However, gross revenue jumped 57.1% to US$31.2 million ($41.3 million) in 1Q18, while net property income (NPI) grew 54.0% to US$19.7 million.
See: Manulife US REIT posts 8.5% drop in 1Q DPU to 1.51 US cents on enlarged unit base
The improvements were “on the back of inorganic contributions from Plaza and Exchange,” says analyst Vijay Natarajan in a Wednesday report.
“Its recent acquisition of Penn and Phipps are expected to be completed by 2Q18, and should contribute positively in 2H18,” he adds.
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MUST in April announced it is acquiring two office properties –1750 Pennsylvania Avenue (Penn) in Washington DC, and Phipps Tower (Phipps) in Buckhead, Atlanta – for a total of US$387 million.
See: Manulife US REIT acquires two properties from sponsor for US$387 mil
While MUST is currently finalising the funding structure for the acquisition, Natarajan believes this is most likely to be a combination of perpetual securities (perps) and fixed debt.
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In addition, he believes the threat of faster rate hikes is mitigated by MUST’s 100% fixed-debt profile.
“While the expectation of more US Federal Reserve rate hikes generally has a negative impact on yield instruments like REITs, we note that rate hikes are coming on the back of a robust US labour market and office demand, which should benefit MUST’s DPU growth,” Natarajan says.
As at 12.29pm, units of Manulife US REIT are trading half a cent lower at 94.5 US cents. This implies an estimated price-to-earnings ratio of 14.6 times and a dividend yield of 6.2% for FY18.
