entered in<strong>to</strong> a<br />
conditional share purchase agreement with Boulevard for the acquisition of one-third of the<br />
issued share capital of ORQPL for the Agreed Consideration of S$941.5 million; and<br />
(ix)<br />
other relevant fac<strong>to</strong>rs as set out in section 6.8 above.<br />
Based on the analyses undertaken by us and subject <strong>to</strong> the qualifications and<br />
assumptions made herein, EYCF is of the opinion that the Acquisition (<strong>to</strong>gether with the<br />
entry in<strong>to</strong> the Share Purchase Agreement) and the issue of the Consideration Units, are<br />
on normal commercial terms and not prejudicial <strong>to</strong> the interests of <strong>Suntec</strong> <strong>REIT</strong> and the<br />
minority <strong>Unitholders</strong>. Therefore, we advise the Independent Direc<strong>to</strong>rs <strong>to</strong> recommend that<br />
the <strong>Unitholders</strong> vote in favour of the Acquisition and the issue of the Consideration Units<br />
at the EGM.<br />
In giving our recommendation, we have not had regard <strong>to</strong> the specific investment objectives,<br />
financial situation, tax position or unique needs and constraints of any individual Unitholder. As<br />
the investment objectives of every Unitholder is different, we would advise that if a Unitholder<br />
require advice in the context of their specific investment position, he should consult his<br />
s<strong>to</strong>ckbroker, bank manager, solici<strong>to</strong>r, accountant or other professional advisers immediately.<br />
This letter is intended for the sole use of the Independent Direc<strong>to</strong>rs and no other person may<br />
reproduce, disseminate or quote this letter (or any part thereof) for any other purpose at any time<br />
and in any manner without the prior written consent of EYCF in each specific case. This opinion<br />
is governed by, and construed in accordance with, the laws of Singapore, and is strictly limited<br />
<strong>to</strong> the matters stated herein and does not apply by implication <strong>to</strong> any other matter.<br />
Yours faithfully<br />
For and on behalf of<br />
Ernst & Young Corporate Finance Pte Ltd<br />
Eric Wong<br />
Direc<strong>to</strong>r<br />
F-24
APPENDIX G<br />
TAXATION<br />
The following is a discussion of certain tax matters arising under the current tax laws of Singapore and<br />
is not intended <strong>to</strong> be and does not constitute legal or tax advice. While this discussion is considered <strong>to</strong><br />
be a correct interpretation of existing laws in force as at the date of this Offering <strong>Circular</strong>, no assurance<br />
can be given that courts or fiscal authorities responsible for the administration of such laws will agree<br />
with this interpretation or that changes in such laws will not occur or changes which could be<br />
retrospective in effect.<br />
The discussion is limited <strong>to</strong> a summary of certain tax considerations in Singapore with respect <strong>to</strong> the<br />
subscription for and conversion of the Convertible Bonds and ownership and disposal of the Units by<br />
inves<strong>to</strong>rs (either individuals or corporations), and does not purport <strong>to</strong> be a comprehensive nor<br />
exhaustive description of all of the tax considerations that may be relevant <strong>to</strong> a decision <strong>to</strong> subscribe<br />
<strong>to</strong>, own, dispose of or convert the Convertible Bonds or own or dispose of the Units and does not<br />
purport <strong>to</strong> deal with the tax consequences applicable <strong>to</strong> all categories of inves<strong>to</strong>rs, some of which (such<br />
as dealers in securities) may be subject <strong>to</strong> special rules.<br />
Prospective inves<strong>to</strong>rs are advised <strong>to</strong> consult their tax advisers regarding the overall tax consequences<br />
of ownership of the Convertible Bonds and Units.<br />
SINGAPORE TAXATION OF SUNTEC <strong>REIT</strong> — ONE RAFFLES QUAY<br />
<strong>Suntec</strong> <strong>REIT</strong> will receive its proportionate share of the rental income and other related income and<br />
receipts from the One Raffles Quay property (“One Raffles Quay”) held indirectly through Comina<br />
Investment Limited (“Comina”) and One Raffles Quay Pte Ltd (“ORQPL”), in a combination of the<br />
following forms:<br />
(i)<br />
(ii)<br />
(iii)<br />
(iv)<br />
Singapore-sourced dividend income;<br />
Singapore-sourced interest income;<br />
Proceeds from the repayment of shareholder’s loans and/or a return of capital; and/or<br />
Gains from disposal of shares in Comina.<br />
<strong>Suntec</strong> <strong>REIT</strong> may also receive <strong>to</strong>p-up payments pursuant <strong>to</strong> a Deed of Income Support entered in<strong>to</strong><br />
with Cavell Limited and the Guaran<strong>to</strong>r.<br />
Singapore-sourced dividend income<br />
Under Singapore’s one-tier corporate tax system (the “One-Tier System”), dividends payable by<br />
Singapore resident companies will be exempt from Singapore income tax in the hands of the immediate<br />
shareholders, regardless of whether underlying tax has been suffered on the profits out of which the<br />
dividends are paid.<br />
Consequently, as ORQPL is resident in Singapore and is under the One-Tier System, the Singaporesourced<br />
dividend income receivable by Comina from ORQPL will be exempt from Singapore income tax<br />
(“Tax Exempt Income”).<br />
When Comina, in turn, distributes dividend income <strong>to</strong> <strong>Suntec</strong> <strong>REIT</strong>, if Comina is a tax resident of<br />
Singapore, that is, the control and management of its business is exercised in Singapore and as it is<br />
under the One-Tier System, the dividend income will be treated as Singapore-sourced income and will<br />
thus be exempt from Singapore income tax when received by <strong>Suntec</strong> <strong>REIT</strong> (“Tax-Exempt Income”).<br />
G-1
Singapore-sourced interest income<br />
Singapore-sourced interest income receivable by <strong>Suntec</strong> <strong>REIT</strong> from ORQPL will be subject <strong>to</strong><br />
Singapore income tax at the corporate tax rate of 18% 1 , after adjusting for allowable expenses (“Taxed<br />
Income”).<br />
However, in a recent Income Tax (Amendment) Bill released by the Ministry of Finance for public<br />
consultation on 15 June 2007, tax transparency treatment for Singapore-listed real estate investment<br />
trusts would be extended <strong>to</strong> include income that is payable out of rental income or income from the<br />
management or holding of immovable property in Singapore, except for gains from the disposal of such<br />
immovable property. This proposed tax transparency treatment will take effect from the year of<br />
assessment 2008 (i.e. financial year ending 2007).<br />
Consequently, if this proposed amendment is passed in Parliament and enacted as law, the interest<br />
income that is payable out of rental income or income from the management of holding of ORQ and<br />
