Manulife US REIT 2Q19 net property income climbs 34 percent

U.S. five dollar currency notes bills; taken September 2018.

Manulife US REIT (MUST) reported Tuesday its second quarter net property income climbed 33.8 percent on-year to US$27.26 million on new acquisitions.

Gross revenue for the quarter ended 30 June increased 33.2 percent on-year to US$43.31 million, the REIT said in a filing to SGX.

The distribution per unit (DPU) for the quarter was 1.53 U.S. cents, up from 1.30 U.S. cents in the year-ago quarter due to 227.94 million new units being issued 20 June 2018 to fund an acquisition which didn’t begin contributions until 22 June 2018, the filing said.

The REIT acquired the Centerpoint property in May of this year and the Penn and Phipps properties in June 2018, the filing said.

“During this period, we renewed close to 367,000 square feet of leases with long tenures averaging 8.6 years and 2.8 percent rental escalations per annum,” Jill Smith, CEO of Manulife US Real Estate Management, the REIT’s manager, said in the statement. “We are convinced that our diversified and high-quality tenant base will enable us to ride through property cycles.”

As of end-June, MUST posted an occupancy rate of 97.2 percent, with 61.3 percent of portfolio leases by net lettable area expiring only in 2024 and beyond.

Two of the Michelson properties largest leases, totaling around 151,000 square feet, were renewed at market rents with 11-year tenures and 3.0 percent per annum rental escalations, MUST said.

For the first half, Manulife US REIT posted net property income of US$52.34 million, up 30.8 percent on-year, on gross revenue of US$83.34 million, up 30.9 percent on-year; the DPU for the first half was 3.04 U.S. cents, compared with 2.53 U.S. cents in the year-ago period, the filing said.

In the outlook, the REIT pointed to some concerns on the U.S. economic horizon.

“The macro-environment is cautious, largely driven by geopolitical volatility and prolonged trade negotiations,” MUST said. “The economy remains supported by low unemployment and rising incomes, but slowing global growth, a strong dollar and trade uncertainties are weighing on the outlook for the remainder of the year.”

But it added, office absorption in the U.S. remained strong in the second quarter, according to JLL data, with the nation’s vacancy rate falling slightly to 14.5 percent at end-June.

Manulife US REIT’s portfolio includes eight office properties across California, Georgia, New Jersey and Washington DC, the filing said.

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