Manulife US REIT Review @ 17 February 2021

Basic Profile & Key Statistics

Manulife US REIT (MUST) is a pure office REIT that owns 9 properties in U.S.

Performance Review

Gross revenue increased by 1.2% YoY but NPI decreased by 8.2% YoY mainly due to provision for expected credit losses of US$ 3.6 million. Distributable income decreased by 5.5% YoY while DPU decreased by 11.3% mainly due to lower NPI and enlarged unitholders base.

FY2020 rental revision is at +0.1%.

Lease Profile

• Occupancy is moderate at 93.4%
• WALE is long at 5.3 years
• Highest lease expiry within 5 years is low at 17.8% which falls in 2022
• All properties are freehold

Debt Profile

• Gearing ratio is slightly high at 41%
• Cost of debt is high at 3.18%
• Fixed rate debt % is high at 96.1%
• All debts are secured debts
• WADE is short at 2.3 years 
• Highest debt maturity within 5 years is low at 27.4% which falls in 2023
• Interest coverage ratio is slightly low at 3.7 times

Diversification Profile

• Top geographical contribution is slightly low at 34.6% (from 2019 Annual Report)
• Top property contribution is low at 18% (from 2019 Annual Report)
• Top tenant contribution is low at 6.2%
• Top 10 tenants contribution is slightly low at 35.2%

Key Financial Metrics

• Property yield is slightly high at 5.7%
• Management fees over distribution is competitive at 10% in which unitholders receive S$ 10 for every dollar paid
• Distribution on capital is high at 4.4%
• Distribution margin is slightly low at 45.8%

Trends

• Flat - Property Yield, Distribution on Capital
• Slight Downtrend - DPU, Distribution Margin
• Downtrend - NAV per Unit, Interest Coverage Ratio

Relative Valuation

• Dividend Yield - Past 4 quarters DPU @ 5.64 cents / average yield @ 7.14% = US$ 0.79
• Price/NAV - NAV @ US$ 0.731 x average P/NAV @ 1.02= US$ 0.745

Author's Opinion

Favorable	Less Favorable
Long WALE	High Cost of Debt
Well Spread Lease Expiry	0% Unsecured Debt
All Freehold Properties	Short WADE
Well Spread Debt Maturity	NAV per Unit Downtrend
Low Top Geographical Contribution	Interest Coverage Ratio Downtrend
Low Top Property Contribution
Low Top Tenant Contribution
Competitive Management Fees
High Distribution on Capital

Overall, MUST fundamentals remain healthy. The occupancy rate is dropping since 2Q 2020, however it is still above U.S. Class A average occupancy of 88.8%. 

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*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee the accuracy, completeness, and reliability. It should not be taken as financial advice or a statement of fact. I shall not be held liable for errors, omissions as well as loss or damage as a result of the use of the material in this blog. Under no circumstances does the information presented on this blog represent a buy, sell, or hold recommendation on any security, please always do your own due diligence before any decision is made.