Manulife US REIT · SGX:BTOU
Manulife US REIT — Q2 2017 Earnings Presentation
53 slides from Manulife US REIT's earnings presentation, Aug 8, 2017
Slide 1: 2Q 2017 Financial Results
2Q 2017 Financial Results (1 Apr 2017 to 30 Jun 2017) 8 August 2017
Slide 2: Important Notice
Important Notice This presentation shall be read in conjunction with Manulife US REIT’s financial results announcement dated 8 August 2017 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 offe
Slide 3: Contents
Contents 1 Key Highlights 2 Financial Highlights 3 Portfolio Performance 4 Acquisition of Plaza 5 Moving Forward 6 Appendix 3
Slide 4: Key Highlights
Peachtree, Atlanta, Georgia Key Highlights
Slide 5: Key Highlights of 1H 2017
Key Highlights of 1H 20171 Yield Accretive Net Property Income Distribution per Unit Acquisition of Plaza for the purchase price of outperformed projection2 by 3.2% outperformed projection2 by 8.0% US$115.0 million US$25.6 million 3.23 US cents Occupancy WALE Gearing Net Asset Valuation Rate Value 9
Slide 6: Financial Highlights
Plaza, Secaucus, New Jersey Financial Highlights
Slide 7: 1H 2017 DPU Exceeded Projection by 8.0%
1H 2017 DPU Exceeded Projection1 by 8.0% 2Q 2017 2Q 2017 2Q 2017 1H 2017 1H 2017 1H 2017 Actual Projection1 Change Actual Projection1 Change (US$’000) (US$’000) (%) (US$’000) (US$’000) (%) Gross Revenue2 19,906 19,970 (0.3) 39,739 40,060 (0.8) • Rental and Other Income 14,721 14,459 1.8 29,384 28,97
Slide 8: Distribution Schedule
Distribution Schedule Advanced Distribution of 3.20 US Cents per Unit Post Plaza Acquisition Total Distribution per Unit 3.23 US cents For 1H 2017 Advanced Distribution per Unit1 3.20 US cents - Ex-Distribution Date: 23 June 2017 For period 1 January 2017 to 28 June 2017 - Books Closure Date: 28 Jun
Slide 9: Portfolio Valuation Increased by 2.8% since Dec 2016
Portfolio Valuation Increased by 2.8% since 31 Dec 2016 Valuation Increases Underpinned by Positive Property Fundamentals Change in Portfolio Value as at 30 Jun 2017 Acquisition Valuation Valuation Price Change since Change since Current as at as at Property as at 20 May 2016 31 Dec 2016 Cap Rate1 3
Slide 10: Robust Balance Sheet
Robust Balance Sheet As at 31 Dec 2016 As at 30 Jun 2017 (US$’000) (US$’000) Investment Properties 833,800 857,500 Total Assets 875,223 974,6701 Borrowings 294,1862 294,4073 Total Liabilities 328,218 358,7124 Net Asset Attributable to 547,005 615,958 Unitholders NAV per Unit (US$ per unit) 0.87 0.84
Slide 11: Proactive Capital Management
Proactive Capital Management 100% Fixed Rate Loans with No Near-term Refinancing Gearing Ratio Reduced Increasing Debt Head Room As at 1Q 2017 As at 2Q 2017 Gross Borrowings US$296.0 million US$296.0 million Gearing Ratio1 34.2% 30.4%2 Adjusted Gearing Ratio of 33.1% Weighted Average Interest 2.46%
Slide 12: Resilient Portfolio with Visible Growth
Resilient Portfolio with Visible Growth Debt Maturity Profile1 99.2%2 of Leases have Rental Escalations 0.8% US$ m 13.2% 150 121.0 Michelson 108.0 Figueroa 100 67.0 Peachtree 40.03 50 Plaza 86.0% Annual rental escalations which average around 3% 0 Mid-term or periodic rental increases Jul 2019 Jul 2
Slide 13: Portfolio Performance
Plaza, Secaucus, New Jersey Portfolio Performance
Slide 14: Existing Portfolio
Existing Portfolio Portfolio Summary as at 30 Jun 2017 Total NLA 1,786,774 sq ft WALE by (NLA) 5.3 years Occupancy 95.9 % Land Tenure 100% freehold No. of Tenants 71 Peachtree Peachtree 24.4% Figueroa 22.2% 33.0% Figueroa 37.9% US$857.5m2 US$48.6m1 Portfolio PY2017 NPI Valuation Michelson Michelson
Slide 15: Increase in Passing Rents
Increase in Passing Rents Positive 12.4% Rental Reversion across Portfolio1 Average Property Gross Rent (US$ psf per year) As at 31 Mar 2017 As at 30 Jun 2017 Change Property (US$) (US$) (%) Figueroa 38.63 39.16 1.4 Michelson 50.20 50.41 0.4 Peachtree 31.53 31.58 0.2 Weighted Average 40.01 40.33 0.8
