Manulife US REIT · SGX:BTOU
Manulife US REIT — H1 2022 Earnings Presentation
39 slides from Manulife US REIT's earnings presentation, Aug 10, 2022
Slide 1: Corporate Presentation
Corporate Presentation 10 August 2022 Highly Confidential
Slide 2: Important notice
Important notice This presentation shall be read in conjunction with Manulife US REIT’s financial results announcement dated 04 August 2022 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: Content
Content 01 1H 2022 highlights 02 Financial performance 03 Portfolio performance 04 The future of office 05 ESG 06 Looking forward 07 Appendix We are a constituent of Singapore Small Cap Index iEdge SG ESG Indices FTSE ST REITs Index, FTSE EPRA Nareit Developed Index and CarbonCare Asia Pacific GPR G
Slide 4: Capitol, Sacramento
Capitol, Sacramento Highly Confidential
Slide 5: 1H 2022 highlights
1H 2022 highlights Financials Portfolio Distribution per unit Occupancy 2.61 US Cents 90.0% -3.3% YoY Above U.S. Class A average ~ 80.7%1 Net property income Executed leases US$57.6M ~192k sq ft +2.8% YoY Physical occupancy Gearing ~28%2 42.4% Fixed rate loans ~70% green portfolio 85.7% Above U.S. a
Slide 6: Penn, Washington, D.C.
Penn, Washington, D.C. Highly Confidential
Slide 7: 1H 2022 financial snapshot
1H 2022 financial snapshot YoY 1H 2022 1H 2021 Change (US$’000) (US$’000) (%) 1H YoY DPU change due to: Accretive contributions from Tanasbourne, Park Place and Diablo Gross Revenue 100,418 90,799 10.6 acquired in Dec 2021 Lower rent abatements provided to Net Property Income tenants affected by COV
Slide 8: Portfolio performance
Portfolio performance NPI (US$ m) +2.8% NPI increase mainly due to: • Accretive contributions from Tanasbourne, Park Place and Diablo acquired in Dec 2021 57.6 56.1 • Lower rent abatements provided to tenants affected by COVID-19 • Higher carpark income Partially offset by: • Lower rental income fro
Slide 9: Strong balance sheet; 100% pay-out for 1H 2022 distributions
Strong balance sheet; 100% pay-out for 1H 2022 distributions Distribution schedule As at 30 Jun 2022 Upcoming DPU: Investment Properties (US$’000) 2,193,643 2.61 US Cents Total Assets (US$’000) 2,318,974 Borrowings (US$’000) 979,8191 Ex-Distribution Date Total Liabilities (US$’000) 1,066,938 12 Augu
Slide 10: Proactive capital management
Proactive capital management Every 1% increase in interest rate will impact DPU by 0.079 US Cents Debt maturity profile post refi (US$ m) As at 30 Jun 2022 Weighted avg. Interest Refinanced in Jul 2022 interest rate coverage1 2.97% 3.5 times Fixed rate loans Gearing2 85.7% 42.4% Post re- 30 Jun fina
Slide 11: Capitol, Sacramento
Capitol, Sacramento Highly Confidential
Slide 12: Long WALE of 5.0 years, expect positive rental reversion
Long WALE of 5.0 years, expect positive rental reversion Leased ~192,000 sq ft in 1H 2022 with +1.0% rental reversion Lease expiry profile as at 30 Jun 2022 (%) Breakdown of leases by NLA (%) 4.6 52.6 52.7 28.7 Leases signed are from: Legal, Finance & Insurance, Real Estate Renewal New 66.7 Expansio
Slide 13: Well-diversified tenant base
Well-diversified tenant base Trade sector by gross rental income (GRI) (%) Finance and Insurance 21.6 Legal 19.0 Information 9.7 Retail Trade 9.6 Real Estate 7.3 Public Administration 4.9 Consulting 4.3 Health Care 4.0 Figueroa, Los Angeles Grant Giving 3.2 Administrative and Support Services 2.8 Ac
Slide 14: Top 10 tenants – HQ, listed or government
Top 10 tenants – HQ, listed or government Top 10 tenants by gross rental income (GRI) Figueroa update Property, Lease NLA Tenant Sector % of GRI Location Expiry (sq ft) TCW William Carter Retail Trade Phipps, Atlanta Apr 2030 277,920 5.5 • Been in Fig since 1991, moving to avoid major renovation TCW
