PWC Project Pitch by phile_phile

28 February 2014

Submission by Jones Lang LaSalle Property Consultants Pte Ltd CEA Licence No: L3008797B

CONTENTS!

1.  INTRODUCTION / BACKGROUND! 2.  THE PROPERTY! 3.  STAKEHOLDER ANALYSIS! 4.  MARKET OVERVIEW! 5.  MARKET COMPARABLE! 6.  PRICING! 7.  SALE SCENARIOS! 8.  RECOMMENDATION!

Introduction & Objectives Jones Lang LaSalle (“JLL”) is pleased to provide this report to DBS Bank Limited (“DBS”) in relation to advisory and evaluation of PWC Building located at 8 Cross Street in Singapore (the “Property”). PWC Building, is 99-year leasehold Grade A office building with a net lettable area of approximately 355,000 sq ft, located at 8 Cross Street within Singapore’s CBD. DBS has a 70% shareholding in the Property while the remaining 30% is owned by CapitaLand Group through owning shares of DBS China Square Ltd (the “SPV”). DBS moved out the property completely in Q4 2012 and subsequently leased the property up to a current occupancy rate of 93%. As PWC Building is a non-core property, DBS is seeking advise with regards to a potential divestment of their shares This report aims to cover the following aspects as outlined in the scope of works: •  Advise on the prevailing and projected market conditions with relation to a potential divestment; •  Advise on the market position of the property and its future potential; •  Explore and evaluate options available to DBS, in terms of a potential divestment, and how to maximise value assuming a sale is recommended; •  Understand the implications for DBS based on the Memorandum and Articles of Association with Capitaland and advise on strategies to maximise value; •  Final recommendation on value based on quantitative and qualitative aspects; •  Recommend a suitable timeline and optimal divestment process should the divestment be recommended.

1.  INTRODUCTION / BACKGROUND! 2.  •  PROPERTY PARTICULARS! 2. THE PROPERTY! 3.  STAKEHOLDER ANALYSIS! •  MASTER PLAN PARAMETERS! 4.  MARKET OVERVIEW! •  LOCATION ANALYSIS! 5.  MARKET COMPARABLE!•  TENANT PROFILE! 6.  PRICING! •  BUILDING SWOT ANALYSIS! 7.  SALE SCENARIOS! •  PROPERTY SUMMARY ! 8.  RECOMMENDATION!

2.1 Property Particulars PWC Building Information

Land Information Lot no.

TS1-593V

Year of Completion

1999

Address

8 Cross Street

Building Grade

A-

Land Owner

DBS China Square Limited (70% DBS, 30% CapitaLand)

Building Type

Year of Completion

1999

28 storey office block L1 – Main Lobby / Retail L2-6 – Car park L 7-28 - Offices

Tenure

99 year leasehold from 1996 (82 years remaining)

GFA

458,284 sq ft

NLA

355,493 sq ft

Typical Floor Plate

~ 15,000 sq ft

Floor Plate

Column-free, centre-core

Clear Ceiling Height

Raised floor to false ceiling – 2.75m

Elevators

5 lifts in each lift zone (2 lift zones)

Car Parking

242 lots

Anchor Tenant

PWC (naming and signage rights)

Current Occupancy Rate

92.7%

Market Rental Rate

$7.70 - $7.80 psf per month

Land Area

33,117 sq ft

Original Sale Price

S$367.3 mil @ 1996

Zoning (2003 Master Plan)

White Site

Permitted Use (State Bldg Agreement)

Commercial, Residential, Hotel, Serviced Apartments

Plot Ratio (2003 Master Plan)

12.6+

2.2 Regulatory Parameters (A) Plot Ratio •  Based on Master Plan 2008 & 2003, it has a base plot ratio of 12.6. •  As the site area is between 3,000 to 5,000 sq m within the Downtown Core Planning Area, there is a bonus of 5% of plot ratio •  As the site falls outside the 200m bonus plot ratio boundary (Raffles Place MRT), there is no bonus plot ratio due to proximity to MRT •  There is currently no bonus plot ratio for Telok Ayer MRT Station •  Based on the State Building Agreement, the maximum permissible plot ratio is 13.9. This already exceeds the 12.6 + 5% bonus plot ratio provided for. •  Currently awaiting URA query on Permitted GFA for verification.

Plot Ratio Calculation Effective Plot Ratio: 12.64 Outside 200m radius – bonus plot ratio not applicable

Area Fact Table Source: State Lease

Site Area

33,117 sq ft

Baseline GFA

458,183 sq ft

Plot Ratio = 13.831

Source: URA

Max. GFA

459,138 sq ft

Plot Ratio = 13.9

Source: State Lease

Min. GFA

413,219 sq ft

Plot Ratio = 12.5

Source: State Lease

Landlord GFA

458,284 sq ft

Plot Ratio = 13.8

Source: DBS

Landlord NLA

355,492 sq ft

Source: DBS

Master Plan 2008 & 2003 Plot Ratio: 12.6+ Zoning: White Site

2.2 Regulatory Parameters (B) Building Height Control •  Current building height is 139m with 28 storeys. •  Based on 2008 Master Plan, the maximum number of floors for the subject site is 30 storeys. •  Subject site falls within the area where relaxation of residential building height applies. Based on URA’s circular dated 5 June 2006 Circular No: URA/PB/2006/13-CUDD, residential developments within parts of Downtown Core, Orchard and Rochor Planning Areas, which are predominantly commercial or mixed use in nature, are allowed to build maximum up to 5m per floor. •  In the case of the subject site, zoned ‘white’ and within a 30-storey height zone, a residential development will be allowed to be built up to 150.0m – i.e. 30 x 5.0 (to the top of the floor slab above the highest floor), regardless of the number of storeys. This translates to between 41-50 storeys.

Building Height Control Max. 30-storey height zone

(D) SLA Lease

•  Based on the 2008 Master Plan Written Statement, ‘white’ sites are sites used or intended to be used for commercial, hotel, residential, sports & recreational and other compatible uses, or a combination of two or more such uses in a mixed use development. •  Based on the State Building Agreement dated 10 June 1996 and State Land Lease no. 22088, the land can be built for commercial, commercial / residential, commercial / serviced apartments and hotel.

•  Lease of 82 years left - unlikely to “top-up” based on current URA policy unless it is residential.

2.3 Location (A) Telok Ayer Vicinity •  The Telok Ayer District consists of mostly conserved and gazetted shop houses, along with numerous religious and clan buildings. •  Within this district, there are several comparable grade buildings to PWC Building: ü  Samsung Hub ü  Prudential Tower ü  18 Cross Street (ex-Marsh & McLennan Centre) ü  Great Eastern Centre (B) China Square Precinct Master Plan •  Collaboration by Far East Organization, Frasers Commercial Trust and The Great Eastern Life Assurance Co Ltd to integrate the Far East Square, China Square Central and Great Eastern Centre into a precinct known as ‘China Place’ •  Aims to revitalise the downtown heritage area and create a vibrant retail, entertainment and hospitality destination. Works include covered connecting link ways, building markers, directional and circulation signs and locally-commissioned building mural artwork •  Far East Organization is also planning two hotel developments within Far East Square. These developments comprise a 37-room designer boutique hotel converted from offices within the conservation shop houses which began operating at end-2013, and a new 28storey 292-room hotel that will serve the business community in the surrounding Central Business District with expected completion in July 2015. •  This Master Plan will have positive trickle-down effect to PWC Building.

Telok Ayer Vicinity

2.3 Location (C) Telok Ayer MRT •  PWC Building is located directly above the Telok Ayer MRT station which opened in December 2013. •  Phase 1 opened with six stations, of which four are interchange stations with the North East, EastWest, and Circle Lines, allowing commuters to transfer conveniently with the rest of the rail network. •  The remaining two stages of the Downtown Line are targeted to be completed by 2017, with increased connectivity from the CBD and Marina Bay to the northeast and eastern regions of Singapore such as Hillview, Sixth Avenue and Bedok Reservoir. •  It is expected that this vicinity will improve in connectivity and visibility. (D) CapitaGreen •  CCT’s first development project; a joint venture between CapitaLand, CCT and Mitsubishi Estate Asia. •  Developed from Market Street car park into a premium grade A office tower (34 office levels with NLA of 700,000 sq ft) with Greenmark Platinum status. •  Targeted completion date is 4Q2014 or 1Q2015 •  Expected yield-on-cost of >6% per annum on a stabilised basis. •  Although it is not a direct comparable, CapitaGreen will give a lift to the image in the surrounding area.

Stage 2 Expected 2016

Stage 1 Opened: Dec 2013

Stage 3 Expected 2017

(E) Robinson Towers •  Tuan Sing are redeveloping Robinson Towers into a single commercial development comprising an office tower with retail podium with a total gross floor area of 257,300 sq ft. •  The new grade A building, which is due to be completed in 2016, will be three times the height of the former building and incorporate energy and water saving features aimed at achieving the Greenmark Platinum standard. •  It will further serve to enhance the area around PWC Building, making it more attractive to new office and retail tenants.

Downtown Line

2.4 Leasing Matters

•  Current average passing rental is $6.74 while current market rent for the building is estimated at $7.75 psf pm. In 2014, FTMSGlobal Academy leased the first floor at $8.30 psf pm. •  Market Rents at PWC Building are around 22% lower than the average for Raffles Place. PWC’s rent is around 30% below the market rent for the Property. •  Expect rental rates in 2014 for PWC Building to surpass S$8.00 psf pm as occupancy is over 90% and there is limited new supply in 2014 and 2015.

16.00 12.00

9.38

8.00

7.70

4.00

Raffles Place

Nikko Asset Management, 4%

PWC Building

Top 5 Tenants by NLA Telstra, 3%

TripAdvisor, 4% Just Office, 4% Pricewaterhou seCoopers, 50%

2013Q3

2013Q1

2012Q3

2012Q1

2011Q3

2011Q1

2010Q3

2010Q1

2009Q3

2009Q1

2008Q3

2008Q1

2007Q3

2007Q1

2006Q3

0.00 2006Q1

•  New lettings done in 2013 have ranged between $7.00 – $7.80 psf pm. New tenants in 2013 include Tripadvisor and Just Offices. New tenancies have ranged from 2,000 sq ft to 15,000 sq ft, in line with office demand in the market.

Market Rent at PWC Building v Raffles Place

20.00

2005Q3

•  Current occupancy is c. 93% in early 2013, vacancy was at c 28% (100,000 sq ft). Approximately 75,000 sq ft has been leased in 2013, bringing the current vacancy down to 7%, in line with market vacancy of around 6% as at end-2013.