receivable by <strong>Suntec</strong> <strong>REIT</strong> would be accorded tax transparency treatment. As such, <strong>Suntec</strong> <strong>REIT</strong> will<br />
not be taxed on such interest income after adjusting for allowable expenses, if this amount is distributed<br />
<strong>to</strong> <strong>Unitholders</strong> in the year in which the income is earned. Instead, tax will be imposed on the<br />
distributions made out of such interest income (“Taxable Income”) <strong>to</strong> <strong>Unitholders</strong>, by way of tax<br />
deduction at source or direct assessment of tax on the <strong>Unitholders</strong>.<br />
For such Taxable Income that is not distributed in the year the income is earned (“Retained Taxable<br />
Income”), the Retained Taxable Income will be subject <strong>to</strong> Singapore income tax at the prevailing<br />
corporate tax rate in the hands of <strong>Suntec</strong> <strong>REIT</strong>. Consequently, any subsequent distribution made by<br />
<strong>Suntec</strong> <strong>REIT</strong> out of such after tax Retained Taxable Income would be a distribution of Taxed Income.<br />
Proceeds from the repayment of shareholder’s loans and/or a return of capital<br />
<strong>Suntec</strong> <strong>REIT</strong> may also receive proceeds from the repayment of shareholder’s loans or a return of<br />
capital from ORQPL or Comina. Such proceeds are capital returns (“Capital Distributions”) and hence<br />
will not be liable <strong>to</strong> Singapore income tax.<br />
Gains from the disposal of shares in Comina by <strong>Suntec</strong> <strong>REIT</strong><br />
In the event that shares in Comina are disposed of by <strong>Suntec</strong> <strong>REIT</strong>, the tax on gains realised from the<br />
disposal will be assessed on the Trustee of <strong>Suntec</strong> <strong>REIT</strong> if the gains are considered <strong>to</strong> be trading gains.<br />
However, gains of a capital nature are not subject <strong>to</strong> tax as there is no capital gains tax in Singapore.<br />
Whether a gain realised from the disposal of shares is a capital gain or a trading profit will have <strong>to</strong> be<br />
determined based on the circumstances of the transaction and the overall business traits of <strong>Suntec</strong><br />
<strong>REIT</strong>.<br />
Where gains arising from the disposal of shares in Comina by the Trustee are trading gains, such<br />
trading gains are assessed <strong>to</strong> tax on the Trustee at the prevailing corporate tax rate, (“Taxed Income”)<br />
and the Trustee will have <strong>to</strong> pay the tax so assessed.<br />
Gains from the disposal of shares in ORQPL by Comina<br />
In the event that shares in ORQPL are disposed of by Comina and if Comina is a resident of Singapore,<br />
the tax on gains realised from the disposal will be assessed <strong>to</strong> tax if the gains are considered <strong>to</strong> be<br />
trading gains. However, gains of a capital nature are not subject <strong>to</strong> tax as there is no capital gains tax<br />
in Singapore. Whether a gain realised from the disposal of shares is a capital gain or a trading profit<br />
will have <strong>to</strong> be determined based on the circumstances of the transaction and the overall business traits<br />
of Comina.<br />
1<br />
While the current corporate tax rate is 20%, in the 2007 Budget announcement, the rate is reduced <strong>to</strong> 18% with effect from<br />
the year of assessment 2008 (i.e. financial year ending 2007). The amendment is subject <strong>to</strong> approval of Parliament.<br />
G-2
Top-up payments made pursuant <strong>to</strong> the Deed of Income Support<br />
Top-up payments made pursuant <strong>to</strong> the Deed of Income Support will be subject <strong>to</strong> Singapore income<br />
tax at the prevailing corporate tax rate (“Taxed Income”).<br />
SINGAPORE TAXATION OF SUNTEC <strong>REIT</strong> — THE EXISTING PROPERTIES<br />
In its initial public offering in 2004, <strong>Suntec</strong> <strong>REIT</strong> has obtained a tax ruling dated 15 June 2004 from the<br />
IRAS for its existing Singapore properties. Under the said tax ruling, the Trustee of <strong>Suntec</strong> <strong>REIT</strong> will not<br />
be taxed on its Taxable Income that is distributed <strong>to</strong> <strong>Unitholders</strong>. This is on the condition that at least<br />
90.0% of such income is distributed in the year in which the income is derived. Instead, tax will be<br />
imposed on the distributions made out of such Taxable Income <strong>to</strong> <strong>Unitholders</strong>, by way of tax deduction<br />
at source or direct assessment of tax on the <strong>Unitholders</strong>.<br />
SINGAPORE TAXATION OF THE UNITHOLDERS — ONE RAFFLES QUAY & EXISTING<br />
PROPERTIES<br />
<strong>Suntec</strong> <strong>REIT</strong> will be making distributions <strong>to</strong> its <strong>Unitholders</strong> out of the above Tax-Exempt Income, Taxed<br />
Income and Taxable Income. <strong>Suntec</strong> <strong>REIT</strong> may also be making capital distributions <strong>to</strong> its <strong>Unitholders</strong>.<br />
Distribution of Tax-Exempt Income<br />
Any distributions made by <strong>Suntec</strong> <strong>REIT</strong> <strong>to</strong> the <strong>Unitholders</strong> out of Tax-Exempt Income would be exempt<br />
from Singapore income tax in the hands of all <strong>Unitholders</strong>, regardless of their corporate or residence<br />
status. It should be noted that only Tax-Exempt Income received by <strong>Suntec</strong> <strong>REIT</strong> within each<br />
distribution period is distributable <strong>to</strong> the <strong>Unitholders</strong> for that distribution period.<br />
Distribution of Taxed Income (Income taxed at Trustee’s level)<br />
Any distributions made by <strong>Suntec</strong> <strong>REIT</strong> <strong>to</strong> the <strong>Unitholders</strong> out of Taxed Income would be exempt from<br />
Singapore income tax in the hands of all <strong>Unitholders</strong>, regardless of their corporate or residence status.<br />
<strong>Unitholders</strong> would not be able <strong>to</strong> claim a credit or refund on the tax paid by <strong>Suntec</strong> <strong>REIT</strong> on such Taxed<br />
Income.<br />
Distribution of Taxable Income (Income granted tax transparency treatment)<br />
Taxable Income of <strong>Suntec</strong> <strong>REIT</strong> that is granted tax transparency treatment is not subject <strong>to</strong> Singapore<br />
income tax in the hands of <strong>Suntec</strong> <strong>REIT</strong>. Instead, tax is imposed on the distributions made by <strong>Suntec</strong><br />
<strong>REIT</strong> out of such Taxable Income <strong>to</strong> the <strong>Unitholders</strong>. Notwithstanding this, individuals and Qualifying<br />
<strong>Unitholders</strong> will receive distributions from Taxable Income without deduction of tax. Tax will however be<br />
deducted at source at the prevailing corporate tax rate or at the reduced rate of 10.0% from such<br />
distributions made <strong>to</strong> all other <strong>Unitholders</strong>.<br />
A “Qualifying Unitholder” refers <strong>to</strong> a:<br />
(i)<br />
(ii)<br />
(iii)<br />
