ESR Interim Report 2020 (EN)

Investment segment results increased by US$9.2 million or 9.3% from US$99.3 million in 1H2019 to US$108.6 million in 1H2020. The increase was mainly contributed by the increase of US$8.9 million in fair value gain from the Group’s investment funds (net of dividend income of US$19.8 million). In 1H2020, the Group recorded higher dividend income mainly from distributions from asset divestment by one of the investment funds held. Accordingly, a corresponding amount of US$19.8 million fair value loss was recorded relating to the fund asset based on net asset value post-distributions. Fund management segment results increased by US$14.5 million or 29.0% from US$49.9 million in 1H2019 to US$64.4 million in 1H2020. The increase was driven by higher recurring income base from the Group’s funds management platforms in South Korea, Japan and India; as well as full half year effect from consolidation of Propertylink Group and Sabana-REIT manager. Increase in segment result was partially offset by the increase in operating expenses from US$12.5 million in 1H2019 to US$19.2 million in 1H2020, largely from increased staff costs in line with fund management growth. Development segment results increased by US$24.4 million or 23.8% from US$102.4 million in 1H2019 to US$126.8 million in 1H2020. The increase was primarily attributable to the following: • Higher fair value from investment properties under construction by US$22.9 million from Qingpu Yurun and newly acquired projects from our China portfolio. In 1H2019, fair value was mainly contributed by the Group’s Japan portfolio from Sachiura properties and RW Higashi-Ogashima DC. • Share of profits and losses of joint ventures and associates increased by US$25.4 million from US$0.7 million in 1H2019 to US$26.2 million in 1H2020. This was mainly from increase in fair value gains on investment properties under construction held by Sunwood Star and e-Shang Star, the Group’s joint venture in South Korea and China, respectively. Increase in development segment results was partially offset by: • Lower fair value gains from investments in funds (accounted as financial assets at fair value through profit or loss) in 1H2020 mainly due to lower development fair value gain from Amagasaki DC which was completed in June 2020 compared to 1H2019. • Lower gain on disposal of subsidiaries in 1H2020 of US$5.5 million compared to 1H2019 of US$16.5 million. The Group disposed five balance sheet properties to a newly established development joint venture with GIC in 1H2020, in line with the Group’s asset light capital recycling strategy. In 1H2019, seven balance sheet properties were disposed to NCI Core Fund. ASSETS The Group reported a strong balance sheet for the period ended 30 June 2020 with US$946.6 million in cash, and healthy net debt over total assets of 28.6%. Total assets as at 30 June 2020 were US$6.66 billion (31 December 2019: US$6.35 billion) comprised mainly investment properties, investment in joint ventures, investment in funds (classified as financial assets at fair value through profit or loss) and investment in listed securities (classified as financial assets at fair value through other comprehensive income) and cash balances. Investment properties decreased by 7.2% to US$2.59 billion (31 December 2019: US$2.79 billion) as at 30 June 2020, attributable to the Group’s asset-light capital recycling strategy in 1H2020 where it disposed of five balance sheet assets in China to a newly established development joint venture with GIC. In Australia, the Group divested its balance sheet assets to a new core-plus fund joint venture with GIC. Accordingly, the carrying value of these investment properties were deconsolidated as at 30 June 2020. Correspondingly, the Group’s investment in joint ventures has increased to US$910.5 million (31 December 2019: US$698.0 million) as at 30 June 2020. It was mainly contributed by re- investments into the above new joint ventures; in addition to higher share of results from existing joint ventures. LIABILITIES Total bank and other borrowings as at 30 June 2020 were US$2.85 billion compared to US$2.57 billion as at 31 December 2019. With cash balance of US$946.6 million, the net debt to total assets as at 30 June 2020 was 28.6%. The increase in net debt was primarily due to additional borrowings to fund the Group’s investments and ongoing development expenditure. Additional corporate borrowings included issuance of S$225 million 5Y 5.10% Notes in February 2020 and US$250 million 3Y term loan in March 2020. Included in borrowings within one-year, was an uncommitted revolver facility of approximately US$153 million. Of the total borrowings, 80% are due and payable after one-year. Management Discussion and Analysis 14