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Manulife US REIT reports 18.6% lower 2HFY2022 DPU of 2.14 US cents after capital retention

Felicia Tan
Felicia Tan • 4 min read
Manulife US REIT reports 18.6% lower 2HFY2022 DPU of 2.14 US cents after capital retention
On a like-for-like basis, MUST’s DPU for 2HFY2022 fell by 10.3% y-o-y to 2.36 US cents. Photo: MUST
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Manulife US REIT (MUST) has reported a distribution per unit (DPU) of 2.14 US cents (2.835 cents) for the 2HFY2022 ended Dec 31, 2022, 18.6% lower than the DPU of 2.63 US cents reported in the 2HFY2021.

This comes after the REIT decided to retain US$3.8 million from its distributable income in the 2HFY2022 for general corporate and working capital purposes on the back of the “volatile macroeconomic environment” and decline in asset valuation. The payout ratio for the 2HFY2022 still stands at 91%. According to the REIT, the implementation of its payout ratio comes as MUST seeks to improve its financial flexibility.

On a like-for-like basis, MUST’s DPU for 2HFY2022 fell by 10.3% y-o-y to 2.36 US cents.

The REIT’s distributable income fell by 10.6% y-o-y to US$38.1 million mainly due to higher finance expenses and following the capital retention. On a like-for-like basis, the REIT’s distributable income fell by 1.7% y-o-y to US$41.9 million before the retention.

2HFY2022 gross revenue increased by 8.3% y-o-y to US$102.1 million mainly due to contributions from Tanasbourne, Park Place and Diablo that were acquired in December 2021. The higher gross revenue was also due to higher carpark income and lower rent abatements provided to tenants during the pandemic.

Net property income (NPI) for the period increased by 3.9% y-o-y to US$55.5 million due to the higher gross revenue and offset by higher operating expenses.

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During the 2HFY2022, MUST reported a net loss of US$192.5 million compared to the net income of US$32.7 million mainly due to the net fair value loss on investment properties and higher finance expenses.

The REIT, on Dec 30, 2022, reported that the real estate valuation of its portfolio fell by 10.9% y-o-y to US$1.95 billion based on its year-end valuations for 2022.

FY2022

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For the FY2022, the REIT’s DPU fell by 10.9% y-o-y to 4.75 US cents after the capital retention in the 2HFY2022. On a like-for-like basis, the REIT’s full-year DPU fell by 6.8% y-o-y to 4.97 US cents over an enlarged unit base following its private placement in December 2021.

Gross revenue for the FY2022 increased by 9.4% y-o-y to US$202.6 million mainly due to contributions from its newly-acquired properties in December 2021.

NPI for the full year increased by 3.3% y-o-y to US$113.2 million due mainly to the higher gross revenue and offset by higher property operating expenses.

For the FY2022, MUST saw a net loss of US$129.7 million compared to the net income of US$39.4 million in the FY2021 primarily due to the net fair value loss on properties.

Distributable income for the FY2022 increased by 2.7% y-o-y to US$87.9 million mainly due to contributions from the REIT’s new properties.

“We have reported an improvement in distributable income in FY2022, coupled with a steady portfolio occupancy of 88.0% and weighted average lease expiry (WALE) by net lettable area (NLA) of 4.7 years, in spite of the challenges in our submarkets,” says Tripp Gantt, CEO of MUST.”

“Cognisant of our gearing level, we will continue exploring funding and strategic options for the REIT,” he adds. “Since our financial advisor Citi began discussions with potential partners from mid-January 2023 in relation to our strategic review, we have seen healthy interest from a broad range of counterparties including local and international real estate developers, REITs and private equity players. We look forward to providing more updates in due time.”

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As at Dec 31, 2022, MUST’s gearing ratio rose by 6.0 percentage points y-o-y to 48.8%, below the regulatory gearing limit of 50.0%, due to the decline in its valuations. Its interest coverage ratio (ICR) and weighted average interest rate stood at 3.1 times and 3.74% respectively as at Dec 31, 2022.

As at Dec 31, 2022, 77.3% of the REIT’s gross borrowings are on fixed rate loans, down from the 86.5% as at Dec 31, 2021.

The REIT’s net asset value (NAV) per unit stood at 57 US cents as at Dec 31, 2022, down from 67 US cents in the year before.

Cash and cash equivalents as at Dec 31, 2022, stood at US$112.9 million.

Looking ahead, the REIT manager says it continues to see a “strong demand for new and repositioned offices in attractive locations”. In addition, it expects to see an improved operating environment for REITs as the Fed seeks to taper its interest rate hikes.

Units in MUST closed 0.5 US cent higher or 1.54% up at 33 US cents on Feb 8.

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