Manulife US REIT Review @ 31 August 2021

Basic Profile & Key Statistics

Manulife US REIT (MUST) is an office REIT that owns 9 properties in U.S.

Performance Highlight

Gross revenue, NPI, distributable income and DPU decreased mainly due to lower income from Michelson, Centerpointe and Capitol, lower carpark income as well as rental abatement provided to eligible tenants. This is partially offset by + $ 2.1 million of net reversal of provision for expected credit losses.

Rental reversion is at +1.3%.

 

Related Parties Shareholding

• REIT sponsor's shareholding is low at 9.2%
• REIT manager's shareholding is low at 0.48%
• Directors of REIT manager's shareholding is moderate at 0.12%

Lease Profile

• Occupancy is slightly low at 91.7%
• WALE is long at 5.3 years
• Highest lease expiry within 5 years is low at 13.2% which falls in 2022, identical to 2023.
• All properties are freehold

Debt Profile

• Gearing ratio is high at 42.1%
• Cost of debt is high at 2.99%
• Fixed rate debt % is high at 96.3%
• Unsecured debt% is low at 28.2%
• WADM is long at 3.2 years
• Highest debt maturity within 5 years is low at 22.7%, which falls in 2022
• Interest coverage ratio is low at 3.3 times

Diversification Profile

• Top geographical contribution is low at 39.1% 
• Top property contribution is low at 16.2% 
• Top 5 properties contribution is slightly high at 65.2% 
• Top tenant contribution is low at 6.4% 
• Top 10 tenants contribution is moderate at 36.1%

Key Financial Metrics

• Property yield is slightly high at 5.5% 
• Management fees over distribution is low at 10% in which unitholders receive US$ 10 for every dollar paid 
• Distribution on capital is high at 4.2%
• Distribution margin is low at 45%

Trends

• Flat - Property Yield
• Slight Downtrend - Distribution on Capital, Distribution Margin, DPU
• Downtrend - NAV per Unit, Interest Coverage Ratio

Relative Valuation

• P/NAV - Average for 1y, 3y and 5y
• Dividend Yield - Average for 1y, 3y and 5y

Author's Opinion

Favorable	Less Favorable
Long WALE	Low REIT Sponsor's Shareholding
Well Spread Lease Expiry	Low REIT Manager's Shareholding
100% Freehold Properties	High Gearing Ratio
High Fixed Rate Debt %	High Cost of Debt
Long WADM	Low Unsecured Debt %
Well Spread Debt Maturity	Low Interest Coverage Ratio
Low Top Geographical Contribution	Low Distribution Margin
Low Top Property Contribution	NAV per Unit Downtrend
Low Top Tenant Contribution	Interest Coverage Ratio Downtrend
Competitive Management Fees
High Distribution on Capital

For upcoming quarters, MUST expected performance to be improved due to:

1) Expected the occupancy of Michelson to reach 87% by 3Q as compared to the current 80.4%. 

2) Expected carpark income to increase due to more tenants returning to the office from September

3) Expected rental relief and credit losses to reduce

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*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee accuracy, completeness, and reliability. It should not be taken as financial advice or a statement of fact. I shall not be held liable for errors, omissions and loss or damage as a result of the use of the material in this blog. Under no circumstances does the information presented on this blog represent a buy, sell, or hold recommendation on any security, please always do your own due diligence before any decision is made.