Singapore incorporated company which is tax-resident in Singapore;<br />
body of persons, other than a company or partnership, registered or constituted in Singapore (for<br />
example, a <strong>to</strong>wn council, a statu<strong>to</strong>ry board, a registered charity, a registered cooperative society,<br />
a registered trade union, a management corporation, a club and trade and industry association);<br />
and<br />
Singapore branch of a foreign company which has presented a letter of approval from the IRAS<br />
granting a waiver from tax deduction at source in respect of distributions from <strong>Suntec</strong> <strong>REIT</strong>.<br />
The reduced rate of 10.0% applies <strong>to</strong> distributions from Taxable Income made by <strong>Suntec</strong> <strong>REIT</strong> <strong>to</strong> a<br />
Qualifying Foreign Non-Individual Unitholder during the period from 18 February 2005 <strong>to</strong> 17 February<br />
2010.<br />
G-3
A Qualifying Foreign Non-Individual Unitholder is a person (other than an individual) who is not a<br />
resident of Singapore for income tax purposes and:<br />
(i)<br />
(ii)<br />
who does not have a permanent establishment in Singapore; or<br />
who carries on any operation in Singapore through a permanent establishment in Singapore,<br />
where the funds used by that person <strong>to</strong> acquire the Units are not obtained from that operation.<br />
Individuals, irrespective of their nationality and tax residence status, are exempt from tax on the gross<br />
amount of the distributions from Taxable Income of <strong>Suntec</strong> <strong>REIT</strong>. This tax exemption does not apply <strong>to</strong><br />
individuals who derive such distributions through a partnership in Singapore or from the carrying on of<br />
a trade, business or profession. These individuals are liable <strong>to</strong> tax on the gross amount of distributions<br />
from Taxable Income received at their own applicable income tax rates.<br />
Qualifying <strong>Unitholders</strong> are liable <strong>to</strong> tax on the gross amount of distributions from Taxable Income.<br />
Where tax had been deducted at source at the prevailing corporate rate, the tax deducted is not a final<br />
tax and may be used as a set-off against the Singapore income tax liability of the <strong>Unitholders</strong>.<br />
Qualifying Foreign Non-Individual <strong>Unitholders</strong> will receive distributions net of tax at the reduced rate of<br />
10.0% for distributions made till 17 February 2010. The 10.0% tax is a final tax.<br />
Capital Distributions<br />
Capital Distributions refer <strong>to</strong> distributions made by <strong>Suntec</strong> <strong>REIT</strong> out of proceeds received from the<br />
repayment of the shareholder’s loans, and/or a return of capital. Such distributions would be made out<br />
of <strong>Unitholders</strong>’ contributions. <strong>Unitholders</strong> will not be subject <strong>to</strong> Singapore income tax on such<br />
distributions. These distributions will be treated as a return of capital for Singapore income tax<br />
purposes, subject <strong>to</strong> the following conditions:<br />
(i)<br />
(ii)<br />
The following statements are included in the annual dividend statement that CDP issues <strong>to</strong><br />
deposi<strong>to</strong>rs:<br />
• This amount of distribution is treated as a return of capital for Singapore income tax<br />
purposes. Therefore, such return of capital cannot be onward distributed as income by<br />
<strong>Unitholders</strong>. These <strong>Unitholders</strong> (and each subsequent level of unitholders) cannot also<br />
onward distribute such return of capital as income.<br />
• For <strong>Unitholders</strong> (and each subsequent level of unitholders) who hold the Units as trading or<br />
business assets and are liable <strong>to</strong> Singapore income tax on gains arising from the disposal<br />
of the Units, the amount of Capital Distributions will be applied <strong>to</strong> reduce the cost of the Units<br />
for the purpose of calculating the amount of taxable trading gains when the Units are<br />
disposed of. If the amount of Capital Distributions exceeds the cost of the Units, the excess<br />
will be subject <strong>to</strong> tax as trading income of such unitholders.<br />
<strong>Suntec</strong> <strong>REIT</strong> will maintain a memorandum account showing the movements in <strong>Unitholders</strong>’ Funds<br />
<strong>to</strong> track the amount of capital distributed, and <strong>to</strong> submit such account prior <strong>to</strong> making any<br />
distribution of capital.<br />
GAINS ON DISPOSAL OF UNITS<br />
<strong>Unitholders</strong> who dispose of the units in <strong>Suntec</strong> <strong>REIT</strong> may realise a gain or loss on such disposal. In<br />
general, the gains on disposal of units may be treated as capital gains, and therefore not subject <strong>to</strong><br />
Singapore tax as there is no capital gains tax in Singapore, or they may be treated as income in nature,<br />
in which case, they are subject <strong>to</strong> Singapore income tax in the hands of the <strong>Unitholders</strong>.<br />
Whether or not a Unitholder is subject <strong>to</strong> Singapore income tax on the disposal gains depends on<br />
whether or not the Unitholder is in the trade or business of dealing in investments. This will be<br />
determined based on the Unitholder’s circumstances. <strong>Unitholders</strong> who are not in the trade or business<br />
of dealing in investments may also be chargeable <strong>to</strong> tax on the gains realised from the disposal of units<br />
G-4
if such gains are treated as trading gains having regard <strong>to</strong> the circumstances of the transaction.<br />
<strong>Unitholders</strong> are encouraged <strong>to</strong> seek advice from their tax advisors <strong>to</strong> determine the tax implications<br />
regarding the acquisition, ownership and disposition of their investments in Units.<br />
SINGAPORE TAXATION IN RELATION TO THE CONVERTIBLE BONDS<br />
In the event that the Convertible Bonds (“Bonds”) are issued, it is intended that the Bonds will be<br />
Qualifying Debt Securities for the purposes of Section 13(16) of the Singapore Income Tax Act (“SITA”),<br />
Chapter 134 of Singapore. Accordingly, a summary of the Singapore income tax implications are as<br />
follows:<br />
• Where interest or, if any discount income (not including discount income from secondary trading)<br />
(“Discount”) is derived from the Bonds by any person who is not resident in Singapore and who<br />
does not carry on any operation in Singapore through a permanent establishment in Singapore,<br />
the tax exemption applies;<br />
• Non-residents who have permanent establishments in Singapore can also benefit from this<br />
exemption provided that they do not acquire the Bonds using any funds from Singapore<br />
operations. Funds from Singapore operations means, in relation <strong>to</strong> a person, the funds and profits<br />
of that person’s operations through a permanent establishment in Singapore; and<br />
• Interest and Discount, if any, on the Bonds received by any company in Singapore and by any<br />
