Acquisition Growth Strategy

The Manager believes that K-REIT Asia has the characteristics that will enable it to make potentially yield-accretive acquisitions which are expected to improve returns to Unitholders and provide potential for net asset value per Unit appreciation in the long term. These characteristics include:

• K-REIT Asia's portfolio of properties (independently valued at an aggregate average Appraised Value of S$677 million as at 31 December 2006) form a sufficiently strong base upon which to support further acquisitions of additional commercial properties;
• K-REIT Asia's sufficiently wide mandate to invest in income-producing real estate and real estate-related assets used predominantly for commercial purposes; and
• K-REIT Asia's conservative capital structure (with an aggregate leverage level of approximately 30% as at the Listing Date) provides K-REIT Asia with some latitude for further aggregate leverage.

The Manager believes that K-REIT Asia's relationship with Keppel Land Group provides K-REIT Asia with a competitive advantage in respect of future acquisition of commercial properties due to the following:

• Keppel Land may source investment opportunities which, if considered suitable for investment by K-REIT Asia, will be made known to K-REIT Asia.
• K-REIT Asia, through the Manager, will be able to leverage off the following:

  - Keppel Land Group's expertise, experience and knowledge of the commercial properties markets in   Singapore and the region;

  - Keppel Land Group's strong relationships with property brokers and institutional and other property owners;   and

  - Keppel Land Group's fully integrated property operations which will enable the Manager to respond quickly   to acquisition opportunities.

Of the 4.234 million sq m* of office space in the Central Business District, the Properties account for only about 1.7% of such space. There is therefore ample opportunity for K-REIT Asia to grow via acquisitions in Singapore alone. Although it is the Manager's intention to hold K-REIT Asia’s properties on a long-term basis, the Manager will consider divesting properties which has reached a stage that affords limited scope for income growth in order to reinvest the sale proceeds in new properties with better potential for growth.

* Source: Property Market Information - Commercial & Industrial Properties (3rd Quarter 2005), Urban Redevelopment Authority.

In evaluating K-REIT Asia's acquisition opportunities, the Manager will focus on the following investment criteria:

Yield thresholds

The Manager intends to invest in properties that are potentially yield-accretive for the Unitholders, unless the said property has the potential to be redeveloped.

Occupancy and tenant characteristics

The Manager intends to invest in properties with good quality existing tenants, or with the potential for higher rentals and potential for high tenant retention rates, relative to comparable properties in their respective micro-markets. In addition, K-REIT Asia will evaluate the following prior to the acquisition of a property:

• tenant credit quality in order to estimate the probability and materiality of potential bad debt;
• rental rates and occupancy trends to estimate rental income and occupancy rate going forward; and
• impact of the acquisition on the entire portfolio's tenant, business sector and lease expiry profile.

Location

The Manager will evaluate potential acquisition targets for micro-market location and convenient access to major roads and public transportation.

Value-adding opportunities

The Manager plans to acquire properties with opportunities to increase occupancy rates and enhance value through proactive property management. The potential to add value through selective renovation or other types of asset enhancements will also be assessed.

Building and facilities specifications

The Manager will acquire buildings with good quality specifications and in compliance with building and zoning regulations. To do so, the Manager will rely on due diligence reports submitted by independent experts relating to structural soundness of the building; maintenance, repairs and capital expenditure requirements; and encroachment of site boundaries. These reports will be the basis upon which the Manager assesses building conditions and expected levels of future capital expenditure.