Manulife US REIT - Annual Report 2020

Capital Management The Manager continues to adopt a disciplined and prudent approach in its capital management strategy to support future portfolio growth initiatives as well as managing debt maturities and interest costs. In keeping with the growing importanceof ESG, theManager has incorporatedenvironment and sustainability as an integral part of MUST’s operations to ensure its long-term business success. This sustainability strategy complements its proactive capital management approach in terms of diversifying MUST’s funding sources with green financing. In line with its prudent capital management strategy, the Manager continues to actively explore refinancing of loans ahead of their maturities to mitigate refinancing risks. During the year, MUST secured its maiden 5-year green loan facility of US$100.0 million at a lower all-in cost of debt of 1.85%. The green loan was raised under MUST’s newly established green finance framework which attests to the Manager’s effort in integrating sustainability practices into MUST’s business operations and activities. Proceeds from the loan were used to refinance Peachtree mortgage facility and fund capital expenditures and leasing costs. In addition, MUST has obtained an additional US$50.0 million committed revolving credit facility (RCF) with a lower interest margin to provide additional liquidity. As at 31 December 2020, 42.0% of MUST’s properties were unencumbered. The following table summarises the facilities that MUST had as at 31 December 2020: Debt Maturity Profile (US$ million) 2021 2022 2023 2024 2025 Expiry Profile (%) 27.3 22.7 12.3 16.7 21.0 17.3 95.5 154.7 105.0 143.0 180.0 40.0 121.0 Penn Michelson Exchange Plaza Phipps Trust-level The good news facilities and committed RCFs are used to fund capital expenditures, leasing costs and general working capital requirements. In addition, MUST has an uncommitted RCF of US$200.0 million used as bridge financing for acquisitions. Sources of Funding Capacity (US$ million) Amount utilised (US$ million) Utilised (%) Property loan facilities 486.6 486.6 100.0 Good news facilities 61.9 29.6 47.8 Trust-level loan facilities 323.0 323.0 100.0 Committed RCFs 100.0 17.3 17.3 Uncommitted RCF 200.0 – – Multicurrency debt issuance programme 1,000.0 – – Total 2,171.5 856.5 39.4 Debt Maturity Profile The total gross outstanding debt of MUST was US$856.5 million with an aggregate leverage of 41.0% as at 31 December 2020. Leverage ratio had increased from37.7%as at 31 December 2019, mainly due to net fair value loss on investment properties and additional borrowings to finance capital expenditures and leasing costs. The higher leverage ratio is well within the regulatory limit of 50.0% 1 set by MAS and is not expected to have a material impact to MUST’s risk profile. The interest coverage ratio for the year ended 31 December 2020 was 3.5 times. MUST’s debt maturity profile remains well-staggered with a weighted average debt maturity of approximately 2.3 years as at 31 December 2020. The refinancing risk exposure is minimised with no more than 27.3% of debt maturing in any year. To mitigate interest rate risk exposures, 94.5% of the gross borrowings have been fixed using interest rate swaps. MUST uses derivative financial instruments to hedge its interest rate risk exposure. The net fair value of these derivatives represents 1.1% of the net assets of MUST as at 31 December 2020. Change in Reporting Frequency Following the amendments to Rule 705(2) of the SGX-ST Listing Manual which took effect from 7 February 2020, the Manager announced on 6 March 2020 that MUST will adopt the announcement of financial statements on a half- yearly basis with effect from the financial year ended 31 December 2020. MUST continues to make distributions to the Unitholders on a semi-annual basis. Unit Buy-back Mandate MUST has obtained the Unitholders’ approval during its AGM in 2020 for its Unit buy-back mandate as part of its proactive capital management strategy. The Unit buy-back programme aims to enhance returns to Unitholders in the long term. The Unit buy-back mandate was not utilised in 2020. 1 MAS had on 16 April 2020 raised the leverage limit for REITs listed on the Singapore Exchange from 45.0% to 50.0% (up to 31 December 2021) and deferred to 1 January 2022 on the implementation of the requirement to have a minimum adjusted interest coverage ratio of 2.5 times before the leverage limit can be increased from the then prevailing 45.0% limit up to a maximum of 50.0%. 22 MANULIFE US REIT FINANCIAL REVIEW