Manulife US REIT · SGX:BTOU
Manulife US REIT — Q2 2019 Earnings Presentation
35 slides from Manulife US REIT's earnings presentation, Aug 13, 2019
Slide 1: 2Q 2019 Financial Results
2Q 2019 Financial Results 1 Apr 2019 to 30 Jun 2019 13 August 2019 1
Slide 2: Important Notice
Important Notice This presentation shall be read in conjunction with Manulife US REIT’s financial results announcement dated 13 August 2019 published on SGXNet. This presentation is for information purposes only and does not constitute or form part of an offer, invitation or solicitation of any offe
Slide 3: Contents
Contents 01 Key Achievements 02 Financial Highlights 03 Portfolio Performance 04 Case Study on U.S. Leases 05 Looking Forward 06 Appendix: U.S. Outlook 07 Appendix: About MUST 3
Slide 4: Key Achievements
Centerpointe, Virginia 2Q 2019 Key Highlights Key Achievements 01 4
Slide 5: 1H 2019 Key Achievements
1H 2019 Key Achievements Ranked 6th among 46 S-REITs and Business Trusts by the Governance Index For Trusts 2019 Net Property Income (NPI) of Refinanced US$117.0 m1 US$52.3 m increased by 30.8% YoY Figueroa loan at trust level Long WALE of 6.2 Years and DPU of 3.04 US Cents high occupancy of 97.2% E
Slide 6: Financial Highlights
Gross Borrowings Figueroa, Los Angeles US$723.1 m Gearing Ratio 37.1%1 Weighted Ave. Interest Rate 3.32% Weighted Ave. Debt Maturity 2.3 years 02 Financial Highlights Interest Coverage (1) Based on gross borrowings as percentage of total assets 3.9 times2 (2) Based on net income before finance expen
Slide 7: 1H 2019 Net Property Income Increased by 30.8%
1H 2019 Net Property Income Increased by 30.8% 2Q 2019 2Q 2018 Change 1H 2019 1H 2018 Change (US$’000) (US$’000) (%) (US$’000) (US$’000) (%) Gross Revenue 43,314 32,521 33.2 83,339 63,674 30.9 Net Property Income 27,258 20,377 33.8 52,342 40,027 30.8 Distributable Income 20,624 16,505 25.0 39,967 32
Slide 8: Acquisitions Deliver Capital Growth and NPI Diversification
Acquisitions Deliver Capital Growth and NPI Diversification Valuation +US$158.9 m over Purchase Price since IPO Reduced NPI Concentration per Property Portfolio Valuation (US$ m) NPI by Property (%) 2,000 1,800 158.9 3.0% 144.1 1,600 12.5% 15.5% 25.2% 1,400 32.4% 9.7% 105.2 1,200 18.5% 1,000 56.4 20
Slide 9: Delivering Robust Income through Fortified Portfolio
Delivering Robust Income through Fortified Portfolio NPI (on Cash Basis) Excluding Penn, Phipps and Centerpointe +US$0.5 m YoY Net Property Income1 (US$ m) Portfolio (excluding Penn, Change YoY 52.3 Phipps and Centerpointe) NPI (US$0.3 m) 40.0 NPI (on cash basis2) US$0.5 m 8.1 8.0 9.7 10.1 10.6 10.5
Slide 10: Strong Balance Sheet and Distribution Schedule
Strong Balance Sheet and Distribution Schedule As at 30 Jun 2019 1H 2019 Distribution Schedule (US$’000) Investment Properties 1,875,470 Paid On Total Assets 1,950,718 Advanced DPU3 30 Jul 2019 Borrowings 719,6021 2.14 US Cents Total Liabilities 837,845 For period 1 Jan 2019 to 8 May 2019 Net Assets
Slide 11: Figueroa and Centerpointe Financed at Trust Level
Figueroa and Centerpointe Financed at Trust Level Figueroa Term Loan1 Refinanced at 3.25%, Benefitted from Lower Interest Rate Environment US$ m 250 Post Refinancing 30 Jun 2019 of Figueroa1 200 Penn Weighted Average 3.32% 3.45% 95.5 Plaza Interest Rate 150 40.0 Centerpointe 33.0 Weighted Average 2.
