Executive Summary

Indian REIT Business

Concept Proposal

With the high local interest rate in India, there is a real need for an introduction of an alternative mechanism to provide funds to the real estate sector. Although there have been some press announcement, as of today there have only been 2 REITs been launched in Singapore for Indian properties. The objectives of this proposal is to highlight the key activities, assets mix and management strategies for the proposed REIT and also to present the key advantages. We believe there are still opportunities for the establishment of a REIT concentrating on properties across India.

October 2011

The Rationale for the Sponsor

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For the Investors, India-REIT or i-REIT will be creating a mechanism which will allow international investors (retail & institutional) to invest safely in Indias property market. A professionally managed listed REIT is a great way to transform illiquid bulk property assets into unitised liquid financial instrument which is tradable. For the Indian property owners, i-REIT can provide them an alternative Exit (Cash-out) mechanism in a rising / toppish property cycle, and a Financing (Borrowing) mechanism in a declining / low-end of a property cycle. For the Sponsors itself, the i-REIT can be used as an exit vehicle for its own developments, which is the first step towards transforming its business model into the more profitable assets-light developers, the i-REIT can also be run as a business of sourcing and buying of 3rd party properties.

The Rationale for the Sponsor / Property Owners

Case Study :

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Asset

Liability Debt Equity $300 $100 $400

SELL PROPERTY INTO REIT 1ST CYCLE

Cash Property

$ 100 $300 $400

Singapores Capitaland Ltd. changed its traditional developer-landlord model to asset light model in 2002, by selling its properties into a REIT to raise funds for new developments in China (which were subsequently sold into a REIT).

Asset Property $ 300

Liability REIT Units (Public) REIT Units (owned) $200

SELL PROPERTY INTO REIT 2ND CYCLE ASSETS SEASONING

$100

$300

$300

Asset

Liability Debt Equity $300 $100 $400

DEVELOPMENT

CREATE TWO NEW INCOME STREAMS :

I) REIT MANAGEMENT FEE on $300 II) PROPERTY MANAGEMENT FEE on $300 III) DIVIDEND YIELD on $100

REIT Units Cash

$ 100 $300 $400

INVEST IN NEW PROPERTY DEVELOPMENT

Key Activities & Business Strategies

i-REIT will originates and source properties, from its parent companys or 3rd party property owners REITs IPO is very much a perception game, thus for the i-REIT, the Sponsor may want to look into the establishment of JV-REIT Mgmt Co with existing REIT Mgmt Partners in Singapore or Malaysia. Under the JV, REIT Partner will be responsible for licensing & sourcing the underwriters.
REIT Partners Sourcing / Origination activities Property Management

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All the properties under the REIT, will be managed by i-REIT Assets Manager

Properties under Sponsor

Joint Venture

Capital + Mgmt or just Mgmt (outsourcing) i-REIT

Assets Managers

i-REIT Mgmt Co 3 Party property owners

rd

Capital + Mgmt

JV-REIT Mgmt Co

i-REIT can also sponsor the dual listing of its REIT into other regional exchanges (those with REIT regulations) if there are demands from investors in these regional exchanges for exposure into the Indian property market.

REIT Management Dual Listings Indian REITs

Property Management

Singapore REIT

Malaysian REIT

The Singapore REIT markets should be the first port of call for i-REIT, due to : stronger cultural identification & shariah compliant acceptance. Singapore & Malaysian markets allows foreign properties to be listed as REITs. The critical difference btw them, is that the Singapore regulator practised a Disclosure base system whereas the Malaysian regulator practiced a Merit base system.

The REITs Assets Mix

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Freehold

Leasehold

Income Generating Properties

Depending on the investors appetite, various permutations in terms of assets mix can be structured as a REIT. The REIT can be structured as a multi-sector country focus or as a single sector (sectorial) REIT. If a REIT is established as a multi-sector REIT, a spin-off can be done to create a Sectorial REIT. Which is also an exit strategy for the initial multi-sector REIT

Non-Income Generating Properties

Retail

Hospitality

Commercial

Structured Income

Shopping Mall

Hotel

Office Guaranteed Floor Income

Retail Chain Store

Service Apartments

Service Office

For properties which are closed to completion or just completed, the REIT will be looking for medium term guaranteed floor income or long term lease with strong obligor(s).