Gross Effective Rent S$ psf/mth

2005Q1

•  Anchor tenant PWC occupies 50% (178,000 sq ft) of the building with lease expiry in Q1 2018. Current rental rate is $5.92 psf pm, inclusive of naming rights. The top five tenants in the building occupy 66% of the NLA.

2.4 PWC Building Stacking Plan •  The property is currently 92.7% occupied by 24 tenants from a range of industries. •  Outside the PWC lease, the property enjoys a balanced lease expiry, with between 10 and 15% of leases expiring in 2015, 2016 and 2017.

Just Office (Cross St) Pte Ltd" #28-01 to 07, 15,446sq ft

Level 28

Forrester Singapore Pte Ltd" #27-01 to 03, 7,320 sq ft

Level 27

Level 25

Aspect Software (Asia Pacific) Pte Ltd" #25-01/02, 5,630 sq ft

•  There is the potential for positive rental reversions on expiry of these leases to capture the expected growth in rents in the next 2-3years.

Level 24

Faithful+Gould Pte Limited" #24-01/02 & 06, 6,846 sq ft

Level 23

•  Limited new supply, and existing demand from small space occupiers, presents an opportunity to lease up the remaining vacant space.

The Economist Group" #23-01/02 & 04, 5,156 sq ft

Level 22

•  Units #01-02/03, currently occupied by Providence Medical Centre, have permission for change of use to Food & Beverage outlets. This provides an opportunity to increase the current rent of $8.00 psf pm when the lease expires in 2015.

Level 8

Level 9

Level 7

Regency Steel Asia Pte Ltd" #24-03/04, 5,177 sq ft

IMS Health Asia" #21-01 to 03, 8,019 sq ft

Asics Asia Pte Ltd" #24-05, 3,251 sq ft

Vacant" #22-06, 3,208 sq ft Vacant" #21-04/06, 7,427 sq ft

PWC " #10-01 to 06 to #20-01 to 06, 166,045 sq ft Amorepacific Singapore Pte Ltd" #09-01 to 03, 6,437 sq ft

Century Tokyo Leasing (Singapore) Pte Ltd" #09-04 to 05, 5,489 sq ft

Vacant" #09-06, 3,100 sq ft

Nikko Asset Management International Limited" #08-01 to 06, 15,134 sq ft Vacant" #07-05, 2,852 sq ft

PWC" #07-01 to 04 & 05A, 12,067 sq ft Mechanical Floor Car park

Vacant" #02-01/02/03, 9,526 sq ft

Level 2

Vacant

Bell Pottinger Pte Ltd" #25-06 to 07, 3,391 sq ft

Hana Bank" Hotel Reservation Korean Reinsurance Feng Nian Co Ltd." #23-06, 3,444 Service" #23-03, 1,688 sq ft Company, #23-05, 2,540 sq ft #23-07 2,024 sq ft sq ft

Level 6 Levels 3-5

Level 1

BUSS Global Management Pte Ltd" #25-03 to 05, 6,071 sq ft

Telstra Singapore Pte Ltd" #22-01 to 05, 12,163 sq ft

Level 21 Levels 10 – 20

Acxiom Pte Ltd" #27-06 to 07, 3,122 sq ft

Tripadvisor" #26-01 to 07, 15,446 sq ft

Level 26

•  However, there is significant leasing risk from 2017 onwards when around 60% of leases are due to expire.

Assab Pacific Pte Ltd" #27-04 to 05, 4,736 sq ft

Vacant" #01-01K 581 sq ft

2014 Lease Expiry

Car park

FTMS Global Academy" #01-00, 10,592 sq ft

2015 Lease Expiry

2016 Lease Expiry

Providence Medical Centre Pte Ltd " #01-02/03, 1,582 sq ft

2017 Lease Expiry

2018 Lease Expiry

2.4 Existing Tenant Profile at PWC Building â&#x20AC;˘â&#x20AC;Ż The Property is currently 92.7% occupied by 24 tenants from a range of industries. Highlighted below are the 10 largest occupiers of space at the Property. Tenant

Unit

Area (sq ft)

Gross Rent ($ psf pm)

Lease Expiry Date

Option to Renew (years)

PricewaterhouseCoopers

#10-01 to 06 to #20-01 to 06

166,045

$5.75

31 March 2018

PricewaterhouseCoopers

#07-01 to 04 & 05A

12,067

$8.20

31 March 2018

6+6

178,113

$5.92

Just Office

#28-01 to 07

15,446

$7.60

14 August 2017

TripAdvisor

#26-01 to 07

15,446

$7.20

7 October 2015

Nikko Asset Management

#08-01 to 06

15,134

$8.02

31 July 2014

Telstra Singapore

#22-01 to 05

12,163

$7.50

30 November 2017

#01-00

10,592

$9.50

14 February 2017

IMS Health Asia

#21-01 to 03

8,019

$7.20

31 March 2016

Forrester Singapore

#27-01 to 03

7,320

$7.60

30 September 2016

#24-01/02 & 06

6,846

$7.40

31 October 2015

FTMS Global Academy

Faithful & Gould

Weighted Average Rent

$6.61

2.4 Existing Tenant Profile at PWC Building % of Total NLA •  The current tenant profile is spread between seven main categories. •  Professional Services companies, which includes PWC, occupy 57.7% of the total NLA at PWC Building, and contribute 51.4% of the total monthly income •  The second largest occupier in terms of industry at the Property is Banking, Finance & Investments and Insurance companies which includes Nikko Asset Management and Korean Reinsurance Company.

Banking, Finance & Vacant, 7.9% Investments, Insurance, Education & 10.1% Healthcare, 8.1% Travel & Tourism, 5.3%

•  Companies from these industries occupy 10.1% of the total NLA at the Property and contribute 11.7% of the total monthly income.

•  Demand is likely to continue to come from professional services companies, including recruitment companies as well as IT, telecommunications and marketing companies.

IT & Telecommunicat ions, 6.3% Marketing & Public Relations, 3.3% Others, 5.7%

Professional Services, 57.7%

•  The remaining tenants in the Property are from a broad mix of industries, evidence of the wide appeal to multiple tenant types due to its good location, column free, regular shaped floor plates and competitive rents when compared to the newer developments in the CBD. •  Existing demand for office space in the CBD is being supported by small space occupiers, presenting a good opportunity to fill the remaining vacant space and secure new tenants or lease renewals at higher rents.

Commodities, 3.5%

% of Total Monthly Income Education & Healthcare, 10.1%

Banking, Finance & Investments, Insurance, 11.7%

Travel & Tourism, 5.7%

Commodities, 4.0% IT & Telecommunicatio ns, 7.0%

Professional Services, 51.4%

Marketing & Public Relations, 3.7% Others, 6.4%

2.4 Existing Tenant Profile at PWC Building Unit Sizes Units Sizes at PWC Building

•  In line with existing demand in the market, the majority of leases at PWC Building are for units of between 5,000 and 10,000 sq ft. •  The main source of demand supporting the take-up of CBD office space is from small space occupiers, largely financial and professional services firms, looking for space between 5,000 – 20,000 sq ft. Both are key industries for existing tenants in PWC Building. Lease Expiry Profile

Number of Units 10 8 6

9 6

4 1

•  Outside of the PWC lease, the property enjoys a balanced lease expiry profile, with between 10% and 15% of leases expiring in 2015, 2016 and 2017. •  The balanced profile minimises leasing risk over the next 2-3 years as there is no major lease expiry until 2018, which will help to maintain a steady income stream at the Property. •  This presents an opportunity to take advantage of the anticipated growth in rents in the next 2-3 years by way of positive rental reversions, as new supply in the CBD will remain limited and demand strengthens as the local and global economy continues to improve. •  From 2017 onwards, 60% of the building could become vacant, posing significant leasing up / renewal risk should PWC decide to vacate. •  The ideal strategy to lease up the vacant space is to secure smaller anchor tenants (2-3 floors) at lower rents, and break up the remaining space into smaller units which can achieve higher rents. This will help increase the passing rent for the property.

0 Below 2,500 2,501 sq ft - 5,001 sq ft - 10,001 sq ft 25,001 sq ft - 50,001 sq ft + sq ft 5,000 sq ft 10,000 sq ft -25,000 sq ft 50,000 sq ft

Lease Expiry Profile by NLA

% of Total NLA 60%

50.1%

50% 40% 30% 20% 10%

14.9% 7.3%

5.6%

Vacant

2014

11.3%

10.7%

2016

2017

0% 2015

2018

2.4 Tenant Profile - Landlord’s Redevelopment Clause •  In PWC’s standard lease, the Landlord’s Redevelopment Clause is provided for. •  According to this clause, the Landlord will be able to evict the tenant if it wishes to demolish, redevelop or refurbish the building. Refurbishment in the real estate context is defined as bringing existing premises back up to the original standard.

Cl. 6.2.3 Landlord’s right to deal with the Building

If Landlord wishes to demolish, redevelop or refurbish the Building or any part of it affecting the demised premises, Landlord may terminate by giving tenant 6 months notice during the Option term(s).

Almost all leases within PWC Building provide for a redevelopment clause with 6 month’s prior written notice, save for the following: Sq ft

Expiry

Redevelopment Clause

Korean Reinsurance Company

2,540

31 Jul 2014

Nikko Asset Management Asia Limited

15,134

31 Jul 2014

The Economist Group

5,156

31 Jul 2015

Yes

6 month's notice after end of 1st term

PricewaterhouseCoopers IAS

12,067

31 Mar 2018

Yes

12 month's notice after end of 1st term **

PricewaterhouseCoopers LLP

166,045

31 Mar 2018

Yes

12 month's notice

Tenants

Notes No provision in lease. *Recommend for DBS to add clause upon renewal. Clause 6.23 missing from TA - acquired DBS Asset Mgt and took over the lease. *Recommend for DBS to add clause upon renewal.

** The PWC IAS lease is the lease with the latest date for early termination as per the clause.

2.5 Building SWOT Analysis •  Centre-core, column-free, large regular floor plate of 15,000 sq ft

•  Driveway looks dated

•  Raised flooring

•  Unattractive retail tenants

•  Good car park ratio (1:1,468 sq ft)

•  Location just outside of Raffles Place can be off putting to tenants

•  Affordable rents in the CBD •  Close to Telok Ayer MRT and Raffles Place MRT •  Recently renovated •  Close to F&B outlets and services

Strengths

Weaknesses

•  Increased human traffic from the completion of Downtown Line

•  PWC leverages on its anchor tenancy to depress the average rent

•  Increase in rent if further upgrade building’s image, security and retail tenants

•  If PWC leave, it will have a large impact on yield, rental income and building vacancy will be over 50%

•  Spill –over effect from future China Place Precinct and new premium grade buildings CapitaGreen and Robinson Towers

•  Significant renewal / leasing up risk from 2017 onwards when around 60% of leases are due to expire.

