Manulife US REIT · SGX:BTOU
Manulife US REIT — FY2017 Earnings Presentation
43 slides from Manulife US REIT's earnings presentation, Feb 6, 2018
Slide 1: FY 2017 Financial Results
FY 2017 Financial Results (1 Jan 2017 to 31 Dec 2017) 6 February 2018
Slide 2: Important Notice
Important Notice This presentation shall be read in conjunction with Manulife US REIT’s financial results announcement dated 6 February 2018 published on SGX Net. This presentation is for information purposes only and does not constitute or form part of an offer, invitation or solicitation of any of
Slide 3: Contents
Contents 1 Key Highlights and Strategy 2 Financial Highlights 3 Portfolio Performance 4 Appendix 5 Market Outlook 3
Slide 4: Key Highlights and Strategy
Peachtree, Atlanta, Georgia Key Highlights and Strategy
Slide 5: Creating Value for Unitholders in FY 2017
Creating Value for Unitholders in FY 2017 Mission: Value Creation Provide Unitholders with sustainable distributions while Assets under Management maintaining an appropriate capital structure AUM AUM increased by 57.4% • FY 2016: US$833.8 million • FY 2017: US$1.3 billion Performance Market Cap2 Dis
Slide 6: FY 2017 Financial Highlights
FY 20171 Financial Highlights Net Property Distributable Distribution Portfolio Income Income per Unit Valuation US$58.4 million US$46.7 million 5.77 US cents US$1.3 billion DPU adjusted for Rights increased by 57.4% outperformed projection2 by 20.0% outperformed projection2 by 24.9% Issue: 5.53 US
Slide 7: Steady Economic Growth
Overall U.S. Outlook Steady Economic Growth +2.6% 2.3% 4.1% 2.1M 148k 4Q 20171 GDP 2017 GDP Growth1 Unemployment Jobs created Non-farm jobs added growth continues to 20172 in December2 decline2 • U.S. remains safe haven for foreign investments; Singapore surpassed China/HK as largest Asian investor
Slide 8: Investment Strategy
Investment Strategy Vast Choice of Yield-Accretive Assets in the World’s Largest Real Estate Market Investment Criteria Long WALE High Occupancy Live, Work, Play Environment Strong Economic Fundamentals Notes: Trophy/ States MUST is in are highlighted in green Class A Assets Class A cap rates highli
Slide 9: Key Strategy
Key Strategy 1. Inorganic Growth Acquire yield-accretive assets – 3rd party/ Sponsor Double AUM to US$2.6 billion within 2 years 2. Organic Growth 3. Capital Management Increase distributions through Optimise capital structure and increase proactive leasing while maintaining financial flexibility op
Slide 10: Financial Highlights
Figueroa, Los Angeles, California Financial Highlights
Slide 11: 4Q 2017 DPU Exceeded Projection by 7.6%
4Q 2017 DPU Exceeded Projection1 by 7.6% 4Q 2017 4Q 2017 4Q 2017 FY 2017 FY 2017 FY 2017 Actual Projection1 Change Actual Projection1 Change (US$’000) (US$’000) (%) (US$’000) (US$’000) (%) Gross Revenue2 29,264 19,555 49.6 92,040 79,342 16.0 • Rental and Other Income 23,415 14,183 65.1 70,354 57,369
Slide 12: Distribution Schedule
Distribution Schedule 2H 2017 Distribution of 2.57 US cents per Unit to be Paid on 29 March 2018 Distribution per Unit 2.57 US cents For period 29 June 2017 to 31 December 2017 Full Year Distribution per Unit 5.77 US cents Ex-Distribution Date 12 February 2018 Books Closure Date 14 February 2018 Dis
Slide 13: Property Portfolio Grew by 57.4% since 31 Dec 2016
Property Portfolio Grew by 57.4% since 31 Dec 2016 Portfolio Growth Driven by Acquisitions and Valuation Gains Change in Portfolio Value as at 31 Dec 2017 Property 31 Dec 2017 30 Jun 2017 31 Dec 2016 Current Cap Rate1 Valuation Valuation Growth Valuation Growth (%) (US$ million) (US$ million) (%) (U
Slide 14: Robust Balance Sheet
Robust Balance Sheet As at 31 Dec 2017 Exchange, Jersey City, New Jersey (US$’000) Investment Properties 1,312,8001 Total Assets 1,369,202 Borrowings 458,3692 Total Liabilities 517,096 Net Asset Attributable to Unitholders 852,106 NAV per Unit (US$) 0.82 NAV per Unit, excluding distributable 0.80 in
Slide 15: Proactive Capital Management
