Mapletree Commercial Trust : Annual Report 2019/20

SHAPING RESILIENCE

ANNUAL REPORT 2019/20

TABLE OF CONTENTS

1	Key Highlights
2	Corporate Overview
3	Strategy
4	Financial Highlights
8	Letter to Unitholders
12	Year in Review
14	Unit Price Performance
16	Trust Structure
17	Organisation Structure
20	Property Overview
36	Operations Review
40	Financial Review & Capital Management
45	Independent Market Overview
58	Board of Directors
62	Management Team & Property Management Team
66	Corporate Governance
86	Risk Management
89	Sustainability Report
113	Investor Relations
116	Financial Statements
181	Interested Person Transactions
Featured art piece on cover:	183	Statistics of Unitholdings
Stillness in Motion - 3 Airborne Self-Assemblies
by Tomás Saraceno	Corporate Directory

KEY HIGHLIGHTS

AMOUNT AVAILABLE FOR DISTRIBUTION

S$243.2 million7.9%

DISTRIBUTION PER UNIT

8.00 cents12.5%

NET ASSET VALUE PER UNIT

S$1.75

9.4%

GEARING RATIO

33.3%

0.2p.p

MAPLETREE COMMERCIAL TRUST

CORPORATE OVERVIEW

Mapletree Commercial Trust ("MCT") is a Singapore-focused real estate investment trust ("REIT") established with the principal investment objective of investing on a long-term basis, directly or indirectly, in a diversified portfolio of income-producing real estate used primarily for office and/ or retail purposes, whether wholly or partially, in Singapore, as well as real estate-related assets.

MCT was listed on the Singapore Exchange Securities Trading Limited ("SGX-ST") on 27 April 2011 and is the third REIT sponsored by Mapletree Investments Pte Ltd ("MIPL" or the "Sponsor"), a leading real estate development, investment, capital and property management company headquartered in Singapore.

As at 31 March 2020, MCT's portfolio comprised five properties in Singapore - four located in the Greater Southern Waterfront (HarbourFront andAlexandra Precincts) and one in the Central Business District ("CBD"), namely:

• 1 VIVOCITY, Singapore's largest mall located in the HarbourFront Precinct;

• 2 MAPLETREE BUSINESS CITY ("MBC"), a large-scale integrated office and business park complex with Grade A building specifications, supported by ancillary retail space, located in the Alexandra Precinct;

• 3 PSA BUILDING, an established integrated development with a 40-storey office block and a three-storey retail centre known as the Alexandra Retail Centre ("ARC"), located in the Alexandra Precinct;

• 4 MAPLETREE ANSON, a 19-storey premium office building located in Singapore's CBD; and

• 5 BANK OF AMERICA MERRILL LYNCH HARBOURFRONT ("MLHF"), a premium office building located in the HarbourFront Precinct.

The portfolio has a total Net Lettable Area ("NLA") of 5.0 million square feet, valued at S$8,920 million1.

MCT is managed by Mapletree Commercial Trust Management Ltd. ("MCTM" or the "Manager"), a wholly-owned subsidiary of MIPL. The Manager aims to provide unitholders of MCT ("Unitholders") with a relatively attractive rate of return on their investment through regular and steady distributions, and to achieve long-term stability in Distribution per Unit ("DPU") and Net Asset Value ("NAV") per Unit, while maintaining an appropriate capital structure for MCT.

1 Based on the independently appraised values by Savills Valuation and Professional Services (S) Pte. Ltd. and CBRE Pte. Ltd.

as at 31 March 2020.

STRATEGY

KEY OBJECTIVES

The Manager's key objectives are to provide unitholders of MCT with a relatively attractive rate of return on their investment through regular and steady distributions, and to achieve long-term stability in DPU and NAV per unit, while maintaining an appropriate capital structure for MCT.

KEY STRATEGIES

VALUE CREATION THROUGH ACTIVE ASSET MANAGEMENT The Manager's strategy for organic growth is to actively manage the portfolio and foster strong understanding and relationships with tenants. Through such active asset management, the Manager seeks to maintain high occupancy levels and stable rental income. The Manager also seeks to improve efficiency and manage costs through various aspects of its operations.

The Manager aims to improve the performance of the properties through the following measures:

• • Improving rentals while maintaining healthy occupancy rates and sustainable occupancy costs;

• • Achieving high tenant retention, particularly for the office portfolio;

• • Optimising tenant mix, particularly for the retail portfolio;

• • Rejuvenating and reconfiguring retail space;

• • Maximising yields through selective asset enhancements; and

• • Improving overall costs and operational efficiencies.

ACQUISITION GROWTH

The Manager will pursue potential asset acquisitions that will provide attractive cash flows and yields relative to MCT's weighted average cost of capital, and opportunities for future income and capital growth.

In evaluating acquisition opportunities for MCT, the Manager will focus primarily on the following investment criteria:

• • Value accretions;

• • Yield thresholds; and

• • Quality of the asset, including

  • • Location;

  • • Asset enhancement potential;

  • • Building and facilities specification; and

  • • Tenant mix and occupancy characteristics.

The Manager intends to hold acquired properties on a long-term basis. However, where the Manager considers that any property has reached a stage that offers limited scope for income contribution or growth in the future, the Manager may consider selling it and use the sales proceeds for other purposes, such as alternative investments in properties that meet its investment criteria.

DISCIPLINED CAPITAL AND RISK MANAGEMENT

The Manager will endeavour to:

• • Maintain a strong balance sheet;

• • Employ an appropriate mix of debt and equity in financing acquisitions;

• • Secure diversified funding sources to access both financial institutions and capital markets;

• • Optimise its cost of debt financing; and

• • Adopt appropriate interest rates hedging strategies to manage exposure to market volatility.