Opportunities

Threats

2.4 Tenant Profile - Landlord’s Redevelopment Clause •  Zoned as a white site under the Master Plan 2008, PWC Building could be refurbished or redeveloped into a commercial, hotel, residential or serviced apartment property, or a combination of these uses. •  The immediate area around PWC Building is undergoing rejuvenation, with the China Square Precinct Master Plan revitalising the area creating a vibrant new retail, entertainment and hospitality hub in the CBD. The newly opened Telok Ayer MRT station, and the future extended Downtown Line, makes the area more accessible to the northern and eastern areas of Singapore, widening its catchment potential. •  The majority of leases at PWC Building provide for a redevelopment clause, whereby the property can be demolished, redeveloped or refurbished with six months prior written notice. In the case of PWC the required notice is 12 months. •  Three other leases either have no redevelopment clause or are restricted to invoking the redevelopment clause in the renewal term. However, as these leases expire prior to the PWC lease, this will not affect the ability to redevelop the property earlier than allowed by the PWC lease. •  The earliest the property could be demolished and redeveloped is 2018 as a result of PWC’s lease on the 7th floor which is still in it’s first term and as such the redevelopment clause is waived. •  PWC are the anchor tenants and currently occupy 50% of the property on a lease expiring in 1Q2018. Its rent is 30% below current market rent for the property. There is opportunity to increase the passing rent at the property with positive rental reversions as around 30% of leases are due to expire in the next three years. •  PWC Building has a broad range of tenants from different industries, attracted by the good location, regular column free floor plates and competitive rents when compared to newer buildings. •  Current market demand is being supported by small occupiers looking for units of between 5,000 sq ft and 20,000 sq ft, in line with the predominant unit sizes at PWC Building, presenting a good opportunity to lease up the vacant space, especially given the limited new supply coming into the CBD market in 2014 and 2015. •  However, there is significant leasing risk from 2017 onwards when around 60% of leases are due to expire.

Transfer of Shares The Share Transfer process is summarised as follows: •  DBS must obtain written consent from URA for any transfer of shares. •  DBS must first offer its share to CapitaLand at fair value. CapitaLand has 28 days to accept the offer. •  If CapitaLand accepts the offer, DBS to complete the sale within 14 days after receipt of notice of acceptance. •  If CapitaLand does not accept the offer, DBS may offer to 3rd party purchaser at a price not less than what was offered to CapitaLand. 3rd party purchaser has 28 days to accept the offer. •  If 3rd party purchaser accepts the offer, DBS to complete the sale within 14 days after receipt of notice of acceptance. •  Fair value is defined as the prevailing market value of the Land Parcel. As described in the MOA, which was executed in 1996, the process is ambiguous on numerous accounts and poses significant risks to any owner looking to sell its shares: •  Lack of certainty and timeframe required to obtain written consent from URA. •  Timeframes for a 3rd party purchaser to accept an offer (28 days) and complete a sale (14 days) are unrealistically short. Typical divestment timeline for a building of this size/value would be 6-7 months. •  The valuation reference is solely to the prevailing market value of the Land Parcel. Although the language says that the valuer will “take into account” the prevailing market value the balance of the language does not expand the definition of the Land Parcel which is very narrow. The seller could be forced to sell for less than the value of the building because Land Parcel is very specifically defined and does not reference any improvements. •  MOA is silent on whether CapitaLand has a “last look”, which would make 3rd party purchasers reluctant to put their best offer forward. Due to the abovementioned risks, it is suggested that DBS collaborate with CapitaLand on the proposed disposal, and agree to amend the process accordingly. •  The timeframe and valuation basis are in neither party’s interest, should they want to sell. •  If CapitaLand agree to jointly sell its shares with DBS (i.e. enbloc offering to the market), this will eliminate the “last look” anxiety from 3rd party purchasers.

Transfer of Shares The diagram below shows Share Transfer process as described in the Memorandum and Articles of Association (MOA).

Either party (DBS) decides to transfer shares

Prior written consent from URA Required (Clause 24)

Member Accepts

YES

First offer in writing to other members at Fair Value (Clause 26)

14 days to complete Transfer Complete

28 days

Member Declines Auditor to certify Opinion of Fair Value (Clause 26d)

Offer to non-member at price not less than Fair Value (Clause 26c)

28 days

Non-Member Accepts

Non-Member Declines

NO Market Value of Land Parcel determined by professional valuers (Clause 26d) Process to repeat if sale is not completed

No Transfer

14 days to complete

1.  INTRODUCTION / BACKGROUND! 2.  THE PROPERTY! 3. •  DBS! 3.  STAKEHOLDER ANALYSIS! •  CAPITALAND! 4.  MARKET OVERVIEW! •  PWC! 5.  MARKET COMPARABLE! 6.  PRICING! 7.  SALE SCENARIOS! 8.  RECOMMENDATION!

3.1 Stakeholder Analysis – DBS DBS’ approach to the disposition of PWC Building is influenced by occupational, operational, financial, relationship, regulatory, timing and governance considerations below. Occupational •  No occupational need in PWC building. •  No retail branch requirement in PWC building. •  Any potential headcount growth will be accommodated in a back office location (e.g. Changi Business Park).

Operational •  70% shareholding; currently have control over building management. •  Non-core asset. •  No strategic reason to retain ownership.

3.1 Stakeholder Analysis – DBS Financial •  Preference to complete divestment by 3rd quarter 2014. •  Maximize sale value •  Sale price must exceed net book value •  Potential opportunity to provide debt to new buyer •  DBS currently satisfies the requirement of 7% Tier 1 capital Regulatory •  MAS regulation will not allow DBS to take on construction risk or participate in a redevelopment of the building. •  Despite the MAS regulation (2001) for banks to dispose non-core assets, DBS understand that this is not applicable to their investment in PWC Building.

Timing •  Dispose at optimal time. •  Capitalize on investor sentiment.

3.1 Stakeholder Analysis – DBS Governance •  MOA terms govern the process of share transfers, unless CapitaLand agree to an amended process. •  Transparent, competitive sale process. Position •  The timing and optimal use associated with the divestment will be affected by the market situation, investor sentiment, demand/supply dynamics, as well as restrictions imposed by the MAS. •  The restrictive and ambiguous terms of share transfer, coupled with the strong relationship with CapitaLand, suggest that a collaborative approach with CapitaLand for this divestment would yield the best results.

3.2 Stakeholder Analysis – CapitaLand Overview • Capitaland currently owns 30% share interest in DBS China Square Ltd. • We understand Capitaland and DBS had preliminary discussions on potentially seeking to sell the property together, with Capitaland having conducted initial analysis on the highest and best use for the site. From those discussions, we understand the highest and best use from Capitaland’s analysis to be sale by way of strata title. Group Strategy • Capitaland’s strategy has been to be asset light on the balance sheet and to be a pure developer, with its funds & REITs being holding vehicles for the different asset classes i.e. office, retail, service apartments etc. • Recent activity suggests the group is seeking to maximise shareholder value even if this means its existing vehicles do not acquire properties. • One example was the sale of Westgate which was expected to be sold into CCT, its office REIT. In late 2013, Capitaland sold the property to a 3rd party. The property was strata subdivided into smaller units and Capitaland could have sold the strata units directly, however decided to sell en bloc to a single party. In the past, Capitaland has sold similar projects en bloc rather than via sale by units i.e. The Adelphi. • These examples suggest that Capitaland may not be as confident in selling strata title office units directly, possibly due to implementation risks (i.e. not being able to sell all units), or because strata sales do not provide sufficient returns on a risk adjusted, cost of capital and net present value basis.

3.2 Stakeholder Analysis – CapitaLand CCT •  CCT has been actively seeking to acquire good quality office properties in Singapore. •  Their last acquisition was Twenty Anson in March 2012. The property was acquired on the basis of a structured deal whereby the seller provided an income guarantee to support a net yield of 4.25% as the property was under rented. The income guarantee is now coming to an end and the property is stabilising at rents assumed under the original underwriting which supports the assumed yield. •  This type of structured deal would be viewed positively by CCT should it acquire a property in the future. •  The REIT is currently trading at DPU yield of 5.7% on 2014 estimated net income. In order to acquire in Singapore, CCT would require a net property yield of X%. Position •  Capitaland’s preliminary discussions with DBS suggest they are willing to jointly market PWC Building. •  Should Capitaland consider acquiring DBS’ shares, it would likely be through CCT.

3.3 Stakeholder Analysis – PWC Overview •  PWC occupies 50% (178,000 sq ft) of the building, comprised of 2 leases of c. 166,000 sf and 12,000 sf, with a current average rental rate of $5.90 psf pm •  PWC’s contracted rental rate is 30% below current market rate. •  New lettings in 2013 have ranged between $7.00 – 7.50 psf pm (for 2,000 – 15,000 sf), while current market rent of is $7.75 psf pm (for an anchor tenant of PWC’s size). •  PWC’s main lease (c. 166,000 sf) commenced in 2000, and it is currently in the 3rd renewal option term which expires in 2018. PWC have 1 further renewal option (2018 to 2024), to be renewed at prevailing market rent. Profile •  PWC is a limited liability partnership. •  The firm’s partners prefer to avoid large capital outlays (e.g. relocation and fitout costs) during their tenures as it impacts short term profitability. Furthermore, partners are risk averse to relocating information and document archives. •  Past experience has shown the Big 4 accounting firms in Singapore relocate offices when they have no other choices. •  The group is very price conscious.

3.3 Stakeholder Analysis – PWC Rights of Termination •  If Landlord wishes to demolish, redevelop or refurbish the Building or any part of it affecting the demised premises, Landlord may terminate by giving tenant 12 months notice during the option term (Clause 6.2.3). •  PWC has 2 leases in the building, (a) c. 166,000 sf (b)12,000 sf. The former is in its 3rd option term, while the latter is in its initial term. Therefore, this termination right is only applicable to the 166,000 sf lease. •  “Refurbishment” has a fairly strict definition in the context of real estate. It means bringing existing premises back up to the original standard. For example, in the context of a 20 year old building which when constructed was Grade A, refurbishment would mean bringing it back up to that level by installing new lifts, upgrading utilities etc. the structure and function of the building remains intact.

Naming/Signage Rights •  PWC has naming and signage rights in the Building, free of charge. •  This right shall cease if (a) the lease is terminated, (b) a Management Corporation for the Building is formed, or (c) if PWC’s occupied area falls below 6 entire floors. •  PWC currently occupy 11 entire floors and 1 part floor.

3.3 Stakeholder Analysis – PWC Relationship with DBS and Capitaland •  PWC provides audit and advisory services to DBS. •  All parties would prefer to maintain a cordial working relationships given their position in the Singapore market.

