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Manulife US Reit posts 9.7% drop in Q2 DPU on enlarged unit base

MANULIFE US Reit (real estate investment trust) reported on Monday that its distribution per unit (DPU) for its fiscal second quarter declined 9.7 per cent to 1.30 US cents from 1.44 US cents for the year-ago quarter, largely due to the drag from the enlarged unit base from a preferential offering and only nine days of income contribution from its acquisitions of Penn and Phipps.

DPU for Q2 2017 and H1 2017 were restated for the preferential offering of 227,935,981 units issued on June 20, 2018, and a rights issue, through which 299,288,423 units were made out on Oct 25, 2017.

With the enlarged unit base, DPU for the first half-year came in 14.2 per cent lower at 2.53 US cents from 2.95 US cents a year earlier.

After normalising the impact of the enlarged unit base, adjusted DPU for Q2 stood at 1.53 US cents, up 5.5 per cent from 1.45 US cents a year ago.

The first pure-play US office Reit listed in Asia said its net property income (NPI) for the three months to end-June increased by 59.3 per cent to US$20.4 million compared to the same period last year, while gross revenue surged 63.4 per cent to US$32.5 million. This was largely due to higher NPI contributions from Plaza and Exchange in New Jersey (acquired in 2017), as well as the newly acquired Penn in Washington DC and Phipps in Atlanta (acquired in 2018).

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Distributable income for the quarter was up 65.3 per cent to US$16.5 million.

For the half year, the Reit recorded a 60.2 per cent jump in gross revenue to US$63.7 million and a 56.6 per cent increase in NPI to US$40 million, while distributable income for H1 rose 57.5 per cent to US$32.1 million.

The distributions will be paid to unitholders on Sept 27.

Jill Smith, chief executive officer of the Reit's manager, said: “The four top-quality assets acquired post-IPO (initial public offering) – Plaza, Exchange, Penn and Phipps – have fortified our overall portfolio and contributed significantly to the growth in the net property income. As at June 30, 2018, our portfolio has an annual rental escalation of about 2.1 per cent and registered a positive rental reversion of 7.2 per cent. In view of the rising rate environment, we intend to concentrate on our organic growth by proactively managing our leases and capital management.”

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