CapitaLand Integrated Commercial Trust - Annual Report 2021

Dear Unitholders Amidst the global pandemic, Singapore’s economy emerged stronger in 2021. Operationally, the COVID-19 situation remained fluid due to the government’s various tightening measures. Businesses and workers were impacted by dine-in restrictions and default work-from-home arrangements spanning more than six months. However, with various government support schemes that were rolled out, businesses were able to overcome some of these operational challenges. Singapore now has one of the highest vaccination rates in the world. This, together with the Vaccinated Travel Lane (VTL) scheme 1 , augurs well for reopening of the economy and again establishes Singapore as the key business and commercial hub in the Asia Pacific region. Against this backdrop, we marked our first full reporting year as CapitaLand Integrated Commercial Trust (CICT). Following the merger of CapitaLand Mall Trust and CapitaLand Commercial Trust, we became the largest Singapore REIT with a market capitalisation of S$13.5 billion as at 31 December 2021. With retail, office and integrated development assets under one banner, we are in a better position to capitalise on opportunities through market cycles. Notwithstanding COVID-19 headwinds, we remainedanchored on sound fundamentals and stayed agile and flexible in managing our assets to secure positive outcomes and value creation. DELIVERING A POSITIVE PERFORMANCE We upheld our commitment to sustainable returns. Buoyed by an enlarged portfolio, comprising office properties and 100% contribution from Raffles City Singapore, we achieved a credible set of results. Gross revenue rose 75.1% to S$1,305.1 million for FY 2021. Meanwhile, with our resilient portfolio and lower interest expenses, we generated a higher net property income (NPI) of S$951.1 million, up 85.5% from the previous year. Distributable income for the year rose 82.7% year-on- year to reach S$674.7 million. This resulted in a distribution per unit (DPU) of 10.40 cents, an increase of 19.7% year-on-year. The DPU yield is 5.1% based on the closing price of S$2.04 on 31 December 2021. We continue to benefit from a stable financial position, with well-diversified sources of funding and have one of the longest debt maturity profiles in the S-REIT sector. As 83% of our total borrowings 2 are on a fixed rate, this mitigates the potential impact from a higher interest rate environment. During the year, we issued two long dated Medium Term Notes at attractive interest rates. Our average cost of debt was 2.3% per annum at the end of FY 2021. To partially fund the proposed acquisition of two office buildings and an integrated development in Sydney, which is expected to complete in 1Q 2022, we raised about S$250.0 million from a private placement in December 2021. As a testament to our financial strength, we have been rated ‘A3’ and ‘A-’ by Moody’s Investors Service and S&P Global Ratings respectively. SUPPORTING OUR TENANTS FY 2021 was a challenging year for our tenants, given the uncertain COVID-19 environment. We proactively assisted affected tenants and worked to stabilise operations while remaining vigilant and agile in our approach. These targeted initiatives included appropriate grant of rental waivers, relevant rental restructuring and marketing support for the retail tenants. The latter included helping our tenants to drive their sales digitally via our online platforms, as well as other measures to attract shoppers. By the close of the financial year, the total rent waivers granted amounted to S$27.3 million. Focused on a proactive leasing strategy, we sought to strike a balance on tenant retention and attracting new ones to our portfolio. Our efforts in addressing their space requirements and specific needs resulted in a healthy committed portfolio occupancy of 93.9% as at 31 December 2021. Tenant retention for our retail and office portfolios were 82.3% 3 and 69.3% 4 respectively. We also achieved a stable weighted average lease expiry (WALE) at 3.2 years. Of the 26.5% leases due for renewal in 2022 based on portfolio committed monthly gross rental income at the end of FY 2021, we have completed lease renewals with two major tenants in January 2022, which constituted 3.4%. We are proactively working on the 1 VTL scheme allows quarantine-free travel to Singapore via air. Please visit https://safetravel.ica.gov.sg/vtl/requirements-and-process for updates on the requirements and process. 2 Including share in joint ventures. 3 Based on the number of renewed versus expiring leases. 4 Based on the net lettable area of renewed versus expiring leases. CapitaLand Integrated Commercial Trust 14 Message to Unitholders