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Author:   |   Latest post: Wed, 21 Aug 2019, 5:20 PM


Manulife Reit Makes An Acquisition of Centerpointe

Author:   |    Publish date:   |  >> Read article in Blog website

Barely a few days after Manulife Reit announces their Q1FY19 quarterly results which I covered here, they announces an M&A for two towers of Centerpointe I & II, which is South of Virginia (about 30 minutes from Washington DC).

The acquisition of these freehold properties is at the implied cap rate of 7.55% for a Class A commercial, which makes it an easy accretive target deal for them based on their current valuation.

The purchase price is $122m, which is about a tenth of their current market cap, so they didn't really need a lot of funding to buy this. 

The properties are leased at 94% occupancy rate at a nice long WALE of 6.9 years but we already know that deals typically in the US are based on long term, then subject to annual escalation.

Management is looking to raise approximately $94m by issuing 114m unit shares private placement, so that works out to be approximately based on 81.8 cents, which is about 6% discount based on last closing price.

What is good about this deal is that they not only managed to do a yield accretive acquisition with pro-forma post acquisition at 6.21 cents (2.6% increase in DPU), but gearing will also reduce marginally from 37.6% to 36.8%. This shows you how good a deal is with a 7.55% cap rate does to a portfolio and is surely an envy to most reits managers out there.

There will be an advance distribution for existing unitholders that will be in the range of 2.03 to 2.23 cents for the past quarterly performance + the current month until book close so look out for that one.

Meanwhile, I like this deal and am looking to get back in a position with this deal should there be a knee jerk reaction off the next couple of days.

Thanks for reading.

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