Slide 16: Figueroa: Located in the Heart of Downtown LA
Figueroa: Located in the Heart of Downtown LA (DTLA) Influx of Millennials has Transformed DTLA into a Live, Work, Play Destination As at 30 Jun 2017 NLA 698,249 sq ft Property Value US$325.0 m Occupancy Rate 95.3% WALE (by NLA) 5.3 Years Lease Expiry Profile as at 30 Jun 2017 (%)1 76.0 75.8 12.1 12
Slide 17: Michelson: State-of-the-Art Trophy Building
Michelson: State-of-the-Art Trophy Building Irvine – Abundant Amenities Available in the Vicinity As at 30 Jun 2017 NLA 532,603 sq ft Property Value US$342.0 m Occupancy Rate 99.1% WALE (by NLA) 4.9 Years Lease Expiry Profile as at 30 Jun 2017 (%) 55.8 50.9 33.3 29.0 11.1 9.7 2.7 2.6 1.3 2.1 0.7 0.8
Slide 18: Peachtree: Prominent Building in International Gateway Market
Peachtree: Prominent Building in International Gateway Market Atlanta – Headquarters for 18 Fortune 500 firms including Coca Cola, Delta Air Lines, Home Depot and UPS As at 30 Jun 2017 NLA 555,922 sq ft Property Value US$190.5 m Occupancy Rate 93.4% WALE (by NLA) 5.8 Years Lease Expiry Profile as at
Slide 19: Office Market Overview
Office Market Overview Limited Supply and Strong Rental Growth for the Three Cities in 2017 Class A Statistics as at 2Q 2017 12 New RBA1 Gross Net Month Properties Vacancy Property Delivery Market (mil sq Asking Absorption Rent Under (%) Name Year ft) Rent (‘000 sq ft) Growth2 Construction (%) (‘000
Slide 20: Strategically Located in Key U.S. Cities
Strategically Located in Key U.S. Cities Portfolio Markets Progressing Steadily Rental Cycle, CBD U.S. Markets 1 Rental Cycle, Suburban U.S. Markets 1 (1) Source: JLL as at 2Q 2017. Retrieved from http://www.us.jll.com/united-states/en-us/research/office 20
Slide 21: Acquisition of Plaza
Peachtree, Plaza, Atlanta, Secaucus, NewGeorgia Jersey Acquisition of Plaza 21
Slide 22: Acquisition of Prime Property in New Jersey
Acquisition of Prime Property in New Jersey Rationale and Key Benefits Expand Geographic Footprint via Best-in-Class 1 Office Building Minutes from New York City Secaucus, New Jersey, Plaza 2 Freehold Property with High Occupancy, Long Los Angeles, Figueroa WALE and High Quality Tenants Irvine, Oran
Slide 23: Plaza: Best-In-Class Asset Located in Secaucus
Plaza: Best-In-Class Asset Located in Secaucus Excellent Regional Connectivity via Public Transportation and Interstate Highways As at 30 Jun 2017 NLA 461,525 sq ft Property Value US$116.0 m Occupancy Rate 98.9% WALE (by NLA) 8.9 Years Lease Expiry Profile as at 30 Jun 2017 (%)1 76.9 77.8 22.9 22.1
Slide 24: Enhances Overall Portfolio's Income Stability and Organic Growth
Enhances Overall Portfolio’s Income Stability and Organic Growth Before: Current Portfolio1 After: Enlarged Portfolio1 WALE by NLA 5.3 years 6.1 years Tenants 71 78 Occupancy 95.9% 96.5% Current Portfolio: Lease Expiry Profile1 (%) Enlarged Portfolio: Lease Expiry Profile1 (%) 68.1 70.2 65.0 66.9 14
Slide 25: Improved Diversification by Tenant Industry
Improved Diversification by Tenant Industry Further Diversification of Tenant Base from Exposure to Two Sectors: (1) Medical & Diagnostics and (2) Retail Trade Current Portfolio: Cash Rental Income by Enlarged Portfolio: Cash Rental Income by Trade Sector1 Trade Sector1,2 Business Services Administr
Slide 26: Top Tenants by Cash Rental Income
Top 10 Tenants by Cash Rental Income (CRI) Current Portfolio1 Enlarged Portfolio1 Leased Area Leased Area Tenant1 Sector % of CRI1 Tenant1 Sector % of CRI1 (sq ft) (sq ft) Kilpatrick Law Firms 227,134 10.6% Kilpatrick Law Firms 227,134 8.8% Financial Financial TCW 188,835 10.1% TCW 188,835 8.4% Inst
Slide 27: Moving Forward
Michelson, Irvine, California Moving Forward
Slide 28: Moving Forward