Slide 12: Portfolio Performance
Michelson, Irvine AUM US$1.9 b Occupancy 97.2% WALE 6.2 years Leases Executed ~367,000 sq ft Portfolio Performance 03 Rental Escalation 2.0% p.a. 12 Data as at 30 Jun 2019
Slide 13: Lengthened WALE to 6.2 Years through Proactive Leasing
Lengthened WALE to 6.2 Years through Proactive Leasing Lease Expiry Profile as at 30 Jun 2019 (%) Crème de la Crème 60.2 61.3 Michelson Trophy, Irvine, Orange County • CBD of Orange County with strong labour pool • Set apart with premier location and amenities Abundance of retail, residential and
Slide 14: Strong Leasing Momentum – High-Quality Tenants Signing
Strong Leasing Momentum – High-Quality Tenants Signing Long Leases Portfolio Rental Escalations as at 30 Jun 2019 Leases Executed in 1H 2019 • Portfolio escalations of 2.0% p.a. • Executed 10% of portfolio’s leases by NLA • 95% of leases by GRI have rental escalation Annual rental escalations ~367,0
Slide 15: 7.5 Years WALE by Top 10 Tenants
7.5 Years WALE by Top 10 Tenants; Majority Listed/HQ Location High-Quality, Diversified Tenant Base Solidifies Portfolio Trade Sector by Gross Rental Income (GRI) Top 10 Tenants by Gross Rental Income (GRI) Manufacturing, 1.5% Administrative and NLA Support Services, 1.0% Tenant Sector % of GRI Arch
Slide 16: Underlying Markets Remain Strong as Reflected by Valuation
Underlying Markets Remain Strong as Reflected by Valuation Valuation Implied Cap Rates Property 30 Jun 2019 31 Dec 2018 30 Jun 2019 30 Jun 20192 31 Dec 20183 Change (%) (US$ m) (US$ m) (US$ Per Sq Ft1) (%) (%) Figueroa 329.9 329.3 0.2 469.5 4.5 4.5 Michelson 345.0 345.0 0.0 647.4 4.7 4.8 Peachtree 2
Slide 17: Strong Growth Markets with Limited Supply
Strong Growth Markets with Limited Supply In-Place Rent (US$) Average Market Rent MUST's Rent Rent Growth Potential • Majority of properties below market rents 60.0 • Irvine: Not comparable as data includes Class A while Michelson is a Trophy 40.0 building 43.09 36.77 39.04 40.10 31.30 41.19 57.48 3
Slide 18: Case Study on U.S. Leases
Peachtree, Atlanta Case Study on U.S. Leases 04 18
Slide 19: How do U.S. and Singapore's Leases for Office Buildings Differ?
How do U.S. and Singapore’s Leases for Office Buildings Differ? Tenant Improvements (TIs) Free Rent Leasing Commissions • Renovations funded by landlords • Negotiated period where • Fees paid to agents • Average 5 to 10-year • Amount negotiated based on tenants do not pay rent • Applicable for both
Slide 20: Future Proofing our Buildings
Future Proofing our Buildings Exchange, NJ, 31 Years Old Unlike Singapore, where buildings may be demolished after 30 years, the offices in our citiesTenant remain evergreen as they in Exchange are well-maintained and improved through ongoing TIs and AEIs. This helps us maintain the valuation and Tr
Slide 21: Looking Forward
Plaza, Secaucus Looking Forward 05 21
Slide 22: Looking Forward – U.S. REIT of Choice
Looking Forward – U.S. REIT of Choice Strong support Continue to Inorganic FTSE EPRA from reputable drive leasing growth NAREIT Sponsor with and NPI by opportunities to Index proven track attracting high- benefit from low inclusion in record quality tenants interest rates sight AUM of US$877 b1
Slide 23: For enquiries, please contact
For enquiries, please contact: Ms Caroline Fong, Head of Investor Relations Direct: (65) 6801 1066 Email: carol_fong@manulifeusreit.sg MANULIFE US REAL ESTATE INVESTMENT TRUST 8 Cross Street, #16-03 Manulife Tower, Singapore 048424 http://www.manulifeusreit.sg 23
Slide 24: Appendix: U.S. Outlook
Exchange, Jersey City Appendix: U.S. Outlook 06 24
