Manulife US REIT · SGX:BTOU
Manulife US REIT — Q3 2019 Earnings Presentation
38 slides from Manulife US REIT's earnings presentation, Nov 4, 2019
Slide 1: 3Q 2019 Financial Results
3Q 2019 Financial Results 1 Jul 2019 to 30 Sep 2019 4 November 20191
Slide 2: Important Notice
Important Notice This presentation shall be read in conjunction with Manulife US REIT’s financial results announcement dated 4 November 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 off
Slide 3: Contents
Contents 01 Key Highlights 02 Financial Highlights 03 Portfolio Performance 04 Looking Forward 05 Appendix: U.S. Outlook 06 Appendix: Latest Acquisition – Capitol 07 Appendix: About MUST 3
Slide 4: Key Highlights
Key Highlights NPI YTD Sep 2019 increased Completed the acquisition of 23.5% YoY to US$80.5 m Capitol for US$198.8 m on 29 Oct 2019 DPU YTD Sep 2019 increased Refinanced Figueroa 3.25% and 11.9% YoY to 4.52 US Cents financed Capitol 3.04% at Trust-level for over 5 years AUM increased 20.4% YoY Long
Slide 5: Financial Highlights
Gross Borrowings Capitol, Sacramento US$729.1 m Gearing Ratio 36.3%1 Weighted Ave. Interest Rate 3.43% Weighted Ave. Debt Maturity 2.8 years 02 Financial Highlights Interest Coverage Data as at 30 Sep 2019 3.8 times2 (1) Based on gross borrowings as percentage of total assets (2) Based on net income
Slide 6: YTD Sep 2019 DPU Increased by 11.9%
YTD Sep 2019 DPU Increased by 11.9% 3Q 2019 3Q 2018 Change YTD Sep 2019 YTD Sep 2018 Change (US$’000) (US$’000) (%) (US$’000) (US$’000) (%) Gross Revenue 45,732 40,379 13.3 129,071 104,053 24.0 Net Property Income 28,123 25,147 11.8 80,465 65,174 23.5 Distributable Income 20,753 19,257 7.8 60,720 51
Slide 7: Delivering Robust Income through Fortified Portfolio
Delivering Robust Income through Fortified Portfolio Diversified and Stable Net Property Income NPI1 (US$ m) Portfolio (excluding Penn, 80.5 Change YoY Phipps and Centerpointe) 65.2 NPI (US$0.3 m) NPI (on cash basis2) US$0.5 m 14.7 15.2 15.8 15.6 12.0 12.0 9.5 9.5 9.9 6.7 6.7 7.7 2.8 3.4 4.2 Portfol
Slide 8: Growing and Diversifying Responsibly to AUM US$2.1 b
Growing and Diversifying Responsibly to AUM US$2.1 b Solid Portfolio with High Occupancy Sustainable Income through Fortified Portfolio Occupancy (%) AUM by Property (%)1 NPI YTD Sep 2019 by Property (%)1 97.0 96.7 97.3 95.9 9.6 9.4 12.9 15.9 5.9 8.8 U.S. Class A average: 88% 10.5 15.7 AUM 10.6 NPI
Slide 9: Strong Balance Sheet
Strong Balance Sheet As at 30 Sep 2019 Distribution Per Unit (DPU) (US cents) 3Q 2019 Investment Properties (US$’000) 1,879,346 Advanced DPU (1 Jul to 29 Sep 2019) 1.47 Total Assets (US$’000) 2,010,008 DPU (30 Sep 2019) 0.01 Borrowings (US$’000) 724,5741 Total DPU 1.48 Total Liabilities (US$’000) 83
Slide 10: Proactive Capital Management
Proactive Capital Management 31.4%1 of Portfolio Unencumbered while Credit Metrics Improved Property-level Mortgages (US$ m) Trust-level Loans without Mortgages (US$ m) Credit Metrics 30 Sep 2019 Post Capitol Weighted Average 1 3.43% 3.39% Interest Rate Weighted Average 2.8 years 3.1 years 223.7 Deb
Slide 11: Portfolio Performance
Michelson, Irvine AUM US$2.1 b1 Occupancy 97.3% WALE 6.0 years Leases Executed ~400k sq ft Portfolio Performance 03 Rental Escalation 1.9% p.a. Data as at 30 Sep 2019 (1) Includes the acquisition of Capitol on 29 Oct 2019 (U.S. Time) 11
Slide 12: Strong Leasing Momentum with High-Quality Tenants
Strong Leasing Momentum with High-Quality Tenants Executed ~400,000 sq ft of leases YTD with Positive Rental Reversions and Long WALE of 8.5 years Lease Expiry Profile as at 30 Sep 2019 (%) Portfolio Rental Escalations as at 30 Sep 2019 • Portfolio rental escalations of 1.9% p.a. 62.3 • 95% of lease