Proactive Capital Management 100%1 Fixed Rate Loans with No Near-term Refinancing As at 31 Dec 2017 As at 31 Dec 2016 Gross Borrowings US$461.9 million US$296.0 million Gearing Ratio2 33.7% 33.8% Weighted Average Interest 2.83% p.a. 2.46% p.a. Rate Debt Maturity 3.4 years 3.6 years (weighted average
Slide 16: Well-Balanced Debt Maturity Profile
Well-Balanced Debt Maturity Profile1 US$ million 200 165.1 150 121.0 108.5 Michelson Figueroa 125.1 100 Exchange 67.3 Peachtree 50 40.0 Plaza 0 2019 2020 2021 2022 23.5% 14.6% 26.2% 35.7% (1) No refinancing required until 2019. Excludes undrawn good news facilities of US$85.0 million and US$10.0 mil
Slide 17: Portfolio Performance
Michelson, Irvine, California Portfolio Performance
Slide 18: Portfolio Overview
Portfolio Overview Figueroa, Los Angeles, California Portfolio Summary as at 31 Dec 2017 Total NLA 2,983,576 sq ft WALE by (NLA) 5.7 years Occupancy 95.9%1 Land Tenure 100% freehold Plaza, Secaucus, New Jersey No. of Tenants 100 Exchange Figueroa 25% 25% US$1,312.8 m2 Portfolio Plaza Valuation 9% Mi
Slide 19: First Class Portfolio of Trophy/ Class A Assets
First Class Portfolio of Trophy/ Class A Assets Figueroa Click to watch property video! NLA 701,978 sq ft Property Value US$326.0 m1 Exchange Occupancy Rate 92.9%2 NLA 730,823 sq ft WALE (by NLA) 4.9 Years Property Value US$332.6 m1 Occupancy Rate 95.7%2 Michelson WALE (by NLA) 5.5 Years NLA 532,663
Slide 20: Best in Class Portfolio across U.S.
Peachtree, Atlanta, Georgia Best in Class Portfolio across U.S. Figueroa, Los Angeles • Surrounded by entertainment venues e.g., Staples Center, the LA Convention Center and LA Live • Booming residential creates appealing live, work, play environment Michelson, Irvine • Attractive corporate location
Slide 21: Quality, Diversified Tenant Base Across Multiple Sectors
Quality, Diversified Tenant Base Across Multiple Sectors Cash Rental Income1 Breakdown by No Tenant Contributing more than Trade Sector 6.7% of Income1 Top 10 Tenants by Cash Rental Income (CRI) Architectural and Related Services 1.6% Leased Transportation and % of Warehousing 2.3% Others 3.7% Tenan
Slide 22: Favourable Lease Profile with WALE of 5.7 Years
Favourable Lease Profile with WALE of 5.7 Years Minimal 2018 Lease Expiries this Year Lease Expiry Profile as at 31 Dec 2017 (%)1 53.9 51.0 18.0 17.8 12.2 9.4 9.5 9.2 6.8 7.1 2.6 2.6 2018 2019 2020 2021 2022 2023 and beyond Cash Rental Income Net Lettable Area (1) Amounts may not sum to 100%, due to
Slide 23: High Occupancy and Tenant Retention Rate
High Occupancy and Tenant Retention Rate High Occupancy of 95.9%1 Exceeds Michelson, Irvine, California U.S. Market Average of 87.2%2 Portfolio 95.9%1 Occupancy Rate Rental Reversion 12.2%3 Peachtree, Atlanta, Georgia Tenant 47.2%4 Retention Rate Annual/Periodic Rental Escalations 98.1% Avg 2.7% p.a
Slide 24: Increase in Passing Rents
Increase in Passing Rents Average Property Gross Rent (US$ psft per year) Change since As at 31 Dec 2017 As at 30 Sep 2017 As at 31 Dec 2016 Property 31 Dec 2016 (US$) (US$) (US$) (%) Figueroa 39.49 39.39 36.78 7.4 Michelson 49.27 48.90 49.27 - Peachtree 31.83 31.70 31.01 2.6 Plaza 30.09 29.191 NA N
Slide 25: Asset Enhancement Initiatives - Figueroa
Asset Enhancement Initiatives - Figueroa US$5 million Lobby Renovations to Start in 2Q 2018 Before After Artist’s Impression Artist’s Impression 25
Slide 26: Strategically Located in Key U.S. Cities
Strategically Located in Key U.S. Cities Portfolio Markets Progressing Steadily Rental Cycle, CBD U.S. Markets1 Rental Cycle, Suburban U.S. Markets1 (1) Source: JLL as at 4Q 2017 26
Slide 27: Office Market Overview
Office Market Overview Limited New Supply and Strong Rental Growth in 2017 New Gross 12 Month Net Properties RBA1 Vacancy1 Asking Rent Property Delivery Market Absorption2 Under (mil sq ft) (%) Rent1 Growth2 Name Year (‘000 sq ft) Construction (US$) (%) (‘000 sq ft) Downtown Los 40.0 14.5 41.51 290
Slide 28: Appendix
Exchange, Jersey City, New Jersey Appendix 28
Slide 29: Portfolio Details
Portfolio Details Figueroa Michelson Peachtree Plaza Exchange Location Los Angeles Irvine Atlanta Secaucus Jersey City Property Type Class A Trophy Class A Class A Class A Completion Date 1991 2007 1991 1985 1988 Last Refurbishment 2015 - 2015 2016 - Property Value1 326.0 342.0 194.2 118.0 332.6 Occ
