DELIVERING GAINS

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  • UNLOCKING VALUEDELIVERING GAINS

    VIVA INDUSTRIAL TRUST ANNUAL REPORT 2013

  • CONTENTS

    2 Corporate Profile

    3 About the Managers

    3 Our Strategy

    4 Letter to Stapled Securityholders

    9 Performance Review

    10 Corporate Social Responsibility

    11 Financial Highlights

    15 Trust Structure

    16 Board of Directors

    19 Management Profile

    22 Portfolio Review

    39 Corporate Governance

    49 Financial Statements

    116 Interested Person Transactions (IPTs)

    117 Directors Interests in Stapled Securities

    118 Statistics of Holdings of Stapled Securities

    119 Notice of Annual General Meeting

    Proxy Form

    Corporate Information

  • Delivering stable and sustainable distributions to stapled securityholders

    VISION

  • CORPORATE PROFILE

    Viva Industrial Trust (VIT) is a Singapore-focused business park and industrial property trust comprising Viva Industrial Real Estate Investment Trust (VI-REIT) and Viva Industrial Business Trust (VI-BT). Listed on the Mainboard of the Singapore Exchange on 4 November 2013, Viva Industrial Trust has a market capitalisation of about S$460.35 million as at 31 December 2013.

    VI-REIT is established with the principal investment strategy of investing, directly

    or indirectly, in a diversified portfolio of income-producing real estate that is used predominantly for business park and other industrial purposes, whether wholly or partially, in Singapore and elsewhere in the Asia Pacific region, as well as real estate-related assets. VI-BT is presently dormant.

    VITs Singapore-focused portfolio has the highest proportion of business park space by asset value among the listed industrial S-REITs. The portfolio

    consists of three properties namely, UE BizHub EAST, Technopark@Chai Chee and Mauser Singapore. These properties cover an aggregate gross floor area of approximately 2.4 million sq ft and are strategically located in key business parks and established industrial clusters in Singapore. The 11 buildings in these properties serve over 100 tenants, with multinational corporations contributing over 76% of its underlying gross rental income.

    2 VIVA INDUSTRIAL TRUST ANNUAL REPORT 2013

  • ABOUT THE MANAGERS

    VI-REIT is managed by Viva Industrial Trust Management Pte. Ltd. (the REIT Manager), while VI-BT, which is presently dormant, is managed by Viva Asset Management Pte. Ltd. (the BT Trustee-Manager, collectively with the REIT Manager, the Managers).

    The Managers are each 90% owned by Viva Investment Management Pte. Ltd. (VIM) and 10% owned by United Engineers Developments Pte. Ltd. (UED). VIM is a Singapore-incorporated company that is approximately 55% owned by Maxi Capital Pte. Ltd. (Maxi Capital), with VITs Sponsors, Ho Lee Group Pte. Ltd. (HLG) and Kim Seng Holdings Pte. Ltd. (KSH)

    owning approximately 28% and 17% respectively. The shareholders of Maxi Capital comprise the key executives of the Managers and Shanghai Summit Pte. Ltd.

    The REIT Managers main responsibility is to manage VI-REITs assets and liabilities for the benefit of VIT stapled securityholders, through setting the strategic direction of VI-REIT and recommending the REIT Trustee on the acquisition, divestment, development and/or enhancement of assets of VI-REIT. The BT Trustee-Manager has the dual responsibilities of safeguarding the interests of VITs stapled

    OUR STRATEGY

    The Managers primary objective is to provide stapled securityholders with a competitive rate of return, by ensuring stable distributions and long-term growth in the distribution per stapled security and net asset value per stapled security, while maintaining a prudent capital and risk management structure. To that end, the REIT Manager will take active measures to identify and capitalise on opportunities for growth, enhance the properties in its portfolio to maximise the property value and improve returns.

    Acquisition Growth The REIT Manager will source for and acquire assets in Singapore and Asia-Pacific region that are aligned with VI-REITs investment strategy and fit within the REIT Managers investment criteria to provide attractive cash flows and yields relative to VI-REITs weighted average cost of capital, and to pursue opportunities for future income and capital growth.

    Active Asset ManagementThe REIT Manager will pro-actively implement measures to improve the leasing profile of VI-REITs properties. Such measures include active leasing, marketing of any vacancies and expiring leases, tenants management and retention, mitigating any risks relating to new leases and lease renewals, implementing programmes for regular maintenance and upgrading of buildings and asset refurbishment and enhancement initiatives. Such active asset management strategies seek to mitigate the risks on renewal of leases, to establish good landlord-tenant relationships and to grow VI-REITs portfolio organically, thereby increasing the yields of the properties over time.