Impact on Building Value •  Given their weighted average rent of $5.92 psfpm is 30% below current market rent and is fixed from 2012 to 2018, PWC’s lease has a negative impact on building value (circa xx). •  Value may be enhanced if (a) PWC agree to restructure its lease (i.e. increase the effective rent paid by PWC closer to market rent), or (b) the owners provide income support to a buyer, between now and 2018.

3.3 Stakeholder Analysis – PWC Lease Restructure DBS/Capitaland may propose the following lease restructure and negotiating position: •  PWC enter into a fresh 9.5 year lease now until the end of PWC’s renewal option term (2014-2024) at an effective rent of $7.75 psfpm, which is consistent with market. •  PWC will be given certainty of occupation and rent through 2024. •  If PWC don’t agree to the restructure: -  PWC may not be granted a renewal at a reasonable rent, and may be forced to relocate. This would involve relocation/fitout costs ($21-23m), and a required breakeven rent at alternative premises of ($7.60 - $7.70 psfpm). -  PWC may not get free naming and signage rights in an alternative building. -  The owners may terminate PWC’s lease by way of the redevelopment clause, by refurbishing the building.

PWC may not agree to restructure its lease and pay a higher rent given that they are price conscious. They may pursue a “wait and see” approach due to the following factors: •  They currently enjoy favorable lease terms including low rent and free naming/signage rights. •  Their lease includes a renewal option, which guarantees them occupation until 2024.

3.3 Stakeholder Analysis – PWC •  Their lease includes a mechanism for an independent valuer to determine the renewal rent, which ensures that PWC’s renewal rent will be consistent with the market rent at that time. •  There is significant future supply coming on stream in 2016 - 2017, which limits the risk that PWC will be facing a high market rent upon renewal. •  In order to terminate PWC’s lease on the grounds of redevelopment, the owners would have to undertake extensive refurbishment works, which is not supported by the pricing financials.

Recommended Approach •  If PWC does not agree to restructure its lease, then the owners should focus on providing income support as a way to enhance building value.

3.4 Stakeholder Analysis – Summary We have analyzed the objectives, position, considerations and preferences of the key stakeholders in PWC Building – DBS and Capitaland as owners, and PWC as the anchor tenant – in order to determine the optimal approach for the proposed disposition. A summary of our findings are provided below.

DBS •  MAS regulation will not allow DBS to take on construction risk or participate in a redevelopment of the building. •  Given the strong relationship with CapitaLand, a collaborative approach for this divestment would yield the best results. •  DBS may consider providing debt financing to any buyer.

Capitaland •  Capitaland’s preliminary discussions with DBS suggest they are willing to jointly market PWC Building. •  Should Capitaland consider acquiring DBS’ shares, it would likely be through CCT. •  Capitaland may not prefer to sell strata title office units directly, possibly due to implementation risks or insufficient returns on a risk adjusted, cost of capital and net present value basis.

3.4 Stakeholder Analysis – Summary PWC •  PWC lease is circa 30% below current market rent and is fixed from 2012 to 2018, therefore, has a negative impact on building value (circa xx). •  Value may be enhanced if PWC agrees to restructure its lease (i.e. increase the effective rent paid by PWC closer to market rent). •  If PWC does not agree to restructure its lease, then the owners should focus on providing income support as a way to enhance building value.

1.  INTRODUCTION / BACKGROUND! 2.  THE PROPERTY! •  OFFICE ENBLOC MARKET! 3.  STAKEHOLDER ANALYSIS! •  OFFICE STRATA MARKET! 4. 4.  MARKET OVERVIEW OVERVIEW! 5.  MARKET COMPARABLE!•  RETAIL MARKET! •  HOTEL & RESIDENTIAL MARKET! 6.  PRICING! •  MARKET OVERVIEW SUMMARY! 7.  SALE SCENARIOS! 8.  RECOMMENDATION!

4.1 Market Overview – Office En-bloc Market Supply!

Raﬄes Place Net Addition, Take Up and Vacancy

•  New supply in the CBD remains limited with no new completions in the 4Q2013. •  CapitaGreen and South Beach Tower are expected to complete near end-2014, adding around 1.2 million sq ft of new Grade A space. •  Beyond this, no new supply is expected until 2016, when around 3.2 million sq ft of new space will complete. This includes Guoco Tower, Marina One and Duo. Demand! •  Demand for office space remains stable and leasing sentiment continues to improve for newer developments. •  Demand from large space occupiers remains muted but small space occupiers – largely financial and professional services firms – continued to support the take up of space in the CBD. •  Net absorption reached 531,000 sq ft in 4Q2013 and as a result vacancy declined from 6.1% to 5.6%. •  Demand is expected to remain stable in the near-term and vacancy expected to fall in 2014. Small space occupiers will continue to support leasing activity, along with some relocation and space consolidation.

4.1 Market Overview – Office En-bloc Market Rents •  Rents continued to grow in 4Q2013, increasing by 3.9% q-o-q to $8.92 psf pm. •  As vacancy rates fall, landlords have started to increase rents to capture the continuing stable demand for space. •  With the existing healthy occupancy and expected decline in vacancy rates, most landlords are likely to start raising their asking rents. •  As such, we expect rents to increase by between 6 – 11% in 2014. Capital Values •  Average capital values edged marginally higher by 0.4% q-o-q to $2,400 per sq ft in 4Q2013. •  En bloc transactions were muted in 4Q2013 but there were several strata transactions, most notable at Springleaf Tower where six floors changed hands at an average price of $2,355 psf. •  Capital values are expected to continue increasing in 2014, supported by continued expectations of positive rental reversions, with growth of between 3 – 7% forecast for 2014.

4.2 Market Overview – Office Strata Market •

•

The strata sales market continued to be strong in 2013, with more than $2 billion transacted for strata office space. The bulk of this was in the resale market where $1.3 billion was transacted.

Primary Strata Sales Transactions 2013

Average prices for strata office space reached $2,250 psf in 2013 island-wide, with strata offices in the Downtown Core area averaging $2,640 psf. The primary sales market of new properties remains strong, with new developments such as SBF Centre and Oxley Tower seeing good demand and selling at average prices of $2,950 psf and $3,450 psf, respectively. Direct comparable properties to PWC Building in the resale market have enjoyed healthy investment sales activity.

•

During 2013, twelve floors of office space were sold at Springleaf Tower at between $2,200 and $2,400.

•

Also within the vicinity of PWC Building, six strata units on the 17th floor at Samsung Hub were sold at between $3,100 and $3,300 psf

Project

Tenure

Strata Area (sq ft)

Price ($)

Price ($ psf)

EON Shenton

99 Years

505 – 8,406

1,524,000 21,435,000

2,311 3,201

Oxley Tower

Freehold

969 – 1,302

3,578,000 – 4,782,900

3,171 – 3,954

Robinson Square

Freehold

1,173 1,938

3,350,000 3,877,000

2,001 2,990

SBF Centre

99 Years

538 – 21,506

1,568,850 – 64,015,000

2,454 – 3,707

Resale Strata Sales Transactions 2013

Project

Tenure

Strata Area (sq ft)

Price ($)

Price ($ psf)

Samsung Hub

999 Years

1,335 7,470

4,405,500 23,904,000

3,150 3,301

Springleaf Tower

99 Years

10,186 10,742

22,732,600 25,780,800

2,200 2,400

Suntec City

99 Years

2,196 12,023

6,100 000 33,063,250

2,165 3,000

4.3 Market Overview – Retail Market •

Following the completion of Asia Square Tower 2 (70,000 sq ft), new supply of retail space in the CBD will continue to come on-stream in 2014.

•

DBS Building and One Raffles Place will add another 160,000 sq ft and 99,000 sq ft of retail space respectively in 2014.

•

Further space set to be added at Robinson Towers (56,000 sq ft) in 2016 and Guocoland’s Tanjong Pagar project (80,000 sq ft) and The Heart (128,450 sq ft) at the Marina One development scheduled to complete in 2017.

•

The addition of new and refurbished retail space is expected to see healthier leasing demand, with many of the new development enjoying healthy pre-commitment levels.

•

As the new space comes to the market, rents are expected to remain subdued in 2014. However, an improving economy and infrastructure completions (Downtown Line in 2015) should mean rental growth as it becomes more attractive to retail tenants.

•

Capital values are expected to grow as new projects complete helping to shore up investor demand.

4.4 Market Overview – Hotel & Residential Market Hotel Market!

Residential Market

•  International visitor arrivals to continue to grow and reached 15.5 million in 2013.

•  The residential market remains subdued following the introduction of further cooling measures in 2013, with the amended ABSD measures and the introduction of the Total Debt Servicing Rations (TDSR) both having a negative impact on demand.

•  The Singapore government is targeting the Meetings, Incentives, Conventions and Exhibitions (MICE) as a growth area, with recent improvements including the $184 million refurbishment of Suntec Singapore Convention and Exhibition Centre.

•  The launch of two new projects in the Central* sub-market, Clermont Residences at Tanjong Pagar and Alex Residences behind Redhill MRT station, supported an increase in demand in 4Q2013, evidence that there is some latent demand for centrally located properties, although in 2013 overall sales dropped by 10.1%.

•  In 4Q2013, the Westin Singapore (315 rooms) opened, bringing the Starwood Hotels brand back to Singapore after a 10-year absence. •  Elsewhere in the CBD, the boutique Amoy Hotel (37 rooms) also opened in 4Q2013. Earlier in 2013, the Park Royal on Pickering opened adding 367 rooms to supply

•  Demand for rental properties also shrank in 4Q2013 and rents declined by 2.0% q-o-q along with the weaker sentiment. However, CBD residential developments such as The Sail @ Marina Bay and Icon remained popular choices for renters –due to their proximity to the CBD and Tajnong Pagar areas.

•  The pipeline for hotels in the CBD area includes Sofitel So (134 rooms) on Robinson Road, Patina Singapore (157 rooms), a sixstar hotel at the Capitol development and Holiday Inn Express at Clarke Quay (442 rooms).

•  In line with the lackluster sentiment, capital values remained stagnant in 4Q32013 at around $1,215 psf.

•  Occupancy remained stable at 85.6% for luxury hotels as at November 2013, with the Average Daily Rate increasing to $428.

•  Looking ahead, the major project in the pipeline in the CBD is at Marina One which will add 1,042 units to stock. However, with the effect of TDSR the outlook for demand remains weak.

•  Hotels continued to be in demand, with the newly opened Westin Singapore being sold to Japanese group Daiso for $468 million or $1.5 million per key.

•  Rental and capital values are expected to see downwards pressure in 2014 due to the subdued sentiment.

•  The 203-room Park Regis was also sold for $165 million or $812,000 per key in 4Q2013.

