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Manulife US REIT declares 0.3% increase in 1H20 DPU to 3.05 US cents on 'resilient portfolio'

Felicia Tan
Felicia Tan • 3 min read
Manulife US REIT declares 0.3% increase in 1H20 DPU to 3.05 US cents on 'resilient portfolio'
Gross revenue for the half-year period came in at US$98.6 million ($135.5 million), 18.3% y-o-y, largely due to contributions from Centrepointe in Washington, and Capitol in California. Both were acquired in FY2019.
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The manager of Manulife US Real Estate Investment Trust (Manulife US REIT) has declared a distribution per unit (DPU) of 3.05 US cents, up 0.3% from 3.03 US cents declared a year ago.

Distributable income for the period rose 20.0% y-o-y to US$48.0 million.

Gross revenue for the half-year period came in at US$98.6 million ($135.5 million), 18.3% y-o-y, largely due to contributions from Centrepointe in Washington, and Capitol in California. Both were acquired in FY2019.

The increase was partially offset by lower rental income primarily from Michelson and lower portfolio carpark income.

Property operating expenses increased 17.6% y-o-y to US$36.5 million mainly due to the newly acquired properties.

Accordingly, net property income (NPI) grew 18.8% y-o-y to US$62.2 million.

Finance expenses for the period rose 22.9% y-o-y to US$14.8 million, due to additional borrowings to partially fund acquisitions, and to fund capital expenditures and leasing costs.

In addition, interest cost was higher due to the Figueroa mortgage being refinanced at prevailing market rate in July 2019 at a higher interest rate.

Net fair value loss on derivatives of US$14.1 million was recognised in 1H20. This is attributable to the fair valuation of interest rate swaps entered into to hedge against interest rate exposures.

Net fair value loss in investment properties of US$77.3 million in the same period was largely due to the appraiser factoring in lower rental growth assumptions as a result of the COVID-19 pandemic, adjusted for capital expenditure and other costs related to investment properties.

Tax income of US$15.0 million was mainly due to deferred tax income arising from net fair value loss in investment properties, partially offset by deferred tax expense from tax depreciation.

As at end June, the REIT’s committed occupancy stood at 96.2% with a weighted average lease expiry (WALE) of 5.7 years by net lettable area (NLA).

Cash and cash equivalents as at end June stood at US$96.1 million.

“We are confident that MUST’s portfolio is well-positioned to weather the ongoing economic turmoil anchored through its high occupancy of 96.2%, long WALE of 5.7 years, minimal expiries in 2020 and 2021, competitively positioned rents and a superior tenant base. As always, we are intent on protecting MUST’s portfolio, preserving DPU and to that end, we are working with our tenants to emerge stronger together,” says Jill Smith, CEO of the manager.

Looking ahead, the REIT says that the continued social distancing measures and business closures will weigh down on economic recovery over the remainder of the year and “possibly through” 2021.

Units in Manulife US REIT closed 2 cents higher, or 2.7% up at 77 US cents on Thursday (July 30).

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