body of persons (as defined in the SITA) in Singapore is subject <strong>to</strong> income tax at a concessionary<br />
rate of 10 percent.<br />
Taxation of Bondholders who are Individuals<br />
Certain Singapore-sourced investment income derived by individuals on or after 1 January 2004 from<br />
financial instruments is exempt from tax, including:<br />
(a)<br />
(b)<br />
interest from debt securities; and<br />
discount income (not including discount income from secondary trading) from debt securities<br />
issued on or after 17 February 2006 2 .<br />
except where such income is derived through a partnership in Singapore or is derived from the carrying<br />
on of a business or profession in Singapore.<br />
Taxation of Bondholders other than Individuals<br />
(A)<br />
Bondholders of Qualifying Debt Securities — Tax treatment and conditions of Qualifying<br />
Debt Securities<br />
As the issue of the Bonds is lead managed and arranged jointly by Citigroup and Deutsche Bank,<br />
which are both Financial Sec<strong>to</strong>r Incentive (Bond Market) Companies (as defined in the SITA), the<br />
Bonds would be Qualifying Debt Securities for the purposes of section 13(16) of the SITA <strong>to</strong> which<br />
the following treatments apply:<br />
(i)<br />
subject <strong>to</strong> certain conditions having been fulfilled (including the submission by or on behalf<br />
of the Issuer of a Return on Debt Securities <strong>to</strong> the Monetary Authority of Singapore (“MAS”)<br />
and the Comptroller of Income Tax (“Comptroller”) within one month from the date of issue<br />
of the Bonds and subject <strong>to</strong> the <strong>Suntec</strong> <strong>REIT</strong> including in all offering documents relating <strong>to</strong><br />
the Bonds a statement <strong>to</strong> the effect that where interest or, if any Discount is derived from the<br />
Bonds by any person who is not resident in Singapore and who carries on any operation in<br />
Singapore through a permanent establishment in Singapore, the tax exemption in this<br />
paragraph does not apply if such person acquires the Bonds using funds from Singapore<br />
operations), interest and Discount, if any, on the Bonds received by a holder who is not<br />
2<br />
Whilst this was proposed in 2006 Budget, it has <strong>to</strong>-date not been promulgated as law.<br />
G-5
esident in Singapore and who does not have a permanent establishment in Singapore is<br />
exempt from Singapore income tax. Non-residents who have permanent establishments in<br />
Singapore can also benefit from this exemption provided that they do not acquire the Bonds<br />
using any funds from Singapore operations. Funds from Singapore operations means, in<br />
relation <strong>to</strong> a person, the funds and profits of that person’s operations through a permanent<br />
establishment in Singapore;<br />
(ii)<br />
(iii)<br />
(iv)<br />
subject <strong>to</strong> certain conditions having been fulfilled (including the submission by or on behalf<br />
of <strong>Suntec</strong> <strong>REIT</strong> of a return on debt securities <strong>to</strong> the MAS and the Comptroller within one<br />
month from the date of issue of the Bonds) interest and Discount, if any, on the Bonds<br />
received by any company in Singapore is subject <strong>to</strong> income tax at a concessionary rate of<br />
10 percent.;<br />
interest and Discount, if any, on the Bonds received by any body of persons (as defined in<br />
the SITA) in Singapore is subject <strong>to</strong> income tax at a concessionary rate of 10 percent.; and<br />
subject <strong>to</strong>:<br />
(i)<br />
(ii)<br />
<strong>Suntec</strong> <strong>REIT</strong> including in all offering documents relating <strong>to</strong> the Bonds a statement <strong>to</strong><br />
the effect that any person whose interest or Discount, if any, derived from the Bonds<br />
is not exempt from tax shall include such interest or Discount, if any, in a return of<br />
income made under the SITA; and<br />
<strong>Suntec</strong> <strong>REIT</strong> or such other person as the Comptroller may direct, furnishing <strong>to</strong> the<br />
Comptroller a return on the debt securities within one month from the date of issue of<br />
the Bonds and such other particulars in connection with those Bonds as the<br />
Comptroller may require,<br />
interest or Discount, if any, derived from the Bonds is not subject <strong>to</strong> the withholding of tax by<br />
<strong>Suntec</strong> <strong>REIT</strong>.<br />
It was announced in 2007 Budget that the above tax exemption and concessionary tax rate on<br />
income derived from qualifying debt securities would also apply <strong>to</strong> redemption premium,<br />
prepayment fees and break costs derived by inves<strong>to</strong>rs pursuant <strong>to</strong> their investments in qualifying<br />
debt securities issued on or after 15 February 2007, subject <strong>to</strong> conditions yet <strong>to</strong> be specified 3 .<br />
However, notwithstanding the foregoing:<br />
(i)<br />
(ii)<br />
if during the primary launch of the Bonds, the Bonds are issued <strong>to</strong> fewer than four persons<br />
and 50 percent or more of the issue of the Bonds is beneficially held or funded, directly or<br />
indirectly, by related parties of <strong>Suntec</strong> <strong>REIT</strong>, the Bonds would not qualify as Qualifying Debt<br />
Securities; and<br />
even though the Bonds are “Qualifying Debt Securities”, if, at any time during the tenure of<br />
the Bonds, 50 percent or more of the issue of the Bonds is held beneficially or funded,<br />
directly or indirectly, by any related party(ies) of <strong>Suntec</strong> <strong>REIT</strong>, interest and Discount, if any,<br />
derived from the Bonds held by<br />
(aa) any related party of <strong>Suntec</strong> <strong>REIT</strong>; or<br />
(bb) any other person where the funds used by such person <strong>to</strong> acquire the Bonds are<br />
obtained, directly or indirectly from any related party of <strong>Suntec</strong> <strong>REIT</strong>,<br />
shall not be eligible for the tax exemption or concessionary rate of tax of 10 percent<br />
described in paragraphs (a) <strong>to</strong> (d) above.<br />
3<br />
Please note that the aforesaid expansion on the scope of the Qualifying Debt Securities incentives is still subject <strong>to</strong> the<br />
approval of Parliament.<br />
G-6
The term “related party”, in relation <strong>to</strong> a person, means any other person who, directly or indirectly,<br />
controls that person, or is controlled, directly or indirectly, by that person, or where he and that<br />
other person directly or indirectly are under the control of a common person.<br />
Notwithstanding that <strong>Suntec</strong> <strong>REIT</strong> is permitted <strong>to</strong> make payments under the Bonds without<br />
deduction or withholding of tax under sections 45 and 45A of the SITA, any person whose interest<br />
or Discount derived from the Bonds is not exempt from tax is required under the SITA <strong>to</strong> include<br />
such interest or Discount in a return of income made under the SITA.<br />