Slide 13: High-Quality, Diversified Tenant Base Solidifies Portfolio
High-Quality, Diversified Tenant Base Solidifies Portfolio Trade Sector by Gross Rental Income (GRI) Top 10 Tenants by Gross Rental Income (GRI) NLA Public Tenant Sector % of GRI Administration Real Estate (sq ft) 5.7% 4.3% The William Carter Co. Retail Trade 304,013 6.6% Health Care, 3.0% Grant Giv
Slide 14: U.S. Co-Working Space Snapshot
U.S. Co-Working Space Snapshot Including Capitol, Co-working (Real Estate Sector) makes up 1.9% of our Portfolio by GRI in 3 Properties Co-working makes up ~1.8% (71.0 million sq ft) of office space in U.S. Dominated by: 1 • High-wage markets • Top 10 Co-working operators account for 64% of the 71.0
Slide 15: Strong Growth Markets with Limited Supply
Strong Growth Markets with Limited Supply In-Place Rent (US$) Average Market Rent MUST's Rent Rent Growth Potential 60.0 • Majority of properties below market rents • Irvine: Not comparable as data includes Class A while Michelson is a Trophy 40.0 building 43.62 36.57 39.27 40.72 34.42 41.36 57.67 3
Slide 16: Looking Forward
Plaza, Secaucus Looking Forward 04 16
Slide 17: Premier Trophy/Class A Assets in Capital Cities and Top MSAs
Premier Trophy/Class A Assets in Capital Cities and Top MSAs Median 2 Ranked by 3 Ranked A Thought Leadership Initiative: MSA Household Population GDP 1 Population by GDP This article series is an initiative between Income U.S. 57,652 327,167,434 - 20,494,100 - Manulife US REIT and financial blogger
Slide 18: Growing Thoughtfully – Doing the Right Thing
Growing Thoughtfully – Doing the Right Thing Fortify Portfolio with Premier Assets and High Quality Tenant Base 1 • AUM increased 20.4% YoY to US$2.1 b with total of 9 Trophy/Class A assets • Majority of top 10 tenants are listed/HQ locations • Long WALE and high occupancy to ride through cycles Dis
Slide 19: 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 Management Pte. Ltd. (Company registration no. 201503253R) 8 Cross Street, #16-03 Manulife Tower, Singapore 048424 http://www.manulifeusreit.
Slide 20: Appendix: U.S. Outlook
Exchange, Jersey City Appendix: U.S. Outlook 05 20
Slide 21: Benefitting from Growth of World's Largest Economy
Benefitting from Growth of World’s Largest Economy U.S. GDP Growth (YoY %)3 1.9% 3.5% 2.5 1.6 2.2 2.4 2.6 2.9 3Q 2019 Low unemployment2 2.3 1.9 1.7 1.6 GDP Growth1 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Q3 -0.3 -2.8 U.S. Unemployment (%)4 470k 136k 9.9 9.3 8.5 Jobs created Non-f
Slide 22: Favourable U.S. Office Real Estate Outlook
Favourable U.S. Office Real Estate Outlook U.S. Office Employment (YoY %)2 14.2%1 +3.6%1 2.6 2.8 2.8 2.4 2.6 2.1 2.0 2.1 2.1 3Q 2019 Annual 1.0 vacancy steady increase in rents 2009Q3 2010Q3 2011Q3 2012Q3 2013Q3 2014Q3 2015Q3 2016Q3 2017Q3 2018Q3 2019Q3 -6.6 +16.2M1 12.0M1 40.0 U.S. Office Net Absor
Slide 23: Located in High GDP Growth and Low Unemployment Markets
Located in High GDP Growth and Low Unemployment Markets Sacramento MSA New York MSA Sacramento Jersey City/Secaucus 2017 GDP Growth1: 2.4% 2017 GDP Growth1: 1.3% Population2: 2.3 million Population2: 20.0 million Unemployment Rate3: 3.7% Unemployment Rate3: 3.9% Washington D.C. MSA Los Angeles MSA W
Slide 24: Located in Cities with Strong Growth Factors and Live, Work, Play Environment
Located in Cities with Strong Growth Factors and Live, Work, Play Environment Downtown Los Angeles Jersey City • Surrounded by entertainment venues such as Staples Center, • Located across Hudson River from Manhattan the LA Convention Center and LA Live • Affordable office and residential alternativ