4.5 Market Overview – Implications for PWC Building •  The anticipated pick up in rents for CBD office space will have a positive impact on PWC Building.

•  PWC building is well placed to take advantage of the tight supply conditions given its good location, regular column free floor plates and competitive rents.

•  Projected rental growth of between 6-11% in 2014 presents an opportunity to secure positive rent reversions on leases expiring in 2014 and 2015, when around 20% of NLA in PWC Building will expire.

•  Further improvements to the retail offering in the CBD will increasingly make it more attractive to new to market brands, offering a chance to maximise the use of the ground floor retail space at PWC Building and achieve higher rents.

•  Existing demand from small space occupiers, largely professional and financial services companies, is supporting leasing activity in the CBD. Demand for units of around 5,000 sq ft – 20,000 sq ft remains good.

•  An influx of supply of new hotel rooms in 2013 has added to the existing stock within the CBD area. Further new additions in 2014 will also boost the choice for both business and leisure travelers looking for centrally located hotel space at a range of prices.

•  Demand also remains for strata office units, with units at nearby buildings transacting at between $2,400 - $3,300 psf

•  The government’s aim to grow the MICE sector could boost demand for CBD hotels, and PWC Building’s location adjacent to Telok Ayer MRT station provides a direct link to existing MICE facilities at Suntec City and Marina Bay Sands via the newly opened Downtown line

•  Given the existing tenant profile at PWC Building, where professional and financial services companies dominate, and the predominant unit size of between 5,000 sq ft – 25,000 sq ft, PWC Building is well placed to capture the existing demand in the market.

•  The softening in the residential market following the introduction of cooling measures by the government has had a negative impact on pricing and rental demand for properties in the CBD. A conversion or redevelopment to a residential property is unlikely to achieve maximum value from the property given the prevailing market conditions.

•  With limited new CBD office supply coming to the market in 2014, and vacancy rates falling to 5.6% at end-2013, existing good quality office space is likely to see strong demand in 2014.

1.  INTRODUCTION / BACKGROUND! 2.  THE PROPERTY! •  OFFICE EN-BLOC COMPS ! 3.  STAKEHOLDER ANALYSIS! •  OFFICE REITS COMPS! 4.  MARKET OVERVIEW! •  OFFICE STRATA COMPS! 5. 5.  MARKET COMPARABLE COMPARABLE! •  GLS COMPS! 6.  PRICING! •  REDEVELOPMENT COMMERCIAL 7.  SALE SCENARIOS! SITE COMPS! 8.  RECOMMENDATION! •  OFFICE LEASING COMPS! •  RETAIL LEASING COMPS! •  SUMMARY!

5.1 Market Comparable â&#x20AC;&#x201C; Office En-bloc Comps Property Name

Tenure (years remaining)

Price (S$ millions)

Unit Price (S$ psf on NLA)

Indicative Yield*

Date

Remarks

Westgate Tower

99-yrs (96)

579.4

1,900

N.A.

Jan-14

Development is strata-titled (8 -16 units per floor)

TripleOne Somerset

99-yrs (60)

970

1,720

4.3%

Dec-13

Development has a retail podium

Robinson Point

Freehold

348.9

2,579

3.0%

Jun-13

21 â&#x20AC;&#x201C;storey development with full occupancy

135 Cecil Street

Freehold

182

2,200

3.5%

May-13

21-storey office tower

PoMo

99-yrs (69)

336

1,915

3.48%

Jun-13

Potential for strata-title subdivision

2 Havelock Road

99-yrs (69)

282.88

1,627

3.15%

Mar-13

Strata-title subdivision in place

16 Collyer Quay (51%)

999-yrs

336.6

2,371

3.0%

Jan-13

37-storey office development with 94 % occupancy. Purchase of remaining 51% stake from Goldman Sacs

79 Anson

Freehold

410

2,029

2.7%

Dec-12

United Engineers

16 Collyer Quay (49% interest)

999-yrs

324

2,365

3.60%

Jan-11

NTUC Income

Commerce Point

999-yrs

204.8

2,493

2.70%

Oct-11

Royal Group

One Phillip Street

999-yrs

79.0

2,050

2.75%

Oct-11

Royal Group

One Finlayson Green

Freehold

227

2,524

2.80%

Mar-11

Private Investor

99-yrs (82)

889

2,300

3.46%

Mar-11

NTUC Income (50%) & Alpha Investment Partners (50%)

Capital Square

5.2 Market Comparable â&#x20AC;&#x201C; Office REITs Comps Year

2012 2011

Subject Property

Ocean Financial Centre

Property NLA (â&#x20AC;&#x2DC;000 sq ft)

Purchaser

Vendor

Share Value (%)

Sale Price (S$ mil)

12.40% 87.50%

774

K-REIT

Keppel Land

LaSalle Investment Management

100%

Mapletree Anson

100%

Net Unit Gross Rate Unit Rate (S$ psf) * (S$ psf)

Remarks

$2,380 $2,400

Acquired 87.5% in Oct. 2011 with income support of $170 million $2,366 12.40% acquired in June 2012 with income support of $24.10 million Indicative yield of 2.8%

$430

$2,121

Purchased via acquisition SPV Net yield of 4% pa with income support of $2,205 $17.1 million Indicative yield of 2.7% without income support

$680

$2,049

No income support Indicative yield of 3.6%

$261.6 $1,570

2012

20 Anson

202

Capita Commercial Trust

2012

Mapletree Anson

331

Mapletree Commercial Trust

2010

MBFC Phase I **

1,700

K-REIT

Keppel Land 33.33%

$1,427

$2,400

$2,568

Income support of $29.0 million Indicative yield of 4.0%

2010

MBFC Phase I **

1,700

Suntec REIT

Cheung Kong 33.33% Holdings

$1,496

$2,400

$2,568

Income support of $113.90 million Indicative yield of 4.0%

2007

One Raffles Quay

1,300

K-REIT

Keppel Land 33.33%

$941.50

$1,877

$2,173

Income support of $103.4 million Indicative yield of 4.65%

2007

One Raffles Quay

1,300

Suntec REIT

Cheung Kong 33.33% Holdings

$941.50

$1,877

$2,173

Income support of $103.5 million Indicative yield of 4.65%

5.3 Market Comparable – Office Strata Comps Project Name

Address

EON SHENTON

70 Shenton Way #17-03

EON SHENTON EON SHENTON

Area (sqft)

Contract Date

Tenure

506

Transacted Price ($) 1,700,000

3,360

28-Nov-13

99 Yrs From 06/10/2011

70 Shenton Way #09-13/14/15

1,765

4,383,700

2,483

14-Aug-13

99 Yrs From 06/10/2011

70 Shenton Way #07-13/14/15

1,765

4,302,400

2,437

14-Aug-13

99 Yrs From 06/10/2011

EON SHENTON

70 Shenton Way #12-13/14/15

1,765

4,436,341

2,513

25-Jul-13

99 Yrs From 06/10/2011

EON SHENTON

70 Shenton Way #07-11/12

1,033

2,922,800

2,828

18-Jul-13

99 Yrs From 06/10/2011

EON SHENTON

70 Shenton Way #13-13/14/15

1,765

4,412,500

2,500

9-Jul-13

99 Yrs From 06/10/2011

EON SHENTON

70 Shenton Way #10-13/14/15

1,765

4,422,500

2,505

8-Jul-13

99 Yrs From 06/10/2011

GB BUILDING

143 Cecil Street #03-01

12,594

20,150,400

1,600

10-Sep-13

99 Yrs From 12/10/1982

GB BUILDING

143 Cecil Street #24-01

5,210

10,550,250

2,025

1-Aug-13

99 Yrs From 12/10/1982

GB BUILDING

143 Cecil Street #04-01

3,294

5,435,100

1,650

30-May-13

99 Yrs From 12/10/1982

GB BUILDING

143 Cecil Street #06-01

5,210

9,550,000

1,833

25-Mar-13

99 Yrs From 12/10/1982

INTERNATIONAL PLAZA

10 Anson Road #33-17

409

945,000

2,310

28-Jan-14

99 Yrs From 02/06/1970

INTERNATIONAL PLAZA

10 Anson Road #22-01

474

1,000,000

2,111

14-Jan-14

99 Yrs From 02/06/1970

INTERNATIONAL PLAZA

10 Anson Road #17-19

463

1,064,900

2,301

29-Nov-13

99 Yrs From 02/06/1970

INTERNATIONAL PLAZA

10 Anson Road #14-10

463

1,047,000

2,262

13-Nov-13

99 Yrs From 02/06/1970

INTERNATIONAL PLAZA

10 Anson Road #27-11

936

2,080,000

2,221

11-Nov-13

99 Yrs From 02/06/1970

INTERNATIONAL PLAZA

10 Anson Road #20-08/08A

2,357

4,442,945

1,885

1-Nov-13

99 Yrs From 02/06/1970

INTERNATIONAL PLAZA

10 Anson Road #10-25

1,453

3,310,000

2,278

22-Oct-13

99 Yrs From 02/06/1970

INTERNATIONAL PLAZA

10 Anson Road #20-12

936

2,152,800

2,299

4-Oct-13

99 Yrs From 02/06/1970

INTERNATIONAL PLAZA

10 Anson Road #14-04

936

2,093,000

2,235

15-Aug-13

99 Yrs From 02/06/1970

INTERNATIONAL PLAZA

10 Anson Road #18-19

463

1,130,000

2,441

14-Aug-13

99 Yrs From 02/06/1970

INTERNATIONAL PLAZA

10 Anson Road #09-14

474

1,113,900

2,352

30-Jul-13

99 Yrs From 02/06/1970

INTERNATIONAL PLAZA

10 Anson Road #20-13

936

2,059,200

2,199

30-Jul-13

99 Yrs From 02/06/1970

OXLEY TOWER

138 Robinson Road #12-04

1,152

3,620,000

3,143

27-Dec-13

Freehold

OXLEY TOWER

138 Robinson Road #29-03

969

3,830,000

3,954

5-Jul-13

Freehold

OXLEY TOWER

138 Robinson Road #24-03

1,001

3,780,000

3,776

5-Jul-13

Freehold

SAMSUNG HUB

3 Church Street #17-01

1,335

4,405,500

3,301

17-Jun-13

999 Yrs From 25/01/1827

SAMSUNG HUB

3 Church Street #17-06

1,765

5,648,000

3,199

31-May-13

999 Yrs From 25/01/1827

SAMSUNG HUB

3 Church Street #17-02/03/04

7,470

23,904,000

3,200

3-May-13

999 Yrs From 25/01/1827

SAMSUNG HUB

3 Church Street #17-05

2,562

8,198,400

3,200

22-Apr-13

999 Yrs From 25/01/1827

SAMSUNG HUB

3 Church Street #13-01/04

6,092

19,189,800

3,150

19-Mar-13

999 Yrs From 25/01/1827

Unit Price ($ psf)

