Manulife Us Reit · SGX:BTOU
Manulife Us Reit — FY2023 Earnings Presentation
32 slides from Manulife Us Reit's earnings presentation, Feb 8, 2024
Slide 1: FY 2023 Financial Results
FY 2023 Financial Results 8 February 2024
Slide 2: Important Notice
Important Notice This presentation shall be read in conjunction with Manulife US REIT’s financial results announcement dated 8 February 2024 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: Content
CONTENT Highlights Financial Performance Portfolio Performance ESG, Outlook and Key Priorities Appendix Negligible Risk; Top 1% 3.7 vs subsector within real estate sector average of 2.8 5 Star Rating since 2018 Ranked 16th out of 43 Singapore REITs and Business Trusts (2023) FY 2023 Financial Result
Slide 4: Highlights
{{f Manulife US REIT O1 Highlights
Slide 5: FY2023 highlights
FY2023 highlights Recapitalisation Plan approved by Unitholders Covenant breach waived, paving the way for stabilisation and recovery Financials Portfolio US$114.6m US$74.3m(1) 84.4% ~740k sq ft Net Property Income Distributable Income Occupancy Leases Executed +1.3% YoY -15.5% YoY 3Q 2023: 83.9% sa
Slide 6: Financial Performance
Financial Performance 02
Slide 7: 2H 2023 & FY 2023 financial snapshot
2H 2023 & FY 2023 financial snapshot 2H 2023 2H 2022 Change FY 2023 FY 2022 Change FY 2023 YoY DI change due to: (US$’000) (US$’000) (%) (US$’000) (US$’000) (%) Higher lease termination fees Gross 108,457 102,141 6.2 208,025 202,559 2.7 Revenue Higher carpark income Net Property 59,245 55,541 6.7 11
Slide 8: Portfolio NPI performance
Portfolio NPI performance NPI (US$m) +1.3% NPI increase mainly due to: 114.6 113.2 • Higher lease termination fees, mainly at Exchange (US$9.0m) and Plaza (US$4.0m) • Higher carpark income Partially offset by: • Lower rental and recoveries income due to higher vacancies • Higher property operating e
Slide 9: Financial position
Financial position As at As at Key changes in FY 2023 31 Dec 2023 30 Jun 2023 11 Apr: Divestment of Tanasbourne for US$33.5m Investment Properties (US$’000) 1,411,800 1,633,550 30 Jun: 14.6% decline in portfolio valuations Total Assets (US$’000) 1,588,270 1,821,475 resulting in breach of a financial
Slide 10: Covenants relaxed; all existing debt maturities extended
Covenants relaxed(1); all existing debt maturities extended Debt profile(1) as at 31 Dec 2023 (US$m) As at Financial Key financial indicators 31 Dec 2023 covenants(1) Trust-level term loan and revolving credit facility (RCF) Sponsor-Lender loan Unencumbered gearing ratio(3) 63.2% 80% Bank interest c
Slide 11: Portfolio Performance
{{f Manulife US REIT O3 Portfolio Performance
Slide 12: Leasing activity doubled y-o-y; strengthen WALE to 5.0 years
Leasing activity doubled y-o-y; strengthen WALE to 5.0 years 4Q 2023 FY 2023 FY 2022 Breakdown of leases executed by NLA (%) Leases executed (sq ft) 104k 740k 378k 28.1 2.5 WALE (years) 8.9(1) 5.0(2) 4.7(2) 4Q 2023 Rent reversion (%) 1.0 8.2 0.7 69.3 • Notable new leases executed in 4Q 2023: 3.1 o I
Slide 13: Well-spread lease expiry; 67% leases with 2.7% escalation p.a.