(B)<br />
Bondholders of Non-Qualifying Debt Securities — Tax treatment<br />
Under the current Singapore income tax legislation, payments falling within section 12(6) of the<br />
SITA (including interest) are deemed <strong>to</strong> be derived from Singapore where the payments are:<br />
(a)<br />
(b)<br />
(c)<br />
borne, directly or indirectly, by a person resident in Singapore or a permanent establishment<br />
in Singapore (except in respect of a business carried on outside Singapore through a<br />
permanent establishment outside Singapore or any immovable property situated outside<br />
Singapore);<br />
deductible against any income accruing in or derived from Singapore; or<br />
income derived from loans where the funds provided by such loans are brought in<strong>to</strong> or used<br />
in Singapore.<br />
Further, where such payments are made <strong>to</strong> a person not known <strong>to</strong> be a resident in Singapore for<br />
tax purposes, such payments are subject <strong>to</strong> withholding tax in Singapore at the rate of 15 percent.<br />
The 15 percent tax rate may be reduced by applicable avoidance of double taxation agreements<br />
concluded between Singapore and the relevant countries. However, if the payment is derived by<br />
a person not resident in Singapore from its trade, business, profession or vocation carried on or<br />
exercised in Singapore or is effectively connected with any permanent establishment in Singapore<br />
of that person, the withholding tax rate is 18 percent with effect from the Year of Assessment 2008<br />
(excluding payments made <strong>to</strong> non-resident individuals/Hindu Joint Families 4 ).<br />
Gains on disposal (including by way of conversion) of the Bonds<br />
Singapore does not impose tax on capital gains. However, in the event that the gains arising from the<br />
disposal of the Bonds (including by way of conversion) are considered <strong>to</strong> be trading gains, such gains<br />
would be subject <strong>to</strong> tax.<br />
Whether or not a gain is treated as trading gain or capital gain depends on whether or not the<br />
Bondholders is in the trade or business of dealing in investments. This will be determined based on the<br />
Bondholders’ circumstances. Bondholders who are not in the trade or business of dealing in<br />
investments may also be chargeable <strong>to</strong> tax on the gains realised from the disposal of bonds if such<br />
gains are treated as trading gains having regard <strong>to</strong> the circumstances of the transaction. Bondholders<br />
are encouraged <strong>to</strong> seek advice from their tax advisers <strong>to</strong> determine the tax implications regarding the<br />
acquisition, ownership and disposition of their investments in Bonds.<br />
Certain tax consequences of a conversion of the Bonds<br />
A conversion of the Bonds in<strong>to</strong> Units may be regarded as a disposal of the Bonds for Singapore income<br />
tax purposes and a Bondholder may consequently need <strong>to</strong> recognise a gain or loss upon the<br />
conversion of the Bonds in<strong>to</strong> Units. Such gain or loss may be income or capital in nature depending on<br />
the circumstances of the holder (as discussed above) and may or may not be taxable or deductible<br />
4<br />
The proposed reduction in the withholding tax rate <strong>to</strong> 18 percent with effect from the Year of Assessment 2008 on certain<br />
payments made <strong>to</strong> non-resident persons (other than non-resident individuals/Hindu joint families) in 2007 Budget is still<br />
subject <strong>to</strong> the approval of Parliament.<br />
G-7
accordingly. In addition, it is not entirely clear whether the value of the Units at the relevant time would<br />
be regarded as the proceeds of such disposal <strong>to</strong> be used <strong>to</strong> compute the gain or loss upon the<br />
conversion of the Bonds in<strong>to</strong> Units.<br />
Non-resident Bondholders receiving gains on the sale or conversion of The Bonds may also be liable<br />
<strong>to</strong> tax in their respective foreign jurisdictions. Subject <strong>to</strong> the domestic laws of the respective foreign<br />
jurisdictions and any avoidance of double taxation agreements concluded with Singapore, there could<br />
be foreign tax relief available for the Singapore tax suffered on the gains (if applicable).<br />
Adoption of FRS 39 treatment for Singapore income tax purposes<br />
On 30 December 2005, the Inland Revenue Authority of Singapore issued a circular entitled “Income<br />
Tax Implications arising from the adoption of FRS 39 — Financial instruments: Recognition and<br />
Measurement” (“FRS 39 <strong>Circular</strong>”). Legislative amendments <strong>to</strong> give effect <strong>to</strong> the FRS 39 <strong>Circular</strong> were<br />
enacted on 13 February 2007 under the Income Tax (Amendment) Act 2007.<br />
The FRS 39 <strong>Circular</strong> generally applies, subject <strong>to</strong> certain “opt-out” provisions, <strong>to</strong> taxpayers who are<br />
required <strong>to</strong> comply with FRS 39 for financial reporting purposes.<br />
Holders of the Bonds who may be subject <strong>to</strong> the tax treatment under the FRS 39 <strong>Circular</strong> should consult<br />
their own accounting and tax advisers regarding the Singapore income tax consequences of their<br />
acquisition, holding or conversion of the Bonds.<br />
Inves<strong>to</strong>rs are advised <strong>to</strong> seek their own tax advice on the tax consequences <strong>to</strong> them of a conversion<br />
of the Bonds in<strong>to</strong> Units. Holders of the Bonds and/or Units who are adopting Financial Reporting<br />
Standard 39 (‘FRS 39”) for Singapore income tax purposes may be required <strong>to</strong> recognise gains or<br />
losses on the Bonds, irrespective of disposal of the Bonds, in accordance with FRS 39.<br />
G-8
APPENDIX H<br />
PROPOSED SUPPLEMENT TO THE TRUST DEED<br />
The proposed form of the Valuation of Real Estate Supplement is as follows:<br />
• Clause 6.1.2 of the Trust Deed be amended <strong>to</strong> reflect the additions as indicated by the underlined<br />
text below and the deletions as indicated by the deleted text below:<br />
“6.1.2 (in the case of an Investment falling within any paragraph of the definition of<br />
“Authorised Investment” which is in the nature of a Real Estate in the form of land<br />
whether held directly by the Trustee or indirectly through Special Purpose Vehicles and<br />
subject <strong>to</strong> Clauses 6.2 <strong>to</strong> 6.4) (a) on the Trust’s acquisition of an Authorised Investment,<br />
its Acquisition Cost thereof on its Acquisition Date and (b) on a subsequent valuation<br />
by an Approved Valuer of such Authorised Investment obtained pursuant <strong>to</strong> any of the<br />
provisions of this Deed since the date of the Trust’s acquisition of such Authorised<br />
Investment, the Value of such Authorised Investment as determined by such valuation<br />
(or an appropriate proportion thereof where relevant, in a situation where the Real<br />
