Manulife US Reit's DPU beats forecast

Manulife US Real Estate Investment Trust (Reit), one of the big new listings here this year, has turned in a stellar first set of results.

The Reit has outperformed its forecast for the distribution per unit (DPU). DPU from the date of listing May 20 to Sept 30 came in at 2.01 US cents, 5.8 per cent better than its initial public offering forecast of 1.9 US cents, its manager reported.

Distributable income was 5.8 per cent higher than forecast at US$12.6 million (S$17.5 million), owing largely to higher net property income, lower interest expenses and other trust expense savings.

"Despite the gloomy global macroeconomic outlook, the US real estate market remains a bright spot, attracting investors seeking yield and growth," said Ms Jill Smith, chief executive of Manulife US Real Estate Management, the trust manager.

Lower property operating expenses helped to lift net property income over its forecast by 1.5 per cent to US$17.6 million. Gross revenue, however, missed its forecast by 1.1 per cent at US$28.2 million, given lower recovery revenues.

NO IMMEDIATE IMPACT FROM US ELECTION

It is about what is going on in the economy and the economy is not going to change overnight. We have seen that in the United Kingdom with Brexit, the UK economy has not changed overnight.

MS JILL SMITH, chief executive of Manulife US Real Estate Management, the trust manager, on the impact of the US presidential election this week

Manulife US Reit - touted as the first pure-play US office Reit listed in Asia - has a portfolio comprising three prime and freehold office properties in the United States. They are: Figueroa in Los Angeles, Michelson in Irvine, Orange County, and Peachtree in Atlanta.

The three properties, valued at US$813.2 million, had an aggregate net lettable area of 1.8 million sq ft and an occupancy rate of 97 per cent as at Sept 30.

The trust manager added in a statement yesterday that the Reit also registered positive rental reversions of 8.5 per cent for the first nine months of this year.

It also has a favourable lease profile with 68.1 per cent of leases expiring in 2022 and beyond.

Law firms accounted for the lion's share of its tenants at 44.4 per cent, followed by financial institutions at 24.6 per cent. The other tenants were spread across various sectors including real estate, business services and arts and entertainment.

Ms Smith noted: "The diverse US office market gives us a cornucopia of future acquisition opportunities... and we will aim to diversify the portfolio geographically and to diversify the tenant base."

The trust manager aims to acquire one asset per year from its listing date with potential investment value in the range of US$100 million to US$150 million. Chief investment officer Jeffrey Wolfe said: "We have started the portfolio with three key core holdings and we will build around that... we feel that we will get better diversification by buying several US$100 million to US$150 million deals than one US$300 million dollar deal."

At the earnings briefing yesterday, Ms Smith was also asked about the potential impact from the outcome of the closely-watched US presidential election this week.

"It is about what is going on in the economy and the economy is not going to change overnight. We have seen that in the United Kingdom with Brexit, the UK economy has not changed overnight," she said.

Net asset value per unit was 84 US cents as at Sept 30, while earnings per unit for the period came in at 5.39 US cents. The counter closed half a cent lower at 84 US cents per unit on Monday, after the earnings were reported.

A version of this article appeared in the print edition of The Straits Times on November 08, 2016, with the headline 'Manulife US Reit's DPU beats forecast'. Print Edition | Subscribe