Hospital

Warehouse

Long Term Lease

The REITs Management Strategies

Lessee Profit Sharing New Development Spinoff Property Level REIT management strategies Corporate Level Leverage i.e. Debt Funding Yield Accretive Acquisition Strategic Level

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Refurbishment & Re-branding Decanting

SubREIT by Sector

Duallisting

In general a REIT Management Strategies are divided into 3 self explanatory strategies as shown above. The continuous future growth of i-REIT will depend on the business model and strategies adopted by the REIT manager. On a strategic level, the logical net step for the i-REIT is to go for dual listing in other regional exchanges or even local exchange to raise further equity for expansion. There may also be an opportunity for the multi-sector i-REIT to spin-off its properties into single sector REIT (Retail, Hospitality or Commercial).

Benefits & Rationales for REIT issuers

1. Off Balancesheet Financing Sale of properties to the REIT removes assets & loans from the balance sheet. Diversification of funding base. 1. 2. Clean balance sheet Higher return on assets

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2.

1. Liquidity & Maturity Management

2.

Exit from older asset base to new asset procurement to enhance asset quality and yield. Extra liquidity to meet unexpected demand of fund and / or other obligation Monetization of existing assets. Redeployment of capital to build business volume without new capital contribution by shareholders.

1. 2.

Improved liquidity Limit exposures to market risks

Business Growth

1. 2.

1. 2.

Increase in income Higher return on equity

1. 1. Vertical Integration: Offering of new products (eg. home equity financing) 2. Horizontal Integration: New business venture Acquisitions of additional business activities

New Business Strategy

2. 3.

Product diversification and differentiation Strategic business positioning Core competencies expansion & competitive advantage

Potential Income for REIT Manager

TYPE OF FEES % / AMT DESCRIPTION PARTIES REIT Manager

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Base Fee

0.50% 3.50%

Annual fee calculated on the value of the real estate assets Annual fee calculated on the performance fee amount (net property income minus the base fee). % of the acquisition price of any real estate assets purchased by the REIT % of the sale price of any real estate assets sold or divested by the REIT One-off, only if the REIT manager is removed by unit holders Annual fee calculated on the revenue from real estate assets

REIT Manager

Performance Fee

Acquisition Fee Divestment Fee Termination Property Management Fee

1.00% 0.50%
SGD 20,000,000

REIT Manager

REIT Manager

REIT Manager

3.00%

Assets Manager

Above are the list of fees that will be earned by a typical REIT management company. These annual fees are charged to the REIT unit holders. In addition, the REIT management company and its promoter / sponsor may also charge additional fees to set-up a dedicated REIT for other property owners.

Build Operate & Transfer Proposal

It takes a minimum of 10 months & a maximum of 12 months, to established a REIT management co, until the first IPO of the REIT in Singapore.

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The BOT will be for a period of 1 + 1 year or 2 +1 year, where a team of professionals from Malaysia / Singapore will plan, design, develop and operate the REIT.. The team members are individuals of good track records in banking & real estate , and will have the required credentials to be approved by the Monetary Authority of Singapore. Proper corporate governance in the REIT Management Cos board level, will be instituted to ensure that the capital of the REIT are controlled by the Sponsor and each item of expense is justifiable.

Build Operate & Transfer Proposal Projected Timeline

Month BOT Mandate to AMS Establishment of REIT Mgmt Co (Singapore) Purchase of Licensed FM in Malaysia Business Plan SOPs Sourcing & Negotiation with Legal Advisor Sourcing & Appointment of Company Sec Establishment of REIT Mgmt Co (un-licensed) Submission Work Submission to Authority REIT Mgmt Co (licensing) - Approval Establishment of the REIT Preliminary Information Memorandum Sourcing & negotiation : Lead Arranger REIT trustee (Singapore) SPV trustee (UAE) FI (UAE) property managers (UAE) tax & accounting consultants (IUAE / Singapore) valuers (UAE / Singapore) REIT IPO Process IPO Date Sourcing of UAE Properties for the REIT Marketing Documents Origination of properties Conditional SPA with Property Owners (or) 0 1 Mandate 2 1 3 2 4 3 5 4 6 5 7 1st REIT 8 9

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IF THE PROPERTIES HAVE ALREADY BEEN IDENTIFIED AND INFORMATION ARE AVAILABLE THEN THE PRELIMINARY INFO MEMO WILL BE PREPARED EARLIER, IF NOT THE PRELIM INFO MEMO WILL HAVE TO WAIT UNTIL THE SOURCING OF THE PROPERTIES REACHED ITS HALFWAY POINT AS SHOWN IN ITEM 'E' BELOW