Estate is not (whether directly or indirectly) wholly-owned by the Trust);”<br />
• that Clause 6.1.3 of the Trust Deed be deleted in its entirety.<br />
• that Clauses 6.1.4, 6.1.5 and 6.1.6 be re-numbered as 6.1.3, 6.1.4 and 6.1.5 respectively.<br />
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NOTICE OF EXTRAORDINARY GENERAL MEETING<br />
NOTICE IS HEREBY GIVEN that an EXTRAORDINARY GENERAL MEETING of <strong>Suntec</strong> Real Estate<br />
Investment Trust (“<strong>Suntec</strong> <strong>REIT</strong>”) will be held at Level 3, Room 325 and 326, <strong>Suntec</strong> Singapore<br />
International Convention & Exhibition Centre, 1 Raffles Boulevard, <strong>Suntec</strong> City, Singapore 039593 on<br />
8 Oc<strong>to</strong>ber 2007 at 2.30 pm for the purpose of considering and, if thought fit, passing, with or without<br />
modifications, the following resolutions:<br />
ORDINARY RESOLUTION<br />
1. THE PROPOSED ACQUISITION OF A ONE-THIRD INTEREST IN ONE RAFFLES QUAY<br />
That:<br />
(a)<br />
(b)<br />
approval be and is hereby given for the acquisition of a one-third interest in One Raffles<br />
Quay (as defined in the circular dated 18 September 2007 issued by ARA Trust Management<br />
(<strong>Suntec</strong>) Limited, as manager of <strong>Suntec</strong> <strong>REIT</strong> (the “Manager”), <strong>to</strong> unitholders of <strong>Suntec</strong><br />
<strong>REIT</strong> (the “<strong>Circular</strong>”)) through the acquisition of the entire issued share capital of Comina<br />
Investment Limited (the “Acquisition”), on the terms and conditions set out in the share<br />
purchase agreement dated 30 July 2007 and the supplemental agreement dated 11<br />
September 2007 made, inter alia, between HSBC Institutional Trust Services (Singapore)<br />
Limited, as trustee of <strong>Suntec</strong> <strong>REIT</strong> (the “Trustee”), and Cavell Limited (the “Vendor”) and for<br />
payment of all fees and expenses relating <strong>to</strong> the Acquisition (as described in the <strong>Circular</strong>);<br />
and<br />
the Manager, any direc<strong>to</strong>r of the Manager (“Direc<strong>to</strong>r”) and the Trustee be and are hereby<br />
severally authorised <strong>to</strong> complete and do all such acts and things (including executing all<br />
such documents as may be required) as the Manager, such Direc<strong>to</strong>r or, as the case may be,<br />
the Trustee may consider expedient or necessary or in the interests of <strong>Suntec</strong> <strong>REIT</strong> <strong>to</strong> give<br />
effect <strong>to</strong> the Acquisition.<br />
EXTRAORDINARY RESOLUTION<br />
2. THE PROPOSED ISSUE OF UP TO S$450,000,000 AGGREGATE PRINCIPAL AMOUNT OF S$<br />
DENOMINATED CONVERTIBLE BONDS<br />
That subject <strong>to</strong> and contingent upon the passing of Resolution 1:<br />
(a)<br />
(b)<br />
approval be and is hereby given for the issue of up <strong>to</strong> S$450,000,000 aggregate principal<br />
amount of S$ denominated convertible bonds (the “Issue of Convertible Bonds” and the<br />
convertible bonds, “Convertible Bonds”), which are interest-bearing and convertible in<strong>to</strong><br />
new units (the “Conversion Units”). By approving the Issue of Convertible Bonds, the<br />
<strong>Unitholders</strong> would be deemed <strong>to</strong> have approved the terms of the Convertible Bonds,<br />
<strong>to</strong>gether with the terms which are incidental or ancillary <strong>to</strong> such terms, and the issue of<br />
Conversion Units upon conversion of the Convertible Bonds; and<br />
the Manager, any Direc<strong>to</strong>r and the Trustee be and are hereby severally authorised <strong>to</strong><br />
complete and do all such acts and things (including executing all such documents as may<br />
be required) as the Manager, such Direc<strong>to</strong>r or, as the case may be, the Trustee may consider<br />
expedient or necessary or in the interests of <strong>Suntec</strong> <strong>REIT</strong> <strong>to</strong> give effect <strong>to</strong> the Issue of<br />
Convertible Bonds.<br />
I-1
ORDINARY RESOLUTION<br />
3. THE PROPOSED ISSUE OF CONSIDERATION UNITS TO THE VENDOR<br />
That subject <strong>to</strong> and contingent upon the passing of Resolution 1:<br />
(a)<br />
(b)<br />
approval be and is hereby given for the issue of such number of new Units <strong>to</strong> the Vendor (or<br />
such other person or persons nominated by the Vendor), at a price per Unit equal <strong>to</strong> the<br />
volume-weighted average price per Unit for all trades on the Singapore Exchange Securities<br />
Trading Limited, in the ordinary course of trading, for the last 10 market days prior <strong>to</strong> the<br />
completion of the Acquisition, (the “Consideration Units”) <strong>to</strong> finance a part of the<br />
Acquisition, in the manner described in the <strong>Circular</strong>; and<br />
the Manager, any Direc<strong>to</strong>r and the Trustee be and are hereby severally authorised <strong>to</strong><br />
complete and do all such acts and things (including executing all such documents as may<br />
be requires) as the Manager, such Direc<strong>to</strong>r or, as the case may be, the Trustee may consider<br />
expedient or necessary or in the interests of <strong>Suntec</strong> <strong>REIT</strong> <strong>to</strong> give effect <strong>to</strong> the issue of<br />
Consideration Units.<br />
ORDINARY RESOLUTION<br />
4. THE PROPOSED GENERAL MANDATE FOR THE ISSUE OF NEW UNITS AND/OR<br />
CONVERTIBLE SECURITIES<br />
That:<br />
(a)<br />
(b)<br />
(c)<br />
(b)<br />
approval be and is hereby given for the general mandate <strong>to</strong> be given <strong>to</strong> the Manager<br />
pursuant <strong>to</strong> Rule 887 of the Listing Manual issued by Singapore Exchange Securities<br />
Trading Limited (the “Listing Manual”) for the issue of new units in <strong>Suntec</strong> <strong>REIT</strong> (“Units”)<br />
and/or convertible securities in the financial year ending 30 September 2008, provided that<br />
such number of new Units and convertible securities does not exceed 50.0% of the number<br />
of Units in issue at the end of FY2007, of which the aggregate number of additional new<br />
Units and convertible securities issued other than on a pro rata basis <strong>to</strong> <strong>Unitholders</strong> shall not<br />
be more than 20.0% of the number of Units in issue at the end of FY2007 (the “General<br />
Mandate”);<br />
where the terms of the issue of the convertible securities provide for adjustment <strong>to</strong> the<br />
number of warrants or other convertible securities, in the event of rights, bonus or other<br />
capitalisation issues, additional convertible securities may be issued notwithstanding that<br />
the General Mandate may have ceased <strong>to</strong> be in force at the time the convertible securities<br />
are issued, provided that the adjustment does not give the holder of such convertible<br />
securities a benefit that a Unitholder does not receive;<br />
Units arising from the conversion of the convertible securities may be issued notwithstanding<br />
that the General Mandate may have ceased <strong>to</strong> be in force at the time the convertible<br />