Slide 15: Capitol, Sacramento
Capitol, Sacramento Highly Confidential
Slide 16: Uncertainty in MUST’s submarkets…
Uncertainty in MUST’s submarkets… U.S. cities gravitate around similar positions on the clock due to similar macroeconomic conditions For more details of MUST’s cities, Peaking Falling please click here phase phase to read Independent Market Report Rising Bottoming (IMR) 1H 2022* phase phase Portlan
Slide 17: Mixed leasing signals in MUST’s submarkets
Mixed leasing signals in MUST’s submarkets Longer leases signed despite declining volume Rising base rents tempered by rising concessions 6.0 73.0 71.0 Leasing volume (m.s.f.) 5.0 Lease terms (years) 69.0 $30 4.0 67.0 65.0 3.0 63.0 2.0 61.0 59.0 1.0 57.0 0.0 55.0 $20 2019 2020 2021 2022 2019 2020 20
Slide 18: Hybrid work is here to stay
Hybrid work is here to stay Fewer people, smaller spaces U.S. 10 city average occupancy 50.0% 1) Where are the workers? 44.1% 44.7% 45.0% 43.8% • Physical occupancy in U.S. ~44.7%, led by sun 39.6% 40.0% belt cities1 35.0% • Pre-COVID-19, ~10% WFH. New normal, ~20% 30.0% WFH, ~40% WFO, ~40% Hybrid m
Slide 19: Hotelisation of office could be the new normal
Hotelisation of office could be the new normal Flexible Flexible Winning Yesterday Tomorrow work space formula Static lease, Flexible lease, ‘cube farm’ versatile space • Offices with premium amenities in great locations will attract tenants • Tenants prefer flexibility, option to expand/contract as
Slide 20: What does this mean for MUST?
What does this mean for MUST? Turning portfolio attributes (e.g. Trophy/Class A) and available space into opportunities Partnering with best-in-class flex operators • On-going interest from various providers, e.g. Flex by JLL • Provide flexible office solutions Shortlist Trophy/Class A assets to emb
Slide 21: Michelson, Irvine
Michelson, Irvine Highly Confidential
Slide 22: Building resilience
Building resilience E Aligned with Sponsor’s commitment to Net Zero by 2050 On track to achieving a 100% sustainable portfolio by 2030 By 2035: ↓ 38% GHG intensity; ↓ 33% energy intensity By 2050: ↓ 80% GHG intensity; ↓ 49% energy intensity ~70% of MUST’s portfolio is green FY 2021 Reduction Michels
Slide 23: Building capacity as ESG stewards
Building capacity as ESG stewards S Entrench position as thought leaders Target the digital generation • LinkedIn followers +70% YTD to reach ~1,5001 Since MUST Go Green conference in 4Q 2021: • Spoke at ~10 ESG conferences, • Collaborating with universities to share on U.S. REITs • Engaged ~1,600 l
Slide 24: Strengthening disclosures to improve governance
Strengthening disclosures to improve governance G • 5 Star rating in GRESB Real Estate Assessment since 2018 • Upgraded to ‘AA’ from ‘A’ in 2021 • Top 26% of MSCI All Country World • Overall score of 93 is +8% and Index constituents Governance score +6% above peer benchmark • Outperformed global pee
Slide 25: Phipps, Atlanta
Phipps, Atlanta Highly Confidential
Slide 26: Economic volatility and uncertainty
Economic volatility and uncertainty Impact to Office • Slowdown in demand, leasing activity U.S. Outlook • Tenant space needs still unclear, • Inflation continues to fuel most still downsizing recession fears Real Estate Markets • Employment plateauing, • Debt costs rising, lenders more possible cut
Slide 27: Ready for the road ahead
Ready for the road ahead Ride out cyclical downturn with Embrace secular shift with defensive strategy offensive strategy Capital recycling/allocation Tactical • Strengthen balance sheet • Partner flex operators • Contain gearing • Hotelisation of offices • Disposition • Provide greater variety of w
Slide 28: Thank You!
