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Manulife US Reit Q1 DPU up 22.8% to 1.51 US cents

MANULIFE US Real Estate Investment Trust (Reit) said on Thursday its distribution per unit (DPU) for the first quarter rose 22.8 per cent to 1.51 US cents from 1.23 cents for the year-ago quarter.

However, adjusted DPU - which normalises the impact of an enlarged unit base from a preferential offering of 227.9 million units issued on June 20, 2018 - was up 0.7 per cent  to 1.51 US cents from 1.50 US cents for the same quarter last year. The distributable income from the year-ago quarter was paid out with the H1 2018 distribution, dragging down Q1 2018 DPU.

The pure-play US office Reit said net property income for the three months ended March 31 rose 27.7 per cent to US$25.1 million from US$19.7 million a year ago. This was largely due to contributions from its Penn and Phipps properties in the US.

Gross revenue for the quarter rose 28.5 per cent to US$40.0 million from US$31.2 million the year before on strong leasing momentum and increases in the portfolio’s occupancy.

Portfolio occupancy stood at 97.4 per cent, with a weighted average lease expiry (WALE) of six years by net lettable area (NLA) as at March 31, 2019.

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This increase was mainly due to Peachtree in Atlanta, off the back of the thriving environment and high employment growth, said Jill Smith, CEO of Reit manager Manulife US Real Estate Management.

"The strong leasing demand resulted in positive rental reversions and drove Peachtree’s occupancy from 93.7 per cent to 99.4 per cent quarter on quarter. With the easing of interest rates, we should benefit when we refinance Figueroa’s loan due in July 2019,” Ms Smith added.

In January this year, Hyundai renewed its lease of around 97,000 square foot (sq ft) by NLA at its Michelson property, bringing the total number of leases signed in the quarter to seven and amounting to 6.1 per cent of the portfolio. Thus, 56 per cent of the portfolio’s leases by NLA will expire in 2024 and beyond.

Tenant base continues to be “well-diversified across multiple trade sectors”, with no single tenant contributing more than 7.3 per cent of gross rental income as at March 31, 2019, the Reit manager said.

To future-proof the Reit’s properties, the manager will undertake asset enhance initiatives (AEI) to rejuvenate Figueroa and Exchange, spending US$8 million and US$12 million respectively. The AEI works are expected to complete in the fourth quarter of this year or the first quarter of 2020.

By gross rental income, around 94 per cent of the leases have built-in rental escalations. 55 per cent have annual rental escalations averaging around 2.5 per cent per annum, while 39 per cent have mid-term or periodic rental increases.

The Reit manager said the trust’s portfolio is “well positioned” amid a positive US market outlook. It will continue to focus on asset lease and capital management, along with sustaining and enhancing environmental, social and governance initiatives. It will also selectively seek investment opportunities delivering long term value to unitholders, it added.

“We remain confident in the world’s largest real estate market and will seek accretive acquisitions of Trophy/Class A buildings in desirable markets,” Ms Smith added.

Units of the Reit closed flat at US$0.87 on Wednesday.

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