securities are issued; and<br />
the Manager, any Direc<strong>to</strong>r and the Trustee be and are hereby severally authorised <strong>to</strong><br />
complete and do all such acts and things (including executing all such documents as may<br />
be required) as the Manager, such Direc<strong>to</strong>r or, as the case may be, the Trustee may consider<br />
expedient or necessary or in the interests of <strong>Suntec</strong> <strong>REIT</strong> <strong>to</strong> give effect <strong>to</strong> the General<br />
Mandate.<br />
I-2
EXTRAORDINARY RESOLUTION<br />
5. THE PROPOSED SUPPLEMENT TO THE TRUST DEED IN CONNECTION WITH THE<br />
VALUATION OF REAL ESTATE<br />
That:<br />
(a) approval be and is hereby given <strong>to</strong> supplement Clause 6 of the trust deed dated 29<br />
November 2004 (as amended) constituting <strong>Suntec</strong> <strong>REIT</strong> with the Valuation of Real Estate<br />
Supplement (as defined in the <strong>Circular</strong>) in the manner set our in Appendix H of the <strong>Circular</strong>;<br />
and<br />
(b)<br />
the Manager, any Direc<strong>to</strong>r and the Trustee be and are hereby severally authorised <strong>to</strong><br />
complete and do all such acts and things (including executing all such documents as may<br />
be required) as the Manager, such Direc<strong>to</strong>r or, as the case may be, the Trustee may consider<br />
expedient or necessary or in the interests of <strong>Suntec</strong> <strong>REIT</strong> <strong>to</strong> give effect <strong>to</strong> the Valuation of<br />
Real Estate Supplement.<br />
BY ORDER OF THE BOARD<br />
ARA Trust Management (<strong>Suntec</strong>) Limited<br />
(as manager of <strong>Suntec</strong> Real Estate Investment Trust)<br />
Company Registration No. 200410976R<br />
Yap Lune Teng/Goh Lee Tao<br />
Company Secretary<br />
Singapore<br />
18 September 2007<br />
Important Notice<br />
(1) A unitholder of <strong>Suntec</strong> <strong>REIT</strong> entitled <strong>to</strong> attend and vote at the Extraordinary General Meeting is entitled <strong>to</strong> appoint not more<br />
than two proxies <strong>to</strong> attend and vote in his stead. A proxy need not be a unitholder of <strong>Suntec</strong> <strong>REIT</strong>.<br />
(2) The instrument appointing a proxy must be lodged at the Manager’s registered office at 9 Temasek Boulevard, #09-01<br />
<strong>Suntec</strong> Tower Two, Singapore 038989 not less than 48 hours before the time appointed for the Extraordinary General<br />
Meeting.<br />
I-3
IMPORTANT: PLEASE READ THE NOTES TO PROXY FORM BELOW<br />
Notes To Proxy Form<br />
1. A unitholder of <strong>Suntec</strong> <strong>REIT</strong> (“Unitholder”) entitled <strong>to</strong> attend and vote at the Extraordinary General Meeting is entitled <strong>to</strong><br />
appoint one or two proxies <strong>to</strong> attend and vote in his stead.<br />
2. Where a Unitholder appoints more than one proxy, the appointments shall be invalid unless he specifies the proportion of<br />
his holding (expressed as a percentage of the whole) <strong>to</strong> be represented by each proxy.<br />
3. A proxy need not be a Unitholder.<br />
4. A Unitholder should insert the <strong>to</strong>tal number of Units held. If the Unitholder has Units entered against his name in the<br />
Deposi<strong>to</strong>ry Register maintained by The Central Deposi<strong>to</strong>ry (Pte) Limited (“CDP”), he should insert that number of Units. If<br />
the Unitholder has Units registered in his name in the Register of <strong>Unitholders</strong> of <strong>Suntec</strong> <strong>REIT</strong>, he should insert that number<br />
of Units. If the Unitholder has Units entered against his name in the said Deposi<strong>to</strong>ry Register and registered in his name<br />
in the Register of <strong>Unitholders</strong>, he should insert the aggregate number of Units. If no number is inserted, this form of proxy<br />
will be deemed <strong>to</strong> relate <strong>to</strong> all the Units held by the Unitholder.<br />
5. The instrument appointing a proxy or proxies must be deposited at the Manager’s registered office at 9 Temasek Boulevard,<br />
#09-01 <strong>Suntec</strong> Tower Two, Singapore 038989, not less than 48 hours before the time set for the Extraordinary General<br />
Meeting.<br />
6. The instrument appointing a proxy or proxies must be under the hand of the appoin<strong>to</strong>r or of his at<strong>to</strong>rney duly authorised in<br />
writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under<br />
its common seal or under the hand of its at<strong>to</strong>rney or a duly authorised officer.<br />
7. Where an instrument appointing a proxy is signed on behalf of the appoin<strong>to</strong>r by an at<strong>to</strong>rney, the power of at<strong>to</strong>rney or a duly<br />
certified copy thereof must (failing previous registration with the Manager) be lodged with the instrument of proxy; failing<br />
which the instrument may be treated as invalid.<br />
8. The Manager shall be entitled <strong>to</strong> reject a Proxy Form which is incomplete, improperly completed or illegible or where the<br />
true intentions of the appoin<strong>to</strong>r are not ascertainable from the instructions of the appoin<strong>to</strong>r specified on the Proxy Form. In<br />
addition, in the case of Units entered in the Deposi<strong>to</strong>ry Register, the Manager may reject a Proxy Form if the Unitholder,<br />
being the appoin<strong>to</strong>r, is not shown <strong>to</strong> have Units entered against his name in the Deposi<strong>to</strong>ry Register as at 48 hours before<br />
the time appointed for holding the Extraordinary General Meeting, as certified by CDP <strong>to</strong> the Manager.<br />
9. All <strong>Unitholders</strong> will be bound by the outcome of the Extraordinary General Meeting regardless of whether they have attended<br />
or voted at the Extraordinary General Meeting.<br />
10. At any meeting, a resolution put <strong>to</strong> the vote of the meeting shall be decided on a show of hands unless a poll is (before or<br />
on the declaration of the result of the show of hands) demanded by the Chairman or by five or more <strong>Unitholders</strong> present<br />
in person or by proxy, or holding or representing one-tenth in value of the Units represented at the meeting. Unless a poll<br />
is so demanded, a declaration by the Chairman that such a resolution has been carried or carried unanimously or by a<br />
particular majority or lost shall be conclusive evidence of the fact without proof of the number or proportion of the votes<br />
recorded in favour of or against such resolution.<br />
11. On a show of hands, every Unitholder who (being an individual) is present in person or by proxy or (being a corporation)<br />
is present by one of its officers as its proxy shall have one vote. On a poll, every Unitholder who is present in person or by<br />
proxy shall have one vote for every Unit of which he is the Unitholder. A person entitled <strong>to</strong> more than one vote need not use<br />
all his votes or cast them the same way.