Well-spread lease expiry; 67% leases with 2.7% escalation p.a. Lease expiry profile as at 31 Dec 2023 (%) Net Lettable Area (NLA) Gross Rental Income (GRI) 40.0 41.2 18.5 15.4 11.6 12.2 11.1 8.1 8.3 9.0 31 Dec 2023 6.0 expiries 6.7 6.2 5.6 2024 2025 2026 2027 2028 2029 and beyond Note: Amounts may n
Slide 14: Top 10 tenants: 4 renewed/expanded; 2 in active engagements
Top 10 tenants: 4 renewed/expanded; 2 in active engagements Property, NLA % of Tenant Sector Lease Expiry Status(1) Location (sq ft) GRI Phipps, 1 The William Carter Co. Retail Trade Jul 2035 209,040 4.8 Renewed until 2035 Atlanta Finance and Figueroa, 2 TCW Group Dec 2023 188,835 4.4 Vacated; lease
Slide 15: Tranche 1 assets contributed to ~50% of valuation decline
Tranche 1 assets contributed to ~50% of valuation decline • Higher average discount (+51 bps) and terminal capitalisation rates (+17 bps) vs. Jun 2023, reflecting market and property level risks e.g. lack of debt availability, net selling of U.S. offices, weak submarket fundamentals, etc. • Higher v
Slide 16: MUST's submarkets performance
MUST’s submarkets performance Leasing volume and lease terms relatively stable Net effective rents steady 6.0 75.0 $35 Leasing volume (million sf) 5.0 70.0 Lease term (mths) 65.0 $30 4.0 60.0 3.0 55.0 2.0 $25 50.0 1.0 45.0 0.0 40.0 $20 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 Leasing Volume
Slide 17: ESG, Outlook and Key Priorities
04 ESG, Outlook and Key Priorities
Slide 18: 2023 ESG highlights
2023 ESG highlights Building resilience People first Driving sustainable growth GRESB Real Estate Average training hours Green/Sustainability-linked loans Assessment 34 hours per staff US$588.1m 5 Star, score of 89 (63.5% of total borrowings) 5th out of 13 U.S. listed offices CSR contribution 122 co
Slide 19: U.S. economic outlook
U.S. economic outlook 3.3% GDP growth(1) U.S. economy remains resilient; full year 2023 growth of 2.5% vs 1.9% in 2022 3.4% Inflation(2) Rising rents contributed to more than half of the increase in Dec 2023’s CPI 3.7% Unemployment rate(3) Labour market healthy; 680,000 jobs gained in 4Q 2023 5.25 –
Slide 20: Recapitalisation Plan – a road to stabilisation & recovery
Recapitalisation Plan – a road to stabilisation & recovery An intensive roadshow carried out by Secured ~98% support for all three resolutions the Sponsor and Management at the EGM on 14 Dec 2023 MUST announced a Recapitalisation Plan on 29 Nov 2023 after rigorous negotiations with its 12 Lenders an
Slide 21: 2024 key priorities
2024 key priorities Recapitalisation Plan 2024 Priorities ✓ Completed disposal of Park Place to • Pay down US$50m(4), reducing pro forma gearing to 56.9% Sponsor at US$98.7m on 15 Dec 2023(1); net proceeds used to repay debt(2) • Focus on asset dispositions and maximising proceeds to reduce indebted
Slide 22: Top questions from investors
Top questions from investors 1. What is the timeline for your Recapitalisation Plan? Any challenges/obstacles hindering the process? Any interested buyers for the Tranche 1 and 2 assets so far? Milestones for execution of the Recapitalisation Plan were outlined in the circular and include dispositio
Slide 23: Top questions from investors
Top questions from investors 4. What plans does the Sponsor have for MUST in the longer term? You will have a small portfolio of U.S. office assets after all the divestments. How do you plan to grow? Will you still be U.S. focused/office focused? While the immediate focus is on stabilisation and rec
Slide 24: Thank You!
Our ESG pillars Building Resilience Reducing environmental impact of our properties Thank You! and supporting the transition to a net zero economy For enquiries, please contact: People First Ms Caroline Fong Deputy CEO, Chief Investor Relations and Sustainability Officer Prioritising the health and
Slide 25: Appendix
{{f Manulife US REIT QO5 Appendix
Slide 26: Mixed outlook in MUST's submarkets
Mixed outlook in MUST’s submarkets New Jersey (Hudson Waterfront & the Meadowlands): Lack of newer buildings limiting leasing volume; class Sacramento (Overall): Expect A asking rents expected to maintain to see improvement in leasing upward trajectory as flight-to-quality activity in 2024, primaril
Slide 27: U.S. economy grew 2.5% in 2023
U.S. economy grew 2.5% in 2023 • GDP grew by 3.3% in 4Q 2023, following from the 4.9% growth in 3Q 2023 3.3%(1) • Unemployment rate held steady m-o-m in Jan 2024, with jobs gained in professional and business 4Q 2023 services, health care, retail trade and social assistance. GDP growth U.S. GDP grow
Slide 28: U.S. office real estate activities
U.S. office real estate activities • 4Q 2023 leasing volume reversed course over previous periods, increasing 14.1% QoQ(1) 18.2%(1) • Asking rents have increased 2.3% YoY, while same-store asking rents increased only 1.4%(1) 4Q 2023 vacancy U.S. office employment YoY (%)(2) -0.1%(1) 2.6% 2.7% 2.6% 2
Slide 29: Limited supply in MUST's markets
Limited supply in MUST’s markets Gross Last 12 New Net RBA Asking Net Months Projected 12 Properties Vacancy Delivery Delivery Markets (m sq Rent Per Absorption Rent Months Rent Under (%) (‘000 sq Year ft) Sq Ft (‘000 sq ft) Growth(1) Growth(1) (%) Construction ft) (US$) (%) (‘000 sq ft) Downtown Lo
Slide 30: Portfolio overview
Portfolio overview Valuation: US$1.4b NLA: 5.0m sq ft Occupancy: 84.4% WALE: 5.0 years No. of tenants: 176 Figueroa Michelson Peachtree Plaza Exchange Penn Phipps Centerpointe Capitol Diablo Washington, Location Los Angeles Irvine Atlanta Secaucus Jersey City Atlanta Virginia Sacramento Tempe D.C. P
Slide 31: Diversified tenant base
Diversified tenant base Trade sector by gross rental income (GRI) (%) Legal 18.7 Finance and Insurance 18.2 Retail Trade 9.3 Real Estate 8.4 Information 6.2 Public Administration 5.9 Consulting 5.0 Administrative and Support Services 4.4 Grant Giving 4.0 Health Care 3.3 Arts, Entertainment, and Recr
Slide 32: 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