Manulife US REIT - Annual Report 2020

Information plus the Finance and Insurance sectors. Going forward, only 5.7% of portfolio leases by NLA are due to expire in FY2021. MUST’s subleasing remained low against the U.S. market trend of double digits, at 3.3%, a YoY decline of about 29.0% as most tenants continue to hold on their space. As at end December 2020, MUST recorded a high committed occupancy of 93.4%compared to the U.S. Class Aoffice average of 84.0% 1 . Our nine buildings remained open throughout the 2020 pandemic although most tenants instigated WFH programmes. At the height of the U.S. pandemic, physical occupancy of our buildings ranged from 5.0%-25.0%. WFH and the fall in hourly parking at some buildings close to entertainment venues resulted in a decline in MUST’s carparking income by approximately 25.0% from FY2019. Strong Capital Management Throughout FY2020, MUST’s balance sheet remained strong, with an additional US$50 million revolving credit facility bringing our undrawn credit facilities to approximately US$115 million. During FY2020, we took advantage of the ultra-low interest rates, refinancing a mortgage locking in a five-year loan and reducing the overall weighted average interest rate to 3.18%. This 2020 loan was a landmark for MUST being its first green loan. As at 31 December 2020, MUST’s weighted average debt maturity was 2.3 years with 94.5% of its gross borrowings secured on a fixed rate basis providing cash flow stability. On 24 March 2021, we have successfully obtained a US$250 million sustainability-linked loan for our 2021 refinancing with further interest savings expected. During the year, the Monetary Authority of Singapore (MAS) raised gearing limits for SREITs from 45.0% to 50.0%. MUST’s gearing stood at 41.0% as at end 2020, well below the regulatory limit providing us with debt headroom for future acquisitions. Moving forward, we will continue to increase MUST’s financial flexibility by diversifying sources of funding, lengthening our weighted average debt maturity and unencumbering the remaining mortgages on our properties as appropriate. Stakeholder Engagement The global pandemic constrained business in FY2020. It was imperative for the Manager to stay engaged with MUST’s stakeholders and deepen the market’s understanding of the U.S. economy and its commercial environment. Besides participating in external panel discussions and investor education forums, we also organised thought leadership events and activities branded under our Green Dot Series. Once the pandemic rendered most in-person meetings impossible, we pivoted to communicate through digital formats. For instance, we were the first SREIT to hold a virtual Annual General Meeting (AGM). Following our intensive outreach, our institutional investor base now constitutes 60.0% of MUST's share register with international funds from an ever-wider range of countries. This ensures stability and will enable greater agility in our growth strategy. Our stakeholder engagement efforts were recognised in December 2020 when MUST was awarded the winner in ‘Best in sector: Financials (including real estate)’ at the IR Magazine Awards – South East Asia 2020. This is a regional award, where analysts and investors cast their votes and provide their opinions on companies with the best Investor Relations (IR) in South East Asia. More information can be found in the Investor andMedia Relations section on page 53 and External Relations section on page 81. At the end of 2017, proposed changes to the U.S. tax regulations (Proposed 267A Regulations) caused concern amongst investors as to the future level of tax they might have to pay onMUST’s assets. The final 267A Regulations were issued on 7 April 2020, and there were no meaningful differences between the Proposed 267A Regulations and outcome. As a result, on 24 April 2020, MUST reverted to a group structure largely similar to that adopted at the time of its listing on 20 May 2016. This will generate modest cost savings from FY2021 onwards. The restructuring costs have no material impact on MUST’s consolidated net tangible asset (NTA) or DPU. Sustainability To ensure MUST’s long-term success, and regardless of the pandemic, in FY2020, we achieved significant progress in our Environmental, Social and Governance (ESG) journey. In FY2020, MUST was ranked 4 th by the Governance Index for Trusts (GIFT) and ranked 9 th by the Singapore Governance Transparency Index (SGTI) amongst 45 REITs and Business Trusts listed on the SGX-ST. In addition, MUST was ranked 1 st in Public Disclosure out of 10 Asia offices and 4 th in Real Estate Assessment out of 15 listed U.S. office REITs by the independent GRESB. MUST’sMSCI ESG ratingwas upgraded to 'A' as at endDecember 2020 reflecting further strengthening of the REIT's corporate governance practices. The REIT instilled strong green building programmes as indicated by the high level of green certification in its portfolio (91.0% versus the industry average of 25.0%). 1 Source: JLL Q42020 US Office Outlook. ANNUAL REPORT 2020 9