    Prudent Capital and Risk ManagmentIn terms of capital and risk management, the REIT Manager will endeavour to maintain a healthy balance sheet, while

    employing an appropriate mix of debt and equity in financing acquisitions, and utilise interest rate and currency hedging strategies where appropriate to minimise exposure to market volatility and optimise risk-adjusted returns to stapled securityholders.

    Selective DevelopmentThe REIT Manager will endeavour to selectively undertake build-to-suit development activities either jointly or on its own, taking into consideration development and construction risks, as well as overall benefits to potential tenants and stapled securityholders.

    DivestmentWhile the intention is to hold assets on a long-term basis, the REIT Manager will, as and when appropriate, divest mature or non-core assets to free up capital for redeployment towards better growth opportunities.

    securityholders, and managing the business conducted by VI-BT. The BT Trustee-Manager has general powers of management over the business and assets of VI-BT for the benefit of the VIT stapled securityholders as a whole. Collectively, the Managers key objective is to provide stapled securityholders with a competitive rate of return by ensuring stable distributions to stapled securityholders as well as long-term growth in distribution per stapled security and net asset value per stapled security, while maintaining a prudent capital structure.

    3VIVA INDUSTRIAL TRUST ANNUAL REPORT 2013

  • LETTER TO STAPLED SECURITYHOLDERS

    We are committed to building a resilient portfolio

    with top-quality assets delivering regular,

    stable and appreciating rental revenues.

    1 Being the average of the independent valuations as at 31 December 2013 by Suntec Real Estate Consultants Pte Ltd and Jones Lang LaSalle Property Consultants Pte Ltd, after taking into account the rental arrangement to be provided by the vendor of UE BizHub EAST in respect of the Business Park Component for a period of five years from the Listing Date (UEBH rental arrangement) and the rental support to be provided by the vendor of Technopark@Chai Chee for a period of two years from the Listing Date (TPCC rental support arrangement). The average of the independent valuations as at 31 December 2013 without taking into account the UEBH rental arrangement and TPCC rental support arrangement is S$725.6 million.

    Mr Wilson AngChief Executive Officer

    Dr Leong Horn KeeChairman

    Dear Stapled Securityholders,

    On behalf of the Board of the REIT Manager and BT Trustee-Manager of Viva Industrial Trust (VIT), we are pleased to present to you our annual report for the financial period ended 31 December 2013. This is our inaugural annual report since our successful listing on the Singapore Exchange Securities Trading Limited on 4 November 2013.

    Our initial public offering received a warm response from the investment community. Through the issuance of stapled securities to the public, which was oversubscribed, and to our stakeholders - Ho Lee Group Pte. Ltd., Kim Seng Holdings Pte. Ltd., United Engineers Developments Pte. Ltd., and cornerstone investor Wealthy Fountain Holdings Inc (a wholly owned subsidiary of Shanghai Summit Pte. Ltd.) - we raised about $463.3 million in gross proceeds. We are grateful to all our new stapled securityholders for their support and belief in the quality of our properties and the strength of our team.

    Our asset portfolio comprises UE BizHub EAST, Technopark@Chai Chee and Mauser Singapore, with collective asset value of about S$743.0 million1 and a strong business park focus. As at 31 December 2013, we have the highest proportion of business park space (77% of asset value) as compared to other listed industrial S-REITs and we continue to benefit from Singapores economic growth that is driving demand for business park space.

    Attractive Yield In Line with Forecast VIT delivered its first set of financial results for the financial period from 4 November 2013 to 31 December 2013 (FP2013) which met expectations. We generated S$9.0 million of gross revenue, which was 2.7% higher than our forecast of S$8.8 million at the time of our IPO.

    Net property income came in at S$6.0 million, which was 5.8% higher than our forecast of S$5.7 million. Total income available for distribution was in line with forecast at S$6.4 million. Consequently, we were able to deliver distribution per stapled security (DPS) of 1.08 cents as forecasted. This corresponds to an annualised DPS of 6.8 cents, which translates into an annualised distribution yield of 8.8%, based on VITs closing share price of 77.5 cents on 31 December 2013. As at 31 December 2013, VITs total assets amounted to S$772.6 million an