Total Costs & Income for REIT Management Co

1
Date Licensed FM 0 1 2 $ 3 4 5 $ 6 7 8 9 10 11 12 13 14 15 16 17 $ 18 19 20 21 22 23 24 REIT Set-up Costs

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74,287

2 $
6,167 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $

6,167

47,535 855,503 1,844 1,844 1,844 1,844 1,844 1,844 1,844 3,470 3,470 7,833 7,025 3,470 3,470 3,470 3,470 3,470 3,470 3,470 3,470 3,470 3,470

AMS BOT Fees / REIT Mgmnt Costs $ 80,842 3 $ 80,842 $ 80,842 $ 80,842 $ 80,842 $ 80,842 $ 80,842 $ 80,842 $ 80,842 $ 80,842 $ 2,560,500 4 $ 77,694 $ 77,694 $ 79,061 $ 78,900 $ 78,189 $ 78,189 7 13,828,189 $ $ 78,189 $ 78,189 $ 78,189 $ 78,189 $ 78,189 $ 78,189 $ 78,189

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Business Expenditure $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ Total Costs 80,842 80,842 202,664 936,345 82,687 359,687 353,520 353,520 353,520 353,520 2,833,178 81,164 81,164 86,895 85,925 81,659 81,659 13,837,825 81,659 81,659 81,659 81,659 81,659 81,659 81,659 Income to REIT Cumulative Net Mgmnt Co Cash Flows $ (80,842) $ (161,685) $ 61,308 $ (303,041) $ 61,308 $ (1,178,078) $ 30,654 $ (1,230,111) $ 30,654 $ (1,559,143) $ 30,654 $ (1,882,009) $ 30,654 $ (2,204,875) $ 30,654 $ (2,527,741) $ 30,654 $ (2,850,607) $ 6,318,460 $ 634,676 $ 241,667 $ 795,178 8 $ 241,667 $ 955,680 $ 241,667 $ 1,110,453 $ 9 241,667 $ 1,266,194 $ 241,667 $ 1,426,202 $ 241,667 $ 1,586,210 6 $ 25,241,667 $ 12,990,051 $ 241,667 $ 13,150,059 $ 241,667 $ 13,310,067 $ 241,667 $ 13,470,075 $ 241,667 $ 13,630,083 $ 2,122,917 $ 15,671,341 10 $ 241,667 $ 15,831,348 $ 241,667 $ 15,991,356

$ $ $ $ $ $

270,833 270,833 270,833 270,833 270,833 270,833

Total Costs & Income for REIT Management Co - Notes

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OPTIONAL : This is if the Client agrees to purchase a stake in a Fund Management license in Labuan, Malaysia (which may aid the licensing in Singapore) The minimum shareholder funds for a licensed REIT Mgmt Co is SGD 1,000,000 (we assumed that this amount will be requested to be put in a bank deposit and cannot be taken out) Advisory fee payable by the Client is on 1 month in advance basis, there will be 3 people involved on full time basis The REIT Mgmt Co is charging the success fee to its clients, under the terms of the BOT, AMS is entitked to 50% share of the Success Fee & REIT Financing Fees Some of the property owners may not want to pay ALL the 3rd party fees upfront, in this case I proposed that the REIT Mgmt Co will stake say, 50% of the expenses, which will be defrayed from the IPO proceeds The REIT mgmt co is also entitled to 15% free units of the REIT as part of its 'options costs' chargeable to the property owner, I have put this at a conservative 5% of the total REIT size, assuming that the REIT JV Partner takes 10% of the total REIT size for this first deal, in subsequent deals the % will increase to 7.5% each (50:50 sharing), however there is a moratorium of 6 months before these units can be sold by the REIT mgmt co after the IPO date As per point 4, the REIT Mgmt Co charges its clients, and AMS have a share of this The REIT mgmt co, may want to partner with an existing licensed REIT mgmt co in Singapore, this can be done on a limited 5 years basis or so Strictly speaking this income is paid to the Property manager (which will be appointed by the REIT), but in practice the owner of the REIT Management Co and the Property Manager would be the same, thus the reason for including the income Performance fee is calculated from the rental income - the base fee of the REIT The REIT Mgmt Fee earns a fee for acquiring or (disposing of properties, however this only applies to acquisition of other properties, subsequent to the first IPO

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Thank You
Contact Details Rashdan Ibrahim +97150 3957226 +6012 3988170