Our ESG pillars Building Resilience Reducing the environmental impact of our properties and supporting the transition to a net zero economy People First Ensuring the needs of our stakeholders are well-served is key to sustaining our business. This includes creating a safe Thank You! and healthy envi
Slide 29: Exchange, Jersey City
Exchange, Jersey City Highly Confidential
Slide 30: U.S. economic outlook turns cautious
U.S. economic outlook turns cautious -0.9%1 • GDP declined by an annualised rate of -0.9% in 2Q 2022, the second straight quarter of decline • Jobs gained led by professional & business services, leisure & hospitality and healthcare sectors 2Q 2022 GDP growth U.S. GDP growth (%)1 1.1m2 -0.3 2.5 1.6
Slide 31: U.S. office real estate activities remain stable
U.S. office real estate activities remain stable • Direct average market asking rents remain stable and showed modest gains of 0.8% QoQ1 19.3%1 • Class A net effective rents have improved, but still down 6% relative to pre-COVID-19 levels1 2Q 2022 vacancy U.S. office employment YoY (%)2 +0.8%1 4.2%
Slide 32: Portfolio overview
Portfolio overview Park Figueroa Michelson Peachtree Plaza Exchange Penn Phipps Centerpointe Capitol Diablo Tanasbourne Place Washington, Location Los Angeles Irvine Atlanta Secaucus Jersey City Atlanta Virginia Sacramento Tempe Chandler Hillsboro D.C. Property Type Class A Trophy Class A Class A Cl
Slide 33: MUST’s occupancy versus average market occupancy
MUST’s occupancy versus average market occupancy Occupancy as at 30 Jun 2022 (%) 100.0 100.0 96.7 94.5 92.1 92.5 91.2 90.9 89.2 89.1 87.4 85.4 84.8 85.7 82.2 83.5 80.9 81.8 82.5 80.7 79.4 77.7 76.0 76.0 Average Market Occupancy MUST's Occupancy Source: Average Market Occupancy Data as at 1 Jul 2022
Slide 34: Limited supply in MUST’s markets; muted rent growth forecast
Limited supply in MUST’s markets; muted rent growth forecast New Gross Asking Net Net Last 12 Projected 12 Properties RBA Vacancy Delivery Class A Market Rent Per Sq Ft Absorption Delivery Months Rent Months Rent Under (m sq ft) (%) Year (US$) (‘000 sq ft) (‘000 sq ft) Growth1 (%) Growth1 (%) Constr
Slide 35: MUST’s tax advantage
MUST’s tax advantage For illustrative purposes only US REIT SREIT1 MUST DPU Yield 8.0%2 9.0% 9.0%3 • No U.S. corporate taxes (21%) • No U.S. withholding taxes (30%) U.S. Withholding Taxes (1.0%) - - • No Singapore corporate taxes on domestic institutions Net Yield – 7.0% 9.0% 9.0% (17%) or Singapore
Slide 36: MUST’s submarket outlook
MUST’s submarket outlook Northern New Jersey: Office market Portland: Sunset Corridor’s critical stabilising, but face talent migration employers in high-growth sectors to lower-cost areas and competition and proximity to infrastructure with New York City buffer against slow leasing Washington, D.C.
Slide 37: Manulife US REIT supported by reputable sponsor
Manulife US REIT supported by reputable sponsor Global real estate AUM of US$20.4 b Kitchener/Waterloo Vancouver Toronto Canada Portland Calgary Ottawa US$8.5 b AUM US$1.1 t Edmonton Montreal AUM Shanghai, China Kunshan, China Halifax 59% of Real Estate in Office U.S. Ground rent , Others, 1% Asia W
Slide 38: 2022 ESG targets and beyond
2022 ESG targets and beyond Align to Manulife’s net zero target by 2050 Building resilience People first Driving sustainable growth Achieve 100% green-certified Zero accident/injury work Zero incidents of portfolio by 2030 environment non-compliance and corruption Achieve 38% reduction in Maintain ‘
Slide 39: 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