5.3 Market Comparable – Office Strata Comps Project Name

Address

Contract Date

Tenure

SBF CENTER

160 Robinson Road #27-09

Area (sqft) 614

Transacted Price ($) 2,127,000

3,467

3-Jan-14

99 Yrs From 21/12/2011

SBF CENTER

160 Robinson Road #26-04

743

2,581,000

3,475

13-Dec-13

99 Yrs From 21/12/2011

SBF CENTER

160 Robinson Road #23-02

947

3,019,500

3,188

6-Dec-13

99 Yrs From 21/12/2011

SBF CENTER

160 Robinson Road #24-01

592

2,176,150

3,676

22-Nov-13

99 Yrs From 21/12/2011

SBF CENTER

160 Robinson Road #24-02

947

3,104,750

3,278

22-Nov-13

99 Yrs From 21/12/2011

SBF CENTER

160 Robinson Road #30-01 ETC

21,506

64,015,000

2,977

23-Oct-13

99 Yrs From 21/12/2011

SBF CENTER

160 Robinson Road #26-01

592

2,194,500

3,707

16-Oct-13

99 Yrs From 21/12/2011

SBF CENTER

160 Robinson Road #23-04

743

2,452,886

3,303

17-Sep-13

99 Yrs From 21/12/2011

SBF CENTER

160 Robinson Road #24-05/06/07

2,777

8,870,436

3,194

6-Sep-13

99 Yrs From 21/12/2011

SBF CENTER

160 Robinson Road #21-04

743

2,363,106

3,182

27-Aug-13

99 Yrs From 21/12/2011

SBF CENTER

160 Robinson Road #24-12

700

2,234,490

3,194

22-Aug-13

99 Yrs From 21/12/2011

SBF CENTER

160 Robinson Road #19-06

1,292

3,930,000

3,043

25-Jul-13

99 Yrs From 21/12/2011

SBF CENTER

160 Robinson Road #26-07

947

3,200,514

3,379

5-Jul-13

99 Yrs From 21/12/2011

SBF CENTER

160 Robinson Road #25-01

592

2,166,665

3,660

1-Jul-13

99 Yrs From 21/12/2011

SPRINGLEAF TOWER

3 Anson Road #26-01

10,742

25,780,800

2,400

15-Nov-13

99 Yrs From 01/10/1996

SPRINGLEAF TOWER

3 Anson Road #27-01

10,742

25,780,800

2,400

15-Nov-13

99 Yrs From 01/10/1996

SPRINGLEAF TOWER

3 Anson Road #25-01

10,742

25,780,800

2,400

15-Nov-13

99 Yrs From 01/10/1996

SPRINGLEAF TOWER

3 Anson Road #22-01

10,742

25,114,796

2,338

25-Oct-13

99 Yrs From 01/10/1996

SPRINGLEAF TOWER

3 Anson Road #21-01

10,086

23,581,068

2,338

25-Oct-13

99 Yrs From 01/10/1996

SPRINGLEAF TOWER

3 Anson Road #17-01

10,333

23,352,580

2,260

9-Oct-13

99 Yrs From 01/10/1996

SPRINGLEAF TOWER

3 Anson Road #20-01

10,333

23,972,560

2,320

30-Sep-13

99 Yrs From 01/10/1996

SPRINGLEAF TOWER

3 Anson Road #16-01

10,333

22,939,260

2,220

6-Aug-13

99 Yrs From 01/10/1996

SPRINGLEAF TOWER

3 Anson Road #15-01

10,333

22,939,260

2,220

6-Aug-13

99 Yrs From 01/10/1996

SPRINGLEAF TOWER

3 Anson Road #19-01

10,333

23,766,705

2,300

30-Jul-13

99 Yrs From 01/10/1996

SPRINGLEAF TOWER

3 Anson Road #18-01

10,333

23,559,240

2,280

28-Jun-13

99 Yrs From 01/10/1996

SPRINGLEAF TOWER

3 Anson Road #14-01

10,333

22,732,600

2,200

9-May-13

99 Yrs From 01/10/1996

SUNTEC CITY

7 Temasek Boulevard #22-03

3,897

9,664,560

2,480

27-Dec-13

99 Yrs From 01/03/1989

SUNTEC CITY

7 Temasek Boulevard #39-02

2,196

6,100,000

2,778

18-Dec-13

99 Yrs From 01/03/1989

SUNTEC CITY

8 Temasek Boulevard #41-01/02/03

10,097

30,291,000

3,000

17-Oct-13

99 Yrs From 01/03/1989

SUNTEC CITY

7 Temasek Boulevard #09-01

6,415

15,909,200

2,480

26-Sep-13

99 Yrs From 01/03/1989

THE OCTAGON

105 Cecil Street #03-02

1,819

3,800,000

2,089

18-Oct-13

Freehold

THE OCTAGON

105 Cecil Street #03-01

1,302

2,825,000

2,169

30-Sep-13

Freehold

Unit Price ($ psf)

5.4 Market Comparable – GLS Comps Date of Award

Location

Use Approval

Lease (yrs)

Zoning

Site Area

GFA

Price

Unit Land Price   ($ psf ppr)

Q3 2013

Cecil Street / Telok Ayer Street

Commercial and open space –not for strata-titled development" (residential use will not be allowed)

Commercial

7,603.2

77,162

$923,952,040.00

1,112

Q4 2012

Thomson Road / Irrawaddy Road

White

White Site

6,676.8

28,043

$492,500,000.00

1,632

Q4 2012

Victoria Street / Jalan Sultan

Hotel or Commercial & Residential

Hotel

8,423.2

30,977

$331,336,000.00

994

2011

Robinson Road / Cecil Street

Commercial – strata-titled development allowed

Commercial

2,932.0

32,839

$311,777,000.00

882

2011

Boon Lay Way

White " (Commercial / Hotel / Residential)

White Site

18,159.1

88,980

$968,999,999.00

1,012

2011

Paya Lebar Road / Eunos Road 8

Commercial

14,851.6

62,377

$585,586,000.00

2010

Peck Seah Street / White " Choon Guan Street (Commercial / Hotel / Residential)

White Site

15,022.6

157,738

$1,708,080,000.00

2010

Stamford Road / North Bridge Road

Commercial

14,311.1

50,389

$250,000,000.00

2010

Jurong Gateway Road

White " (Commercial / Hotel / Residential)

White Site

19,124.5

107,098

$748,888,000.00

872 1,006 461 650

5.5 Market Comparable â&#x20AC;&#x201C; Redevelopment Commercial Site Comps Tenure (years remaining)

Price (S$ millions)

Unit Land Price ($ psf ppr)

Date

Remarks

NOL Building

Freehold

380

$1,265

Oct-12

Strata title based on redevelopment in place

Tower 15

Freehold

360

$1,420 *

Jun-12

90% office 10% retail

Keypoint

99-yrs (62)

360

$1,670 **

Apr-12

The Corporate Building

Freehold

$1,280 ***

Jan-11

80% office 20% retail Strata office and retail redevelopment

The Corporate Office

Freehold

215

$1,260 - $1,270*

Oct-10

Strata office and retail redevelopment

Chow House

Freehold

101

$1,200 *** $1,300

Aug-10

For office block For residential development

Marina House

99-yrs (56)

148

$741****

Mar-10

Residential and strata office development with retail on ground floor

Freehold / 99-yrs

100.8

$590 *****

Jul-09

Fission Group & Yi Kai Group

Freehold

$700******

Jun-09

Fission Group & Yi Kai Group

Property Name

Aviva Building & Cecil House VTB Building

* Inclusive of DC payable ** Inclusive of DC & DP payable ***Unsure whether DC was payable **** Marina House excludes DC and lease top up ***** Unit Land Price figure only for Aviva Building, excludes any DC payable ******VTB Building assuming no DC payable

5.6 Market Comparable – Office Leasing Comps Direct Comparable

Raffles Place

1. Samsung Hub Rent: $8.50 – $9.50 psf per month Occupancy: 95%

14 8

4 1 3

2. Prudential Tower Rent: $8.40 - $8.60 psf per month Occupancy: 95% Other Developments

7 2 11

10 12

9. Asia Square Tower 1 5. SGX Centre Rent: $11.00 - $13.00 psf per month Rent: $7.50 - $8.00 psf per month Occupancy: 90% Occupancy: 95% 6. Marina Bay Financial Centre Tower 3 10. Asia Square Tower 2 Rent: $11.00 - $13.00 psf per month Rent: $9.50 - $10.50 psf per month Occupancy: 50% Occupancy: 95% 7. Ocean Financial Centre 11. CapitaGreen Rent: $9.50 – $12.00 psf per month Rent: $9.00 - $10.00 psf per month Occupancy: 98% Occupancy: 0% 8. One Raﬄes Place Tower 2 12. Robinson 77 Rent: $9.50 - $10.50 psf per month Rent: $7.50 - $8.00 psf per month Occupancy: 75% Occupancy: 90% 13. Springleaf Tower 14. Capital Square Rent: $7.50 - $8.00 psf per month Rent: $8.00 - $8.50 psf per month Occupancy: 90% ???? Occupancy: 90% ????

3. 18 Cross Street Rent: $7.50 - $8.00 psf per month Occupancy: 90% 4. Great Eastern Centre Rent: $7.00 – $7.50psf per month Occupancy: 100%

Marina Bay Financial Centre

PWC Building

5.6 Market Comparable – Office Leasing Comps S/N Development 1 2

Samsung Hub Prudential Tower

Tenant / Industry

NLA (sq ft)

Rental Type ($ psf pm) (Renewal / New)

Lease Term

Date of Transaction

Comments

Permal

3,000

9.20

Renewal

3 years

Q1 2014

Kroll Associates

2,800

8.50

Renewal

3 years

Q4 2013

Profile Search

3,000

9.00

Renewal

3 years

1Q 2014

Great Eastern Centre

Profunds

1,500

7.30

New Lease

3 years

Q2 2013

SGX Centre

Publicis

30,000

8.00

New Lease

3 years

Q1 2014

First Offer

Pavillion Energy

6,000

11.00

Expansion

3 years

1Q 2014

Booking.com

45,000

9.50

New Lease

5 years

4Q 2013

Spencer Stuart

9,000

12.50

Renewal

5 years

1Q 2014

F5 Networks

6,000

12.92

New Lease

5 years

1Q 2014

2nd Offer

ILFC

13,000

11.43

New Lease

5 years

3Q 2013

Jump Trading

7,800

11.02

New Lease

3 years

3Q 2013

Mercuna Energy Nikko Asset Management

20,000

12.38

New Lease

5 years

1Q 2014

17,000

10.15

New Lease

3 years

Q4 2013

SCOR Insurance

20,000

11.08

New Lease

3 years

Q4 2013

Technology

20,000

11.00

New Lease

3 years

1Q 2014

First offer

Regus

9,000

7.50

New Lease

5 years

1Q 2014

Offer Only

Amazon

30,000

8.00

New Lease

3 years

Q3 2014

MBFC Tower 3

7 8

Ocean Financial Centre

One Raffles Place Tower 2

Asia Square Tower 1

Asia Square Tower 2

14 15

Capita Green

Springleaf Tower

Capital Square

5.7 Market Comparable – Retail Leasing Comps S/N Development 1

China Square Food Centre

China Square Central

Tenant / Industry

NLA (sq ft)

Rental ($ psf pm)

Comments

Segrafrado

450

25.00

ORA?????

