SINGAPORE (April 29): Manulife US REIT has agreed to acquire a freehold 11-storey Class ‘A’ office asset at the Washington Metropolitan area in Fairfax, Virginia, for a consideration of US$122 million ($166.1 million) from Carr Properties.

Comprising two towers dubbed Centrepointe I and II, the property is located along 4000 and 4050 Legato Road and features a total net lettable area (NLA) of 419,981 sq ft with 1,456 parking spaces.

To help finance the acquisition – which is estimated to cost US$127 after factoring in an acquisition fee of US$1.2 million on top of other transaction fees and expenses amounting to US$3.8 million – the manager aims to raise at least US$94 million through a private placement at 81.1-83.6 US cents per new unit.

Post the acquisition, which will be funded with a combination of equity and debt, the manager expects Manulife US REIT’s aggregate gearing ratio to improve to 36.8% from the current 37.6% – thus providing US$101 million and US$284 million of debt headroom based on the REIT’s target gearing of 40% and regulatory gearing limit of 45%, respectively.

This acquisition is also expected to be DPU-accretive. Based on FY18 pro forma financial impact of the acquisition, the REIT’s DPU is expected to increase by 3.3% to 5.76 US cents from 5.57 US cents.  

In a press release on Monday, the manager highlights Centrepointe as a “best-in-class Class A asset” operating at 98.7% occupancy as at end-March, with over 50% of the tenants by NLA using the building as their headquarter location.

100% of the leases in the building have built-in rental escalations ranging from 2.5% to 3%, providing organic growth to the rental income for Manulife US REIT, it adds.

As the highest building in FairFax Center, the property also provides unobstructed signage and branding opportunities, along with the newly-renovated Centrepointe II providing features that distinguish the building as a unique asset in the Fairfax Center submarket.

In all, the acquisition of Centerpointe is expected to increase the REIT’s aggregate portfolio value by 7% to US$1.9 billion from US$1.7 billion, and NLA by 11.2% to 4.3 million sq ft from 3.7 million sq ft as at end-2018.

Centrepointe’s inclusion in Manulife US REIT’s existing portfolio will further diversify its tenant sector mix, adds the manager, by reducing the concentrations of legal and retail trade tenants while increasing the concentration of information sector tenants.

Units in Manulife US REIT closed 1 cent higher at 88 US cents on Monday.