ESR IR 2021 - EN

16 STEP FORWARD Management Discussion and Analysis Growing Presence in Data Centres Pandemic-led demand has reinforced the resiliency of the data centre sector, which is driven by strong digital trends and accelerated consumer shift to e-commerce. Total data centre net absorption in Asia Pacific Tier I markets reached 322 MW in 2020, and doubled that of 2019 6 . With the continued digital transformation, ESR strives to capitalise on this secular trend by scaling up its data centre efforts, building a network of agile and scalable data centres that interconnect businesses and individuals in the digital economy, support customers’ expansion in scale and reach, and create value for ESR’s ecosystem of New Economy real estate. In 1H2021, the Group launched its first data centre development by acquiring a key data centre asset in Osaka which will be developed into a US$2 billion multi-phase data centre campus of up to 78MW IT load. The Group also acquired an asset in Kwai Chung, one of the major data centre clusters in Hong Kong, which will be developed into a 40MW data centre. The Next Stage of Growth Looking ahead, the Group remains confident in the strong fundamentals and future prospects for New Economy real estate in APAC. E-commerce acceleration and digital transformation will continue to drive demand for logistics infrastructure and data centres. On the capital front, global investors are increasingly consolidating their relationships towards a limited number of large-scale managers and allocating more capital to a smaller roster of platforms. Note: 6. CBRE, Asia Pacific Data Centre Trends H2 2020. To capitalise on these prevailing trends, ESR is firmly focused on accelerating its growth in size, scale and offerings. In August 2021, ESR entered into an agreement to acquire 100% of the share capital of ARA Asset Management Limited (“ ARA ”) for US$5.2 billion (“ The Proposed Transaction ”) via a 90/10 stock/cash consideration, with net cash of US$269 million (net of share placement to SMBC). The Proposed Transaction, which includes ARA’s captive logistics and data centre specialist LOGOS, will create the largest real estate and real asset manager in APAC and the third largest listed real estate investment manager globally, powered by leading New Economy real estate platform. With an enlarged Group New Economy AUM of US$53 billion, a development WIP of over US$10 billion and the largest logistics and data centre pipeline of over 7.7 million sqm/>1,200 MW of capacity in Asia Pacific, the Group has even greater conviction and confidence in the power of the combined platform and in delivering the Group’s next phase of growth. The Proposed Transaction is subject to ESR’s shareholders’ approval at an extraordinary general meeting which will be convened in due course, and is subject to customary closing conditions including, amongst others, regulatory approvals. ESR will continue to actively evaluate opportunities in key markets and new locations to grow its footprint, while strengthening its deep relationships with its quality tenants and best-in-class capital partners. With its quality portfolio of logistics properties, coupled with its strong underlying business fundamentals and well-capitalised balance sheet, the Group is well-placed to leverage ongoing growth and development opportunities and seize investment opportunities. ESR Chigasaki Distribution Centre, Japan