Manulife US REIT FY2020 Financial Results

Manulife US REIT

Manulife US REIT has released its FY2020 financial results on 8th February 2021. Gross revenue and distributable income rose 9.3% to US$194 million and 6.8% to US$89.0 million respectively.

However, despite the increase in distributable income, full year distribution per unit (DPU) fell 5.4% to 5.64 cents. A DPU of 2.59 cents was declared which will be paid on 30th March 2021.

Net property income increased 4.6% to US$116.0 million mainly due to the contributions from Centerpointe and Capitol acquired in 2019. The increase was partially offset by lower carpark income, lower rental income due to higher vacancies in Michelson and Peachtree and Provision for expected credit losses on trade receivables.

Financial Summary

Below is the full year 2020 versus 2019 financial results.

FY2020
(US$’000)
FY2019
(US$’000)
Change
Gross Revenue 194,312 177,853 9.3%
Net Property Income 115,837 110,776 4.6%
Distributable Income 88,967 83,341 6.8%
Distribution Per Unit (“DPU”) (US cents) 5.64 5.96 (5.4%)

Occupancy

Overall occupancy stood at 93.4% which is above the U.S. Class A office average of 84%.

Manulife US REIT Occupancy 31 Dec 2020

The Weighted Average Lease Expiry (WALE) is 5.3 years. The good news here is that there is minimal lease expiries in 2021.

Manulife US REIT Lease Expiry 31 Dec 2020

Debt

Gearing stood at 41.0% which is well below the Monetary Authority of Singapore (MAS) limit of 50%. Weighted Average Debt Maturity stood at 2.3 years.

According to what was shared from the presentation slides, there is still US$115.0 total undrawn committed facilities.

Manulife US REIT Debt Maturity Profile 31 Dec 2020

Current Dividend Yield

Based on the current share price of US$0.72 and FY20 full year DPU of 5.64 cents, this translate to a current dividend yield of 7.83%.

Sounds attractive?

Summary

In my opinion, the manager has performed well by keeping its occupancy high and with minimal leases expiring in 2021, the REIT should remain rather stable throughout the year.

The catalyst for Manulife US REIT to perform will be the recovery of the US economy from COVID-19. With Joe Biden taking over as President, he is in progress of delivering 150 m vaccines in 100 days. With more people back to work means more office space will be taken up.

Prior to the release of Manulife US REIT financial results, I have been making small purchases of Manulife US REIT over the past few months given the attractive dividend yield.

I still remember I wrote about why I did not subscribe to Manulife US REIT IPO in 2016. But I ended up buying Manulife US REIT in 2019 as the REIT has proven itself over the years to be resilient and the dividend yield has been rather stable.

SPH REIT 1QFY2021 Updates

SPH REIT Portfolio

SPH REIT has provided their key business and operational updates for 1QFY2021 on 13th January 2021.

Gross revenue was S$66.6 million which is an increase of 10.8% year-on-year, largely attributed to Westfield Marion’s contribution of S$12.8 million.

The Gross revenue from its Singapore assets decreased by 11.3% y-o-y to S$49.7m, largely attributed to the rental relief granted to assist tenants which were significantly impacted by COVID-19.

Footfall and tenant sales across the malls recovered during the year-end festive period. However, Paragon which primarily traffic comes from tourists continue to be impacted by border restrictions. Suburban malls such as the Clementi Mall continue to be impacted by the work-from-home arrangements.

The Gross revenue contributed by its Australian assets was S$16.9 million, an increase of S$12.8 million, driven by the acquisition of Westfield Marion in 2Q FY2020.

Despite the overall increase in gross revenue, a distribution per unit (DPU) of only 1.20 cents was declared for 1Q2021. This was a decrease of 13% as compared 1.38 cents paid in1Q2020.

Occupancy

Overall portfolio occupancy stood healthily at 97.9% with a Weighted Average Lease Expiry (WALE) at 5.5 years.

I notice that occupancy has improved for each individual mall. Surprisingly, the occupancy for The Rail Mall is 100%!

As of 30 November 2020, the occupancy for each asset is as follows:

  • Paragon (98.0%)
  • The Clementi Mall (99.6%)
  • The Rail Mall (100.0%)
  • Figtree Grove Shopping Centre (99.2%)
  • Westfield Marion Shopping Centre (97.3%)

Lease Expiry

As you can see below, 21% of the leases are expiring in terms of Net Lettable Area (“NLA”) in FY21. If the manager fails to proactively renew the leases, this will mean a loss of rental income. Since this is only the first quarter of FY2021, we should continue to monitor the expiring leases over the next 3 quarters.

SPH REIT 1Q2021 Lease Expiry

Debt

Gearing ratio information is not available in this update but if we based on 31st August 2020, the gearing ratio stood at 30.5%.

Refinancing of S$215 million loans maturing by July 2021 is in progress with revolving credit facility lines of S$225 million being available.

Current Dividend Yield

Based on the FY20 full year DPU of 2.72 cents and current share price of S$0.86, this translate to a current dividend yield of 3.16%.

SPH REIT Share Price 22 Jan 2021

Summary

SPH REIT makes up 11.93% of my stock portfolio. The REIT has been slow in recovery from the impact of the COVID-19 pandemic. This can be seen from the weakness in its share price. DPU continue to be depressed which is disappointing for dividend investors.

I can understand why as its prime asset Paragon Mall is primarily focused on tourists. The catalyst for a fast recovery will be the opening of the international borders where tourist return to shop in Singapore.

In the meantime, existing investors can only wait for the day for the border to open and SPH REIT can regain its glorious days. Having said that, SPH REIT is not sitting around doing nothing. The manager ventured into Australia. As you can see, its financial results can be worst without contribution from its Australian assets.