LEASE EXPIRY FOR MASTER LEASESi As at 31 December 2023 8% 11% 4% 0% 77% 2024 2025 2026 2027 2028 & after i Percentage of gross rental income for master leases expiring at respective years over the total gross rental income for all master leases. Management Contracts With Minimum Guaranteed Income Management contracts are entered into between CLAS and the operators and managers of our properties. Unlike the properties under master leases, guests lease the units directly from CLAS, including our subsidiaries (for properties outside of Japan) or other entities acting on behalf of CLAS (for properties within Japan2). Under a MCMGI, the management contract enables CLAS to capture the upside during a market upturn, while the minimum income guarantee from the operator mitigates downside risks. As at 31 December 2023, 10 of our properties across Belgium, Ireland, Singapore, Spain and United Kingdom are on MCMGI. The operating performance of all 10 properties surpassed their respective minimum income guarantee levels in FY 2023. The weighted average remaining term of CLAS’ MCMGI is around 15 years. Longer-stay Accommodation CLAS’ longer-stay accommodation comprises rental housing and student accommodation properties. Rental housing and student accommodation are countercyclical lodging asset types with long average length of stay of two years and one year respectively. Given the long leases and high average occupancies, longerstay accommodation provides CLAS with income stability and resilience through market cycles. As at 31 December 2023, CLAS has 23 rental housing and nine student accommodation properties. 2 In Japan, CLAS’ interests in properties are indirectly held as trust beneficial interests through the godo kaisha and tokutei mokuteki kaisha structures and Singapore special purpose vehicles. Master Leases Under a master lease, CLAS receives rental income from the master lessee who operates or engages an operator to manage the operations of the property. A master lease typically comes with a fixed rent component, which provides downside protection and stable income to CLAS. Most of the operational expenses under a master lease are paid for by the master lessee. As at 31 December 2023, 28 of our operating properties – 12 in France, five in Germany, four in Japan, five in Australia, and two in South Korea are on master leases. 17 of CLAS’ master leases (mainly in Asia and France) have fixed and variable rent components, and all of them received variable rent in FY 2023. The remaining 11 master leases (mainly in Germany and Australia) are on fixed rent terms, which may be subject to annual indexation, market review or rental revisions pegged to indices representing construction cost, inflation or commercial rental prices. In 2023, seven of CLAS’ French master lease agreements were renewed on a revised rent structure which was based on the higher of the fixed rent and variable rent. The fixed rent is indexed to the French commercial lease index, and the rent is automatically increased or decreased accordingly each year. The variable rent is based on a percentage of the property’s total revenue. CLAS and the master lessee will co-share furniture, fixtures, and equipment capital expenditure during renovation. An independent consultant was engaged for the renewal of the French master leases, and the rent to revenue ratios of the master leases are in line with that of the market. According to the independent consultant, CLAS is projected to receive approximately 28% higher rent in FY 2024 under the revised rent structure. In addition to the seven French master leases, the master lease for Quest Mascot in Australia and The Madison Hamburg in Germany were also renewed in 2023. The former was renewed on fixed rent terms, while the latter was renewed on fixed and variable rent terms, ahead of its expiry in 2024. The weighted average remaining tenure of CLAS’ master leases is about 10 years. For master leases which were renewed in FY 2023, the weighted average lease expiry based on the date of commencement of the leases is approximately 17 years. The renewed master leases account for about 2% of CLAS’ FY 2023 gross revenue. There were no income support payments for CLAS in FY 2023. ANNUAL REPORT 2023 27 Overview Leadership Portfolio & Performance Sustainability & Governance Financial Statements and Other Information
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