Manulife US REIT 1QFY2021 Updates

Manulife US REIT

Manulife US REIT has provided their key business and operational updates for 1QFY2021 on 11th May 2021.

There are no information on Gross Revenue, Net Property Income (NPI) and Distribution since this is only an operational update.

Nevertheless, let us look at some of the key indicators to see how Manulife US REIT has performed in the first quarter.

Occupancy

Overall portfolio occupancy stood healthy at 92% with Weight Average Lease Expiry (WALE) at 5.3 years.

This is slightly lower than the last reported occupancy of 93.4%.

Lease Expiry

The number of expiring leases in 2021 and 2022 have been further reduced.

Manulife US REIT 1QFY2021 Lease Expiry Profile

From the chart below, you can see that 62.8% of the rentals have annual escalations of 2.7% p.a. in-place. This will benefit Manulife US REIT in terms of growing its revenue y-o-y.

Despite such rental escalations, new leases are minimal with 93.6% are lease renewals. This is a positive sign that Manulife US REIT is able to retain its tenants.

Manulife US REIT 1QFY2021 Rental Escalations

Debt

Gearing stood at 41.3% which is still below the MAS limit of 50%.

As you can see from the chart below, the loans due in April 2021 was refinanced. Thus, the Weighted Average Debt Maturity increased to 3.4 years.

In conclusion, there is no worrying debt for now in 2021.

Manulife US REIT 1QFY2021 Debt Maturity Profile

Current Dividend Yield

Based on the current share price of US$0.73 and FY20 full year DPU of 5.64 cents, this translate to a current dividend yield of 7.73%.

Summary

As more US citizens get vaccinated, the government lock down rules have relaxed slightly. This benefits the overall US economy which in turn will stimulate the recovery of US REITs such as Manulife US REIT.

I identified 2 key components which I feel is the strength of Manulife US REIT. They are

  1. Annual rental escalations
  2. Long WALE providing stability

The above are definitely strong reasons to keep invested in Manulife US REIT and I shall top up my stock portfolio when opportunity arises!

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.