Manulife Reit published their Q4 FY18 results this morning which saw them registered an impressive 55.4% increase year on year on the Net Property Income (NPI) due to their 2018 recent acquisitions of the two buildings – Penn in Washington DC and Phipps in Atlanta). In terms of bottomline DPU performance, it grows by 3.6% year on year to end the financial year at 6.05 US cents.
At the current share price of 85 US cents, this represents a decent 7.1% yield for exposure to a freehold Top Grade A quality of US commercial property. Do note that even while the properties are freehold, the management will have to do AEI enhancement every now and then for wear and tear, and to remake the office look to attract potential tenants. These AEIs typically cost them in the range of $8m to $10m for a smaller to midscale kind of enhancement which they will manage to self-fund using their free cash flow. For the past 4 quarters, management has managed to increase the operational performance of their properties based on the increasing net property income that is shown to us in the slides. You can see this trickles down to increasing DPU in the past 4 quarters, from 1.51 US cents in Q1 to 1.53 US cents in Q2 to 1.51 US cents in Q3 and 1.54 US cents in Q4 this quarter. In terms of debt maturity, it has gone down to 2.7 years, mostly because they are still negotiating to refinance the $110m loan for their Figueroa property. The average financing interests rate has slowly creeped up to 3.27% this year and if we based on the latest loan they took on their two most recent acquisitions, we can expect this to go up further. The
