Manulife US REIT declares 22.8% higher 1Q DPU of 1.51 US cents on enlarged portfolio

SINGAPORE (Apr 25): The manager of Manulife US Real Estate Investment Trust (Manulife US REIT) has declared a DPU of 1.51 US cents for the 1Q19 ended March, 22.8% higher than the 1.23 US cents DPU declared the same quarter a year ago.

Manulife US Real Estate Management says there was a drag on 1Q18 DPU for the enlarged unit base resulting from the preferential offering units issued on June 20 2018 to partially fund Penn and Phipps acquisitions while there was no income contribution from Penn and Phipps properties in 1Q18.

1Q19 gross revenue of US$40 million ($54.5 million) was 28.5% higher than in 1Q18 largely due to revenue contribution from Penn and Phipps properties acquired in June 2018.

Property operating expenses of US$14.9 million also correspondingly increased by 29.9% due to incremental property expenses from Penn and Phipps properties.

Accordingly, net property income of US$25.1 million was 27.7% higher than 1Q18.

Finance expenses of US$5.8 million also increased mainly due to incremental borrowings secured to partially fund the Penn and Phipps properties.

The tax expense was higher than 1Q 2018 largely due to deferred tax expense arising on Penn and Phipps properties acquired last year, and temporary differences between accounting and tax base on remaining properties.

Net income of US$13.7 million was higher than 1Q18 largely due to higher net property income, partially offset by higher finance expenses and higher deferred tax expense.

Distributable income of US$19.3 million was 23.7% higher than 1Q18 largely due to higher net property income, partially offset by higher finance expenses.

As at March 31, the portfolio has a high occupancy rate of 97.4% and long WALE by NLA of 6.0 years. In January, Hyundai renewed its lease of 97,000 sf by NLA at Michelson. Including this lease, a total of seven leases amounting to 6.1% of the portfolio were signed in 1Q19. As a result, 56% of the portfolio’s leases by NLA will expire in 2024 and beyond.

As at 31 March 2019, the REIT has an NAV per unit of US$0.81, with gross borrowings of US$673.8 million and a weighted average interest rate of 3.28%.

The REIT’s gearing of 37.6% is below the regulatory limit of 45.0%, and has a weighted average debt maturity of 2.5 years.

In its outlook, Manulife US Real Estate Management says US economic fundamentals remain solid driven by a productive workforce, flexible labor system and a leading technology sector. Also, the possible easing of trade tensions with China could benefit growth during the year.

The Federal Reserve held the Federal Funds rate steady in March 2019, following four increases in 2018. Rates are now expected to remain stable in 2019 as the Central bank has signalled its intent to be patient in light of reduced expectations in GDP growth and inflation and a potentially higher unemployment rate outlook.

Units of Manulife US REIT closed at 87 US cents on Wednesday.