Slide 25: Benefitting from Growth of World's Largest Economy
Benefitting from Growth of World’s Largest Economy U.S. GDP Growth (YoY %)1 2Q 2019 GDP Growth3 2.1% Low unemployment4 3.7% 2.2 1.6 2.9 Non-farm jobs created 2Q 20194 512,000 2.5 2.4 2.6 2.3 1.7 2.1 Non-farm jobs added in Jun4 224,000 1.6 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 -
Slide 26: Favourable U.S. Office Real Estate Outlook
Favourable U.S. Office Real Estate Outlook U.S. Office Employment (YoY %)2 14.5%1 +3.6%1 2.5 2.7 2.7 2.2 2.7 2.1 2.0 2.1 2.1 2Q 2019 Annual -0.1 vacancy steady increase in rents 2009Q2 2010Q2 2011Q2 2012Q2 2013Q2 2014Q2 2015Q2 2016Q2 2017Q2 2018Q2 2019Q2 -6.7 U.S. Office Net Absorption (m sq ft) and
Slide 27: Diversified and Resilient Portfolio with Highest Population and Strongest GDP
Diversified and Resilient Portfolio with Highest Population and Strongest GDP MUST’s Properties Located in Top 10 Largest MSAs out of 383 in the U.S. with High Median Household Income Median 2 Ranked by 3 Ranked by MSA 1 Population GDP Household Income Population GDP U.S. 57,652 327,167,434 - 20,494
Slide 28: Limited Supply in Our Cities
Limited Supply in Our Cities Majority of our Properties are Below Market Rents 12 Month New Properties Gross Net Net 2Q 2019 RBA Vacancy Rent Under Asking Rent Absorption Delivery Delivery Year Class A Market (mil sq ft) (%) Growth1 Construction (US$) (‘000 sq ft) (‘000 sq ft) (%) (‘000 sq ft) Downt
Slide 29: Located in Cities with Strong Growth Factors and Live, Work, Play Environment
Located in Cities with Strong Growth Factors and Live, Work, Play Environment Secaucus Downtown Los Angeles • Affordable office and residential alternative to Manhattan • Surrounded by entertainment venues such • Excellent connectivity via public transport and interstate highways as Staples Center,
Slide 30: Appendix: About MUST
Penn, Washington, D.C. Appendix: About MUST 07 30
Slide 31: Supported by Reputable Sponsor with Proven Track Record
Supported by Reputable Sponsor with Proven Track Record Vertically-Integrated Real Estate Platform: Global Real Estate AUM of US$18.4 b Vancouver Calgary Kitchener/Waterloo Edmonton Toronto Canada Ottawa US$7.4 B Montreal AUM AUM US$877 B Halifax 72% of Real Estate in Office U.S. Asia US$8.9 B Other
Slide 32: Tax Advantaged Tax Structure
Tax Advantaged Tax Structure 1 MUST’s tax advantage For illustrative purposes only US REIT S-REIT1 Manulife US REIT • No U.S. corporate taxes (21%) DPU Yield 3.2%2 6.9% 6.9%3 • No U.S. withholding taxes (30%) U.S. Withholding Taxes (1.0%) - - Net Yield – 2.2% 6.9% 6.9% Singapore Retail Investor • No
Slide 33: Tax Structure
Tax Structure Predominantly Supported by Four Pillars i Parent U.S. REIT Structure Sponsor Unitholders Manulife (9.8% limit)3 • Tax transparency – Dividends distributed are deductible 0% Tax • Income shielded by interest expense and depreciation ii U.S. Portfolio Interest Exemption Rule • No 30%1 wi
Slide 34: Portfolio Overview
Portfolio Overview Figueroa Michelson Peachtree Plaza Exchange Penn Phipps Centerpointe Washington, Location Los Angeles Irvine Atlanta Secaucus Jersey City Atlanta Fairfax D.C. Property Type Class A Trophy Class A Class A Class A Class A Trophy Class A Land Tenure Freehold Freehold Freehold Freehol
Slide 35: Additional Disclaimer
Additional Disclaimer CoStarPS does not purport that the CoStarPS Materials herein are comprehensive, and, while they are believed to be accurate, the CoStarPS Materials are not guaranteed to be free from error, omission or misstatement. CoStarPS has no obligation to update any of the CoStarPS Mater