Slide 30: Old: Tax Structure
Old: Tax Structure Sponsor Manulife Unitholders No 30%1 withholding tax on interest and principal on shareholder’s loan - US Portfolio Interest 0% Tax Exemption Rule Zero tax in Singapore - Foreign sourced income not subject to tax 100% Distribution from US to Singapore through 100% Shareholder comb
Slide 31: Revised: Tax Structure
Revised: Tax Structure Sponsor Unitholders Manulife (9.8% limit) 0% Tax Change 1: Exempted from cap on interest deduction by redeeming preferred shares. 100% 100% Shareholder Loan Equity SPV SPVs1 Singapore Barbados 100% Wholly-owned Change 2: 100% Barbados entity in place to continue to Barbados En
Slide 32: Sustainability
Sustainability Energy Star Certifications for all properties LEED Gold Certification for Michelson Awarded Rank of Green Star in GRESB Assessment 2017 Ranked 11th among 43 REITs and Business Trusts in the Governance Index for Trusts 2017 32
Slide 33: Local Community
Peachtree, Atlanta, Georgia Engaging Communities Media & Analysts Investors Retail Investor Day 2017 U.S. Site Visit Local Community Tenants Volunteers at St. Luke’s Hospital Tenant Appreciation: “In-N-Out Burger” 33
Slide 34: Market Outlook
Plaza, Secaucus, New Jersey Market Outlook
Slide 35: Greater Downtown Los Angeles – Market Overview
Greater Downtown Los Angeles – Market Overview Limited New Supply Supports Rising Rental Rates Class A Statistics as at 4Q 2017 Gross Net Net Under Availability rate RBA1 Vacancy Asking Availability Absorption Delivery Construction down by 70 bps (mil sq ft) Rent (US$) (‘000 sq ft) (‘000 sq ft) (‘00
Slide 36: Irvine, Orange County – Market Overview
Irvine, Orange County – Market Overview Rent Growth Continues in Irvine Class A Statistics as at 4Q 2017 Gross Net Under RBA1 Net Gross Asking Rent Vacancy Asking Availability Absorption Construction (mil sq ft) Delivery up 3% since last Rent (US$) (‘000 sq ft) (‘000 sq ft) quarter 14.3 17.4 US$35.4
Slide 37: Midtown Atlanta – Market Overview
Midtown Atlanta – Market Overview Strong Demand is Reducing Vacancy and Increasing Rental Rates Class A Statistics as at 4Q 2017 Gross Net Under Positive net RBA1 Net Vacancy Asking Availability Absorption Construction absorption and (mil sq ft) Delivery Rent (US$) (‘000 sq ft) (‘000 sq ft) availabi
Slide 38: Meadowlands, New Jersey – Market Overview
Meadowlands1, New Jersey – Market Overview Top Tier Buildings Outperform Overall Market Class A Statistics as at 4Q 2017 Gross Net Under Vacancy and RBA2 Net Vacancy Asking Availability Absorption Construction availability include old (mil sq ft) Delivery Rent (US$) (‘000 sq ft) (‘000 sq ft) and unc
Slide 39: Hudson Waterfront, New Jersey – Market Overview
Hudson Waterfront1, New Jersey – Market Overview Limited New Supply will Continue to Support Rent Growth Class A Statistics as at 4Q 2017 Gross Net Under Highest rental rate in RBA2 Net Vacancy Asking Availability Absorption Construction Northern New Jersey (mil sq ft) Delivery Rent (US$) (‘000 sq f
Slide 40: Benefitting from the Growth of the World's Largest Economy
Benefitting from the Growth of the World’s Largest Economy Exposure to Growth of U.S. Economy U.S. GDP Growth (y-o-y %)1 U.S. Unemployment (%)2 2.5 2.9 9.6 2.7 2.6 9.3 2.2 2.3 8.9 1.8 1.6 1.7 1.5 8.1 -0.3 7.4 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 6.2 5.8 5.0 5.3 4.5 4.9 4.6 4.6
Slide 41: Favourable U.S. Real Estate Outlook
Favourable U.S. Real Estate Outlook Demand for Office Space Driven by Technology and Other Creative Sectors U.S. Office Net Absorption (m sq ft) U.S. Office Employment (y-o-y %)1 and Occupancy Rate (%)2 89.6 89.7 89.8 89.8 89.5 3.0 3.0 89.1 89.3 89.4 2.3 2.4 2.4 2.3 2.0 1.6 0.5 22.4 22.7 20.7 18.8 1
Slide 42: 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
Slide 43: Thank You
Thank You 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 51 Bras Basah Road, #11-00 Manulife Centre, Singapore 189554 http://www.manulifeusreit.sg