Slide 25: 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 3Q 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 26: Appendix: Latest Acquisition - Capitol
PROXIMITY TO THE CALIFORNIA STATE NEARBY EAST SAC AND “THE KAY” CAPITOL LAND PARK NEIGHBORHOODS 400 Capitol GOLDEN 1 CENTER DOWNTOWN COMMONS CLOSE BY THE R STREET CORRIDOR OLD SACRAMENTO PROMINENT LOCATION ON CAPITOL MALL 06 Appendix: Latest Acquisition - Capitol
Slide 27: Overview of 400 Capitol, Sacramento, California
Overview of 400 Capitol, Sacramento, California Top Class Tallest in Sacramento, instantly recognisable Description 29-storey top Class A office building, located in Sacramento’s CBD office tower with best-in- A class features Location 400 Capitol Mall, Sacramento, California Asset Land Tenure Freeh
Slide 28: Investment Rejuvenating Sacramento, Capital of California
>US$2.0 b Investment Rejuvenating Sacramento, Capital of World’s 5th Largest Economy1, California Healthcare Hub, Residential, Hospitality and Retail Projects Driving Economy and Office Market Sports and entertainment venue 1.5 m sq ft of office, residential, retail and hotel 1 US$47 m committed
Slide 29: Thriving Office Market – High Barriers to Entry
Thriving Office Market – High Barriers to Entry • Limited CBD supply with high Class A replacement cost of ~ US$700 per sq ft • Competitive micro market has average vacancy of 6.3%1 vs Class A average vacancy of 11.3%2 • Strong growth in economy leading to office demand and robust rent growth Histor
Slide 30: Strong Occupancy and Long WALE with Upside Potential
Strong Occupancy and Long WALE with Upside Potential • Occupancy of 94.9%1 with average 2.3% rental escalations p.a. Retention rate of > 80.0% for expiring leases for last 3 years • Average in-place rent is up to 11.5% below potential asking rental rate of the property Long WALE by NLA of 5.9 Year
Slide 31: Appendix: About MUST
Penn, Washington, D.C. Appendix: About MUST 07 31
Slide 32: 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 Toronto Canada Edmonton 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 33: Portfolio Overview
Portfolio Overview Figueroa Michelson Peachtree Plaza Exchange Penn Phipps Centerpointe Capitol2 Washington, Location Los Angeles Irvine Atlanta Secaucus Jersey City Atlanta Virginia Sacramento D.C. Property Type Class A Trophy Class A Class A Class A Class A Trophy Class A Class A Completion Date 1
Slide 34: 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 6.6% 6.6%3 • No U.S. withholding taxes (30%) U.S. Withholding Taxes (1.0%) - - Net Yield – 2.2% 6.6% 6.6% Singapore Retail Investor • No
Slide 35: 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 36: Awards and Accolades
Awards and Accolades SIAS 20th Investors' Choice Award 2019: Singapore Corporate Governance Award, REIT & Business Trusts, Runner Up Sustainability Award, REIT & Business Trusts, Runner Up Governance Index for Trusts 2019 Ranked 6th among 46 REITs and business trusts with a total score of 78.5 Globa
Slide 37: Distribution Yield of MUST vs Other Investments
Distribution Yield of MUST vs Other Investments 7% 6.6% 6% 5.1% MUST Distribution Yield is 5% 480 bps above 10-year US 4.2% Government Bond Yield 4% 3% 2.0% 2% 1.8% 1.7% 1% 0.2% 0% MUST Distribution FTSE REIT Dividend STI Index Dividend 10-year US 10-year SG 12 Months Fixed Savings Account Yield 1 Y
Slide 38: 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