The Rotisserie

4,000

11.00

ORA????? Source of Information - market intelligence

O Briens

1,500 -2,000

10.00

ORA????? Source of Information - market intelligence

9.00 + 1% GTO

Current tenant Don Pie is moving out Q1 2014. Asking Rental at $9 psf pm+1% GTO

Don Pie

3,000

N.A.

500

Asking Rental for basement units at China Square Central at $10.00 to 11.00 psf pm

N.A.

Previous tenant a chinese restaurant. Unit is an 11.00 or 18% GTO 1,454 whichever is higher intermediate shop along the row of shophouses where YaKun is located at China Street

N.A.

2,015

Far East Square

Capital Square

10.00 - 11.00

Toastbox

12.00 or 18% GTO whichever is higer

Unit is at the lobby at new Amoy Hotel by Far East Hospitality with previous tenant Subway. ORA?????

5.8 Summary •  Recent office investment transactions have recorded yields of between 3.0 – 3.5%. •  Capital values for freehold office buildings in the CBD are between $2,200 to $2,600 psf. Capital values for comparable leasehold office buildings are between $1,600 to $1,900 psf on NLA. A recent en-bloc transaction of Westgate Tower at $1,900 psf on NLA was sold with strata-subdivision plans for 8-16 strata units of approx.430 – 1,800 sq ft per unit. •  Strata office sales at Samsung Hub, Springleaf Tower and Suntec were recorded between $2,700 to $3,200 psf on NLA/strata area. •  Commercial redevelopment sites that had approval for strata-titled developments were sold between $1,260 to $1,280 psf ppr in 2010/ 2011. These included developments such as The Corporate Office, The Corporate Building re-named Oxley Tower and Robinson Square respectively ( both strata-titled commercial developments). •  The most recent GLS commercial site in Q3 2013 was recorded at $1,112 psf ppr for approx. $924 million. The site is approved only for commercial use, with no strata-title approval in place. A GLS site sold for commercial strata-titled development is the current SBF Centre – the site was purchased by Far East Organisation in 2011 for $882 psf ppr ( approx. $312 million). •  Office leasing transactions for comparable office developments such as Samsung Hub, Prudential Tower, 18 Cross Street and Great Eastern Building were recorded at between $7.30 to $9.20 psf pm for office spaces between 1,500 to 3,000 sq ft from Q2 2013 to date. Retail leasing transactions at China Square Food Centre, China Square Central, Far East Square were recorded between $9 - $12 for ground floor F&B tenants for retail spaces between 1,000 to 3,000 sq ft.

1.  INTRODUCTION / BACKGROUND! 2.  THE PROPERTY! 3.  STAKEHOLDER ANALYSIS! 4.  MARKET OVERVIEW! •  PRICING OVERVIEW! 5.  MARKET COMPARABLE! •  PRICING SCENARIOS! 6. 6.  PRICING PRICING! •  “AS – IS” BASIS! 7.  SALE SCENARIOS! •  REFURB BASIS! 8.  RECOMMENDATION! •  REDEVELOPMENT BASIS! •  PRICING SUMMARY!

6.1 Pricing Analysis •  The pricing analysis outlined in this section seeks to identify the optimal strategy to maximise the value of DBS’s shareholding. •  Given the property is a “white site”, there a number of potential scenarios that we have analyzed in detail to determine the optimal value including the following: -  Value on “as is” basis, i.e. existing office building, exploring income support as well as sale through strata title -  Value based on a refurbishment to alternative use such as hotel, hotel & office and serviced apartments -  Value based on redeveloping the site into residential use, hotel & retail use, office etc. •  We have run through these scenarios to ensure all options have been explored and analysed before we conclude on the optimal option which would maximise value for DBS.

6.2 Scenario Overview Proposed Scenarios

En-bloc Sale •  Current use as office & ground floor retail •  Explore potential for asset enhancement initiatives

•  •

Sale of 100% of the property or company on the basis of existing tenancies. Potential to explore conversion of level 1 & 2 into F&B use to enhance income.

En-bloc Sale with Income Support •  Current use as office & ground floor retail •  Income support to market rent for PWC’s lease

•  •

Sale of 100% of the property or company on the basis of existing tenancies. Mark to market rent for PWC’s lease, at assumed rental rate of $7.75 psf pm.

•  En-bloc Sale with OPP for Strata Subdivision •  Current use as office & ground floor retail •  Obtain Outline Planning Permission (OPP) to strata title building on a floor by floor basis •

Sale by Strata Titles •  Current use as office & ground floor retail •  Formal strata title approval on a floor by floor basis •  Sale by strata title, either floor or units

As Is Basis

Description

Sale of 100% of the property or company with in-principle approval (OPP – Outline Planning Permission) to strata title the building either by units or floor. Timing expected to obtain OPP is 4 weeks. Purchaser would need to go through the formal strata title process

•  •  •

Obtain approval for strata title either by floor or existing tenancies and go through for formal strata title process. Expected timeframe from application to obtain strata title approval is 6-12 months. Sale by strata tittles through a marketing campaign Expected timeframe to sell 100% is c 2 to 3 years

Refurbish Existing Property to Oﬃce & Hotel •  Maintain office on lower floors •  Convert level 17-28 for hotel use

•  •  •  •  •

Obtain approval to convert part of existing building to hotel use Terminate leases from level 17 to level 28 (12 floors) Expected timeframe for termination is maximum of 12 months Building would provide 240,000 sq ft of office NLA and 460-470 hotel rooms Cost for conversion estimated at c $100,000 per hotel room

Refurbish Existing Property to Hotel •  Convert entire property for hotel use •  Maintain retail space on level 1

•  •  •  •

Terminate entire building and shutdown for c 12 months for conversion Expected timeframe for termination is maximum of 12 months Building would provide 860-870 hotel rooms Price per hotel room for conversion is c $100,000

Refurbish Existing Property to Serviced Apartments •  Convert entire property to serviced apartments •  Maintain retail space on level 1

•  •  •  •

Terminate entire building and shutdown for c 12 months for conversion Expected timeframe for termination is maximum of 12 months Building would provide for 470-480 apartments (studio, 1 BR & 2 BR) Estimated cost for conversion is $380 psf on converted GFA

Refurbishment Basis

•

6.2 Scenario Overview Proposed Scenarios

Assumptions

Oﬃce & Retail for Lease or Strata Sale •  80% office & 20% retail podium •  NLA of 300,000 sq ft office & 65,000 sq ft retail

Hotel •  95% hotel use & 5% supporting retail •  5 star hotel with full facilities

Redevelopment Basis

Mixed Use: Oﬃce & Hotel •  60% hotel & 40% office •  5 star hotel with full facilities •  Office for strata sale

Residential for Sale •  High end residential •  Includes 10% for balcony at c $40 DC

•  •  •  •

Average efficiency of 80% Office rents of $11.00 psf pm & retail average at $15.00 psf pm Exit Cap Rate: 4.5% Gross Development Value (GDV): $880 million / $2,432 psf NLA / $1,936 psf GFA

•  •  •  •  •

760 hotel rooms at 32 sqm Building efficiency of 60% ADR: $350 @ occupancy of 85% Exit Cap Rate: 4.5% GDV: $970 million / $1.3 million per key / $2,122 psf GFA

•  •  •  •  •  •

320 room hotel & 235,000 sq ft office Building efficiency of 75% ADR: $350 @ occupancy of 85% Exit Cap Rate for Hotel: 4.5% GDV: $945 million / $2,060 psf GFA Hotel GDV: $1.2 million per key; Office GDV: $2,500 psf office

•  •  •  •

Average unit size of 650 sq ft for apartments Total of 670-680 apartments & 24 units of retail on ground floor Average sale price for residential at $2,000 psf & for retail at $3,000 psf GDV: $900 million / $2,030 psf NSA

6.2 Pricing Analysis Land Value ($)

Unit Land Price ($ psf ppr)

3 a) Hotel with Ground Floor Retail

499,000,000

1,088

3 b) Office with retail podium

476,000,000

1,037

3 c) Mixed Use - Office (60%) & Hotel (40%)

508,000,000

1,105

3 d) Residential (+ 10% balcony) with ground floor retail

438,000,000

953*

Option

Scenarios

Redevelopment Basis (Residual Land Value)

6.3 Pricing Summary •  The analysis suggests pricing would be maximised without having to refurbish or redevelop the property. •  The highest and best use in terms of pricing would be to strata title and sell the property. This would generate a price of c $850 million over 3 to 4 year sale period. The Net Present Value on this basis would reflect c $650 – 680 million. •  However there are risks associated with the strata title sales including market conditions, timing, pricing, leftover units etc, particularly to strata a building of this size. •  The current value on the basis of a building for lease is $640 – 675 million, which reflects a unit rate of $1,800 – 1,900 psf on existing NLA. •  The pricing range would reflect a net initial yield of 3.4% for outright buyers and potentially 4.0% for buyers requiring income support. •  Refurbishment scenarios reflect $390 – 570 million, while redevelopment suggests value of $476 – 508 million. Pricing on these 2 options are much lower than an “as is” basis. •  There is a premium for a strata title sale however there are major risks to undertake under a strata sale program. In order to tap on the strata sale value, DBS can apply to strata title the building so that a purchaser may attribute an incrementally higher value, than on “as is” basis should there be future exit potential through strata sales. •  Our recommendation would be to apply for the strata sub division prior to marketing for the divestment of the property. Purchasers may be able to factor a premium which would be closer to strata title value than purely en bloc value.

1.  INTRODUCTION / BACKGROUND! 2.  THE PROPERTY! 3.  STAKEHOLDER ANALYSIS! 4.  MARKET OVERVIEW! •  INTRODUCTION! 5.  MARKET COMPARABLE!•  TRANSFER OF SHARES! 6.  PRICING! •  STRATA SUBDIVISION PROCESS! 7.  SALE SCENARIOS SCENARIOS! 7. •  HIGHEST AND BEST USE SCENARIOS! 8.  RECOMMENDATION! •  SUMMARY!