---------------------------------------------------------------------------------------------------------------------------------------------<br />
✂<br />
SUNTEC REAL ESTATE INVESTMENT TRUST<br />
(Constituted in the Republic of Singapore<br />
pursuant <strong>to</strong> a trust deed dated 1 November 2004 (as amended))<br />
PROXY FORM<br />
EXTRAORDINARY GENERAL MEETING<br />
I/We<br />
of<br />
IMPORTANT<br />
1. For inves<strong>to</strong>rs who have used their CPF monies <strong>to</strong><br />
buy units in <strong>Suntec</strong> Real Estate Investment Trust,<br />
this <strong>Circular</strong> is forwarded <strong>to</strong> them at the request of<br />
their CPF approved nominees and is sent FOR<br />
INFORMATION ONLY.<br />
2. This Proxy Form is not valid for use by CPF<br />
inves<strong>to</strong>rs and shall be ineffective for all intents and<br />
purposes if used or is purported <strong>to</strong> be used by them.<br />
being a unitholder/unitholders of <strong>Suntec</strong> Real Estate Investment Trust (“<strong>Suntec</strong> <strong>REIT</strong>”), hereby appoint:<br />
Name<br />
and/or (delete as appropriate)<br />
Name<br />
Address<br />
Address<br />
NRIC/Passport<br />
Number<br />
NRIC/Passport<br />
Number<br />
(Name)<br />
(Address)<br />
Proportion of Unitholdings<br />
No. of Units %<br />
Proportion of Unitholdings<br />
No. of Units %<br />
or, both of whom failing, the Chairman of the Extraordinary General Meeting as my/our proxy/proxies <strong>to</strong> attend and<br />
<strong>to</strong> vote for me/us on my/our behalf and if necessary, <strong>to</strong> demand a poll, at the Extraordinary General Meeting of<br />
<strong>Suntec</strong> <strong>REIT</strong> <strong>to</strong> be held at 2.30 pm on 8 Oc<strong>to</strong>ber 2007 at Level 3, Room 325 and 326, <strong>Suntec</strong> Singapore<br />
International Convention & Exhibition Centre, 1 Raffles Boulevard, <strong>Suntec</strong> City, Singapore 039593 and any<br />
adjournment thereof. I/We direct my/our proxy/proxies <strong>to</strong> vote for or against the resolution <strong>to</strong> be proposed at the<br />
Extraordinary General Meeting as indicated hereunder. If no specific direction as <strong>to</strong> voting is given, the<br />
proxy/proxies will vote or abstain from voting at his/their discretion, as he/they will on any other matter arising at<br />
the Extraordinary General Meeting.<br />
No.<br />
Resolutions<br />
1 To approve the acquisition of a one-third<br />
interest in One Raffles Quay (Ordinary<br />
Resolution)<br />
2 To approve the issue of up <strong>to</strong><br />
S$450,000,000 aggregate principal amount<br />
of S$ Denominated Convertible Bonds<br />
(Extraordinary Resolution)<br />
3 To approve the issue of Consideration Units<br />
<strong>to</strong> the Vendor (Ordinary Resolution)<br />
4 To approve the general mandate <strong>to</strong> issue<br />
new Units and/or convertible securities<br />
(Ordinary Resolution)<br />
5 To approve the supplement <strong>to</strong> the Trust<br />
Deed in connection with the Valuation of<br />
Real Estate (Extraordinary Resolution)<br />
To be used on a<br />
show of hands<br />
For* Against *<br />
To be used in<br />
the event of a poll<br />
No. of<br />
Votes For **<br />
No. of Votes<br />
Against **<br />
* If you wish <strong>to</strong> exercise all your votes “For” or “Against”, please tick () within the box provided.<br />
** If you wish <strong>to</strong> exercise all your votes “For” or “Against”, please tick () within the box provided. Alternatively, Please indicate<br />
the number of votes as appropriate.<br />
Dated this day of 2007 Total number of Units held<br />
Signature(s) of Unitholder(s)/Common Seal
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Affix<br />
Postage<br />
Stamp<br />
The Company Secretary<br />
ARA Trust Management (<strong>Suntec</strong>) Limited<br />
(as manager of <strong>Suntec</strong> Real Estate Investment Trust)<br />
9 Temasek Boulevard<br />
#09-01 <strong>Suntec</strong> Tower Two<br />
Singapore 038989<br />
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3rd fold here
ARA Trust Management (<strong>Suntec</strong>) Limited<br />
9 Temasek Boulevard<br />
#09-01 <strong>Suntec</strong> Tower Two<br />
Singapore 038989<br />
Tel: (65) 6835 9232 Fax: (65) 6835 9672<br />
www.suntecreit.com