The manager of Manulife US REIT (MUST) has reported a distribution per unit (DPU) of 2.63 US cents (3.54 cents) for the 2HFY2021 ended December, 1.5% higher than the DPU of 2.59 US cents in the 2HFY2020.
The higher half-year DPU was due to lower provision for expected credit losses and higher carpark income, although offset by lower rental income from higher vacancies.
DPU for the FY2021 stood at 5.33 US cents, down 5.5% from the FY2020 DPU of 5.65 US cents due to higher rental abatements, lower car park income and lower rental income from higher vacancies. This was partly mitigated by the net reversal of provision for expected credit losses, says the REIT manager.
2HFY2021 gross revenue fell 1.4% y-o-y to US$94.3 million mainly due to lower rental income from the higher vacancies and offset by the higher car park income in the portfolio, as well as revenue contribution from the newly-acquired properties in December 2021.
Property operating expenses for the 2HFY2021 fell 2.85% y-o-y to US$40.8 million mainly due to the lower provision for expected credit losses.
As a result, 2HFY2021 net property income (NPI) dipped 0.3% y-o-y to US$53.5 million.
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2HFY2021 distributable income grew by 4.0% y-o-y mainly due to higher cash NPI. After factoring in the enlarged unit base mainly due to the private placement, which issued 154.1 million new units on Dec 9, 2021, DPU was up by 1.5% y-o-y.
As at end-December, MUST reported a high occupancy rate of 92.3% and a long weighted average lease expiry (WALE) of 5.1 years.
The REIT’s portfolio comprises a high-quality and well-diversified tenant base across over 16 different trade sectors. The majority of its top 10 tenants are either public-listed companies, government agencies or corporate headquarters.
The valuation of its nine properties (excluding the recent three acquisitions) rose 0.4% over the six months to US$1.98 billion as at 31 December 2021, signalling a stabilising in MUST’s office values.
In the FY2021, the REIT executed leases amounting to an estimated 654,000 sq ft or 12.0% of the portfolio by net lettable area (NLA), at an average rental reversion of -0.8%.
Excluding Michelson, the rental reversion for executed leases in FY 2021 would have been +3.3%. The expiring rents in MUST’s portfolio in 2022 are currently 2.1% below market rents.
As a result of proactive forward renewals, only 8.0% and 12.9% of leases by NLA will expire in 2022 and 2023 respectively, while 54.3% of the portfolio’s leases will expire in 2026 and beyond.
During the year, MUST’s MSCI ESG ratings were upgraded to ‘AA’ from ‘A’. Around 90% of the REIT’s portfolio is green-certified as at end-December.
Cash and cash equivalents as at end-December stood at US$78.6 million.
“2021 was a tale of two halves. The first half was about quelling the pandemic through the vaccination programme and the reopening of the US economy, leading to a surge in GDP growth. On the back of that, from the middle of the year, the US office market started to rebound as transactions and leasing improved, resulting in leasing activity increasing +13.8% from 3Q to 4Q, whilst tenant improvement allowances eased 11.4%,” says Jill Smith, CEO of the manager.
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“MUST saw similar green shoots in its portfolio in the second half. We signed leases with longer WALE, saw net effective rents improve +3.4% from 1HFY2021 to 2HFY2021, and portfolio valuations turned positive for the first time since the start of Covid-19,” she adds.
“We are extremely pleased to have ended 2021 with the delivery of our previously communicated strategy to enter into high-growth markets with greater exposure to technology and healthcare tenants… These three acquisitions, with a DPU accretion of +2.8%, will raise our assets under management (AUM) in growth markets by 38.1% to 29.0%, and our exposure to such tenants by 32.0% to 12.8%,” she continues, adding that the REIT will “conserve spending, rejuvenate the portfolio, as well as seek joint ventures, M&A and capital recycling to contain gearing, whilst continuing our recovery and growth momentum in FY2022”.
Units in MUST closed flat at 64.5 US cents on Feb 8.
Photo: MUST