1.  INTRODUCTION / BACKGROUND! 2.  THE PROPERTY! 3.  STAKEHOLDER ANALYSIS! 4.  MARKET OVERVIEW! 5.  MARKET COMPARABLE! 6.  PRICING! •  DIVESTMENT STRATEGY! 7.  SALE SCENARIOS! •  RECOMMENDATIONS! 8. 8.  RECOMMENDATION RECOMMENDATION! •  TARGET BUYERS! •  SUMMARY!

Risks Associated With Strata Sales Although selling strata units will achieve the highest value, the approval process and sale process come with risk: •  It is easier to achieve strata title approval for development projects (e.g. NOL, The index, etc.) where there are no existing building and tenancies constraints. •  Obtaining strata title approval for an existing development is possible, but it is likely to be based on whole floor basis (i.e. URA is unlikely to approve strata title of small units that is not aligned with existing tenancies, e.g. Keypoint). •  PWC currently leases circa 50% of the building, and its lease agreement does not provide a clear right for the landlord to assign to multiple parties. This may hinder/ delay URA’s approval to strata title, or delay the sale of strata units. •  URA approval process: -  In-principle approval (OPP): up to 4 weeks -  Formal approval (WP): Requires QP to propose and submit plans for URA review and approvals (circa 6 to 12 months) •  Selling strata units may take up to 3 years, which exposes the seller to the risk of market price corrections. •  There is always a risk that not all strata units will be sold. •  Furthermore, strata sales may not provide sufficient returns on a risk adjusted, cost of capital and net present value basis.

Strata Subdivision Process Submitting the Strata Plan The strata subdivision process begins with the owner submitting an Online Planning Permission(OPP) for in-principle approval or the Additions & Alterations(A&A) application for formal approval. The former is submitted when the likelihood of strata subdivision is believed to be low. It is a cost effective solution that does not require the services of an Surveyor and requires 4 weeks for URA to approve. If required, Architects(Qualified Person) can be engaged to have a preconsultation with URA on likelihood of approval for strata plan for the development. Result of pre-consultation will determine whether to do an OPP or formal A&A application. Once the OPP has been approved, the owner can continue with the submission of the A&A process. The process of submitting the strata plan is as follows: •  Engage the Architect to extract plans and propose the partitioning plans in line with guidelines from the relevant authorities i.e. URA, SLA, LTA including FSB for fire safety requirements. The architect will advise on safeguarding GFA based on all technical requirements enforced by various authorities. •  Architect to submit the A&A application and URA will respond in 4 weeks. •  Once Written Permission is obtained, further application to URA for strata subdivision by architects / surveyors is required. •  The Surveyor is engaged to carry out physical strata-subdivision in accordance to the A&A. •  Architect / Surveyor to submit to URA for approval on strata plan which will take URA another 4 weeks to respond.

Strata Subdivision Process Obtaining share value allocation •  After submitting the strata plan, the surveyors have to determine the share value allocation to the individual units (BCA and SLA are the relevant authorities governing these aspects). Timing of the entire process •  The entire process will 6 - 12 months depending on complexity of the case. Cost involved •  Costs incurred by hiring all third party consultant costs including architect, surveyor and lawyers, as well as submission costs and costs for plans etc. •  The submission to URA OPP and A&A varies with the size of the development is estimated to be $4,500 and $9,000 respectively based on 15 typical floors. •  The application for strata subdivision is a fixed fee of $1,000.

Divestment Strategy Joint vs 70% Sale •  Given DBS’ strong relationship with CapitaLand, a collaborative approach for this divestment would yield the best results. •  Capitaland’s preliminary discussions with DBS suggest they are willing to jointly market PWC Building. •  A joint sale (100% enbloc offering to the market) will eliminate the “last look” anxiety from buyers and thereby maximize pricing. •  Once bids are received from prospective buyers, Capitaland would still have the opportunity to buy DBS’ shares. Under this scenario, the competitive sale process would provide strong evidence on pricing levels. •  If Capitaland is not willing to jointly market the building, DBS have no choice but to market its 70% shares in the open market, and use any offers received to negotiate with Capitaland. •  DBS selling its 70% share will not maximize pricing because: -  A buyer will not get 100% control of the building -  The MOA share transfer process is ambiguous and poses significant risks to an owner looking to sell its shares. -  A buyer will be concerned that Capitaland has a “last look” and therefore may not put the best offer forward.

Divestment Strategy Strata vs Enbloc Sale •  Our pricing analysis shows that the highest value for PWC Building will be achieved by selling strata units (insert price). •  Selling the building enbloc with its current usage would yield the next highest value (insert price). •  Although selling strata units will achieve the highest value, the approval process and sale process come with risk. Moreover, strata sales may not provide sufficient returns on a risk adjusted, cost of capital and net present value basis. •  One possibility of achieving a premium on the enbloc value is to obtain in-principle approval to strata-title the building (which takes up to 6 weeks), and then sell the building enbloc. The buyer would then seek formal approval and sell strata units. The sale price achieved could be (insert price). •  If in-principle approval to strata-title the building is not achieved, then the building can be sold enbloc with its current usage. However buyers will not pay any premium as the potential to strata-title the building in the future would no longer exist.

Approach to PWC’s Lease •  The owners may approach PWC to restructure its lease, however the probability of success is low. •  If PWC does not agree to restructure its lease, then the owners should focus on providing income support as a way to enhance building value.

Divestment Strategy When to Sell? •  It is our recommendation that PWC Building be put on the market for sale this year, due to the positive market conditions •  Rents are forecast to increase by between 6% and 11% in 2014 and a further 4% to 8% in 2015, presenting the opportunity for positive rental reversions on the upcoming lease expiries. •  There is a lack of new supply in the CBD office market in 2014 and 2015. Over the two years, only CapitaGreen (400,000 sq ft) and South Beach Tower (500,000 sq ft) are due to complete. •  Average annual absorption for CBD office space over the past 10 years was 1.1 million sq ft, meaning there may be an undersupply of office space which will further provide a boost to rents. •  Demand is expected to remain healthy, especially among small space occupiers, amid the anticipated improvement in the economy and as such good quality, well located and competitively priced office space will be sought after. •  The existing low interest rate environment and availability of debt (albeit at a lower LTV) is also a positive for investors looking for a secure and safe investment in a growing economy. •  With vacancy currently at around 6% and expected to fall further in 2014, there is a strong case to put PWC Building on the market in order to capture the positive sentiment coming out from the leasing market.

Divestment Strategy A summary of possible divestment scenarios is provided below: 1. DBS and Capitaland jointly sell strata units 2. DBS and Capitaland jointly sell enbloc to 3rd party, with in-principle approval to strata-title building 3. DBS sell 70% shares to Capitaland, with in-principle approval to strata-title building 4. DBS sell 70% shares to 3rd party, without in-principle approval to strata-title building 5. DBS and Capitaland jointly sell enbloc to 3rd party, without in-principle approval to strata-title building 6. DBS sell 70% shares to Capitaland, without in-principle approval to strata-title building •  Scenarios 2 and 5 are optimal: DBS and Capitaland jointly sell enbloc to a 3rd party, either with or without in-principle approval to strata-title building. •  Scenarios 3 and 6 remain possible: Once bids are received from prospective buyers, Capitaland would still have the opportunity to buy DBS’ shares. •  Scenario 1 may not be preferred due to implementation risks. •  Scenario 4 will not maximize price, but DBS may be forced to explore this if Capitaland is not willing to sell jointly.

Divestment Strategy No.

Description

DBS and Capitaland jointly sell strata units

DBS and Capitaland jointly sell enbloc to 3rd party, with in-principle approval to strata-title building

1. DBS sell 70% shares to Capitaland, with in-principle approval to strata-title building

DBS sell 70% shares to party, without in-principle approval to strata-title building

DBS and Capitaland jointly sell enbloc to 3rd party, without in-principle approval to strata-title building

DBS sell 70% shares to Capitaland, without in-principle approval to strata-title building

Estimated Pricing / Impact

Comments - Need to obtain formal approval for strata sub-division/ sale - Can be a lengthy sales process - May not succeed in divesting 100% interest in a timely manner - Exposed to market conditions over time - PWC 2018 lease expiry may hinder/ delay strata sales - Joint marketing will eliminate “last look” anxiety among buyers - Selling 100% interest will increase market reach and pricing - Capitaland known to be risk averse, therefore unlikely to take on formal strata approval and sale process - Sale of 70% share will not maximize pricing and market reach - May limit market interest due to “last look” anxiety - MOA share transfer process poses significant risks, unless Capitaland agrees to amend

3rd

- Joint marketing will eliminate “last look” anxiety among buyers - Selling 100% interest will increase market reach and pricing - Difficulty to establish fair market value due to “last look” anxiety, unless property is first marketed jointly

Divestment Strategy – Target Buyers Singapore REITs

Developers

•  CCT, FCOT, MCT, KREIT •  Stamp duty savings on asset level •  Yield accretive at 3.5% but likely require yield of closer to 4.0% (after structuring) •  Do not require 100% interest

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Capitaland, Mapletree, Frasers, Far East, Keppel, Swire

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Seeking to land bank

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Focus on redevelopment value

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Require 100% interest, if not immediately, in the future.

Private & Oﬀshore Groups

Sovereign Wealth Funds •  ADIA, QIA, NPS, CIC, CPPIB, SOFAZ, •  Seeking long term capital appreciation & rental income •  3.0% yield may be less attractive unless there is a strong view on rental market.

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Bright Ruby, China Sonangol, Sinar Mas, Mayapada

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Medium to long term

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Yield and capital value driven

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Preference for 100% interest

•  Do not require 100% interest. Real Estate Funds •

Blackstone, Alpha Investment, Gaw Capital, Carlyle, RECAP

•  Sun Venture, Guthrie, ARA

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Capital value driven

•  Key issue is lot size and timing to sell down units

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Short to medium term view

•  Policy / regulatory risk

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Do not require 100% interest.

Strata Buyers

•  Require 100% interest.

Recommendations & Next Steps •  Review pricing analysis with Capitaland; recommend a joint sale. •  Agree to amend MOA process if required. •  Pre-consult with URA to understand the ability to receive in-principle approval for strata-title. •  Depending on outcome of URA’s determination, jointly market the building. •  Approach PWC to restructure its lease, failing which provide income support as a way to enhance building value. •  Capitaland would have the opportunity to buy DBS’ shares after bids are received. •  If Capitaland is not willing to jointly market the building, DBS should market its 70% shares in the open market, and use any offers received to negotiate with Capitaland.