ESR Interim Report 2020 (EN)

CAPITAL MANAGEMENT ESR adopts a proactive and disciplined capital management approach to maintain a strong and well-capitalised balance sheet, and regularly review its debt maturity profile and liquidity position on an ongoing basis. The Group maintains a strong balance sheet, and actively diversifies its funding sources through a combination of facilities with both local and international banks, and capital market issuances in optimising its costs of debt financing. The Group’s total borrowings as at 30 June 2020 were US$2.85 billion. With a cash balance of US$946.6 million, the net debt to total assets as at 30 June 2020 was 28.6% which was within an acceptable and healthy range. The Group manages its interest rates exposure by maintaining a combination of fixed and floating rate borrowings. As at 30 June 2020, 34% of the Group’s borrowings was on fixed rate while the remaining 66% was on floating rate basis. In managing the interest rate profile, the Group considers interest rate outlook and holding periods of its investment profile. The Group’s weighted average interest rate was 5% at end June 2020. In March 2020, the Group entered into an US$250 million three-year syndicated unsecured term loan with leading international banks at a rate of Libor plus 3.00%, which has been drawn down in full in March 2020. On 26 February 2020, the Group issued a S$225 million of five-year fixed rate notes bearing 5.10% per annum. With these financing, the Group has demonstrated its clear ability to materially reduce its cost of borrowing post listing by over 150bps. As at 30 June 2020, the Group’s weighted average debt maturity remains at approximately 3 years. The Group monitors its debt maturity profile on an ongoing basis and proactively built up sufficient cash reserves and refinancing existing borrowings to meet its short-term obligations, ongoing development expenditures and opportunistic investments. Debt Maturity Profile (US$ million) As at 30 June 2020 7% 198 29% 843 44% 1,244 Within 1 Year In the 2 nd year In the 3 rd and 5 th year, inclusive Beyond 5 Years 20% 570 Net debts as at 30 June 2020 was US$1.9 billion compared to US$1.7 billion as at 31 December 2019. Higher net debts were mainly due to additional borrowings to fund the Group’s investments and ongoing development expenditure. Total equity had decreased from US$3.3 billion as at 31 December 2019 to US$3.2 billion as at 30 June 2020 despite net profit for the period of US$144.7 million. The reduction was primarily due to redemption of US$100 million perpetual capital securities in June 2020; and fair value losses of US$69.9 million from the Group’s investments in listed securities (classified as financial assets through other comprehensive income) as a result of quoted market prices volatility as at 30 June 2020 caused by the pandemic. With its well-capitalised balance sheet and focus placed on the fundamentals of its investments, the Group remains well-positioned through this economic cycle. 15 ESR Interim Report 2020 MANAGEMENT DISCUSSION AND ANALYSIS