What Investors Need to Know About Manulife US Real Estate Investment Trust’s First Quarter of 2018 Results
Manulife US Real Estate Investment Trust (SGX:BTOU) is a pure-play U.S. office REIT listed in Singapore. It is a fairly new REIT and only went public in 2016 at a price of US$0.83. As of 31 March 2018, the REIT had a portfolio of five office properties located in Los Angelas, Irvine, Atlanta, Seacaucus and Jersey City.
Recently, the REIT released its earnings update for the first quarter of 2018. Here are 10 takeaways from its results presentation:
1. Gross revenue for the quarter surged 57.1% year-on-year to US$31.1 million from US$19.8 million. Likewise, net property income grew 54% to US$19.7 million from US$12.8 million the same period last year.
2. However, more importantly, distribution per unit still fell 8.5% to 1.5 US cents from 1.65 US cents.
3. The increase in revenue was driven by revenue contribution from its two acquisitions completed last year, namely Plaza in Secaucus and Exchange in Jersey City. Distributions per unit declined due to the enlarged unit base from the rights offering last year.
4. As of 31 March 2018, the REIT had assets valued at US$1.36 billion and total borrowings of US$458.6 million. That equates to a gearing ratio of 34.1%, which is around the average gearing ratio of REITs in Singapore. It is also well below the 45% regulatory limit.
5. The REIT had a weighted average interest rate of 2.83%, debt maturity level of 3.2 years and comfortable interest cover of 4.7 times.
6. At the end of the quarter, after adjusting for distributions, the REIT had a net asset value of US$0.79 per unit.
7. As at 31 March 2018, the REIT had a weighted average lease expiry profile of 5.7 years. Only 1.9% of leases by gross rental income is due in 2018. There was also a healthy mix of tenants with the largest tenant only contributing 6.3% of the total gross rental income.
8. The REIT had an overall portfolio occupancy of 95.8%, comprising 101 tenants. The chart below shows a summary of the portfolio value by property:
Source: Manulife US REIT 2018 Q1 Earnings Presentation
9. During the results presentation, the REIT announced a proposed acquisition of two properties that would expand its portfolio to seven properties. The first property is 1750 Pennsylvania Ave in Washington DC. It will be purchased at a price of US$182.0 million. The second property is Phillips Tower in Atlanta. It has a purchase price of US$205.0 million.
10. On the outlook for the rest of the year, the management is generally positive saying that market conditions continue to be generally favourable in the five locations that the REIT invests in, with minimal new supply and increasing market rents.
At the time of writing, units of Manulife US REIT exchanged hands at US$0.905 per share. This translates to a price-to-book ratio of 1.14 and an annualised distribution yield of 6.66%.