Moving Forward U.S.A. Still Growing, Business Confidence Remains Strong Demonstrated ability to acquire third party Inorganic property and yield accretive property Growth enhancing Unitholders’ returns Long Term Achieving growth in Gross Revenue Strategy: Proactive Asset and NPI while maintaining op
Slide 29: 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
Slide 30: Appendix
Peachtree, Atlanta, Georgia Appendix Confidential, Not for Further 30
Slide 31: Portfolio Overview
Portfolio Overview Figueroa Michelson Peachtree Plaza Portfolio3 Location Los Angeles Irvine Atlanta Secaucus Property Type Class A Trophy Class A Class A Completion Date 1991 2007 1991 1985 Last Refurbishment 2015 - 2015 2016 Property Value1,2 US$325.0 million US$342.0 million US$190.5 million US$1
Slide 32: Distribution Yield of MUST vs. Other Investments
Distribution Yield of MUST vs. Other Investments 8% 7% 6.8% 6.0% MUST Distribution Yield is 6% 450 bps above 10-year US Government Bond Yield 5% 4% 3.3% 3% 2.3% 2.1% 2% 1% 0.4% 0.1% 0% MUST FTSE REIT STI Index 10-year US 10-year SG 12 Months Savings Distribution Dividend Yield Dividend Yield Governm
Slide 33: Performance of Manulife US REIT
Performance of Manulife US REIT Market Cap Grew by 29.8% since IPO Increase in Market Cap and Free Float Liquidity USD/SGD Exchange Rate Post Plaza Acquisition 1.9 US$673.7m3 (S$914.2)m4 1.8 1.7 US$519.2m2 (S$704.6)m4 1.6 Long-term Average: 1.5151 1.5 Free Float 1.4 Sponsor Stake 1.3 Current: 1.3571
Slide 34: Reputable Sponsor
Reputable Sponsor Proven Property Management Track Record Vertically-Integrated Real Estate Platform: Global Real Estate AUM of US$16.2b Vancouver Sponsor Calgary Kitchener/Waterloo Edmonton Toronto Canada Ottawa US$6.5B Montreal AUM AUM Halifax 74% of Real Estate in Office US$754B U.S. Asia US$8.1B
Slide 35: Tax Efficient Structure of Manulife US REIT
Tax Efficient Structure of Manulife US REIT Sponsor Unitholders No 30%1 withholding tax on interest and principal on Manulife shareholder’s loan - US Portfolio Interest Exemption Rule 0% Tax Zero tax in Singapore - Foreign sourced income not subject to tax Distribution from US to Singapore through 1
Slide 36: U.S. Outlook
Michelson, Irvine, California Michelson, Irvine, California U.S. Outlook
Slide 37: Overall U.S. Outlook
Overall U.S. Outlook 1 Steady Economic Growth • GDP growth rate was 2.6%1 in 2Q 2017 versus 1.4%1 for 1Q 2017and 1.6%1 for calendar year 2016 • The U.S. economy created 222,000 non-farm jobs in Jun, exceeding the 188,000 per month average year to date in 2017 • Unemployment rate in Jun 2017 decrease
Slide 38: Downtown Los Angeles
Downtown Los Angeles Boom in Residential Development Creates Live, Work, Play Environment Population 10.2 million1 Median household income US$56,1962 12,303 residential units under construction with an additional 29,383 units currently proposed3 Current residential inventory is 37,991 units3 Holds o
Slide 39: Greater Downtown Los Angeles – Market Overview
Greater Downtown Los Angeles – Market Overview Limited New Supply Supports Rising Rental Rates Class A Statistics as at 2Q 2017 Gross Net Net Under Vacancy rate down RBA1 Vacancy Asking Availability Absorption Delivery Construction by 70 bps since (mil sq ft) Rent (‘000 sq ft) (‘000 sq ft) (‘000 sq
Slide 40: Figueroa: No New Class A Office Space in Past 23 Years
Figueroa: No New Class A Office Space in Past 23 Years and None Until 2017 Excellent Location and Amenities Located in the South Park submarket Excellent access to the LA freeway system Close proximity to 7th Street Metro Station Free shuttle to surrounding areas of Downtown LA Entertainment venues:
Slide 41: Irvine, Orange County
Irvine, Orange County Attractive Corporate Location with Diversified Economy Population 3.2 million1 Median household income US$76,5092 Irvine is considered the “CBD” of Orange County Strong labour pool with senior executives, middle managers and administrative personnel all living within Orange Cou
Slide 42: Irvine, Orange County – Market Overview
Irvine, Orange County – Market Overview Strong Rent Growth Continues in Irvine Class A Statistics as at 2Q 2017 Gross Net Under RBA1 Net Vacancy Asking Availability Absorption Construction (mil sq ft) Delivery Rent (‘000 sq ft) (‘000 sq ft) Availability rate down 210 bps 13.7 12.7% US$34.20 21.8% (1
Slide 43: Michelson: Best Building in a Highly Amenitised Office Park
Michelson: Best Building in a Highly Amenitised Office Park Excellent Location and Amenities Near the 405 San Diego freeway 4 km away from international airport, John Wayne Airport Surrounded by hotel developments, high-end condominiums and apartments, restaurants and a wide range of retail offering
Slide 44: Atlanta
Atlanta Attractive Corporate Location Leads to Superior Job Growth Population 5.7 million1 Median household income US$57,0002 Ranked #22 city in US by percentage job growth; 175,500 jobs added over the last two years Home to 18 Fortune 500 companies, including: Coca Cola, Delta Airlines, Home Depot,
Slide 45: Midtown Atlanta – Market Overview
Midtown Atlanta – Market Overview Strong Demand is Reducing Vacancy and Increasing Rental Rates Class A Statistics as at 2Q 2017 Gross Net Under RBA1 Net Vacancy Asking Availability Absorption Construction (mil sq ft) Delivery Vacancy rate down Rent (‘000 sq ft) (‘000 sq ft) 160 bps since last 17.8
Slide 46: Peachtree: Located in Atlanta; World's Busiest Airport
Peachtree: Located in Atlanta; World’s Busiest Airport (Hartsfield-Jackson International) Excellent Location and Amenities Easily accessible to business district via two freeways – Interstate 75 and Interstate 85 Close proximity to Midtown and Arts Center Metro Stations 20 minutes from Atlanta Harts
Slide 47: Secaucus, Northern New Jersey
Secaucus, Northern New Jersey Affordable Manhattan Alternative Attracts Major Corporations Population 3.7 million1 Median household income US$72,0102 Excellent regional connectivity through public transportation infrastructure and interstate highways Affordable office location just across the Hudson
Slide 48: Secaucus, Northern New Jersey – Market Overview
Secaucus, Northern New Jersey – Market Overview Top Tier Buildings Outperform Overall Market Class A Statistics as at 2Q 2017 Gross Net Under Vacancy and RBA1 Net Vacancy Asking Availability Absorption Construction availability include old (mil sq ft) Delivery Rent (‘000 sq ft) (‘000 sq ft) and unco
Slide 49: Plaza: Best-In-Class Asset Located in Secaucus
Plaza: Best-In-Class Asset Located in Secaucus Excellent Location and Amenities Located in Secaucus, Northern New Jersey within Hudson County office market and Meadowlands office submarket 3 miles from Manhattan, New York City via Lincoln Tunnel with easy accessibility to the interstate highways Les
Slide 50: Depth of Top U.S. Office Markets
Depth of Top 151 U.S. Office Markets Seattle-Bellevue Chicago New York Boston • Inventory: 97.4m sq ft • Inventory: 247.2m sq ft • Inventory: 451.2m sq ft • Inventory: 166.8m sq ft • Occupancy: 91.5% • Occupancy: 85.0% • Occupancy: 89.4% • Occupancy: 86.7% • Median Household • Median Household • Med
Slide 51: 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 and USD U.S. GDP Growth (y-o-y %)1 U.S. Unemployment (%)2 2.5 2.7 9.6 2.6 9.3 2.4 2.2 2.1 8.9 1.8 1.7 1.6 1.6 8.1 -0.3 7.4 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017F 6.2 5.8 5.3 5.0 4.9 4.
Slide 52: 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 Employment1 (y-o-y %) and Occupancy Rate (%)2 89.4 89.6 89.7 3.0 3.0 89.1 89.1 89.3 88.6 88.7 88.9 2.3 2.4 2.4 2.3 1.6 29.5 0.5 26.2 23.0 22.4
Slide 53: 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