Manulife US REIT buys US freehold Class A office building for $166.09m

The acquisition could boost the firm’s DPU by 3.3%.

Manulife US Real Estate Investment Trust (Manulife US REIT), through its indirect wholly owned subsidiary, has entered into a purchase agreement with Carr Properties to acquire Centerpointe I & II, which is a two-tower freehold Class A office building located at Fairfax, Virginia, Washington, D.C. Metro Area for $166.09m (US$122m).

The estimated total cost of the acquisition is approximately $172.9m (US$127m), comprising the purchase consideration of $166.09m (US$122m), a $1.63m (US$1.2m) acquisition fee, as well as professional and other transaction fees and expenses of approximately $5.17m (US$3.8m).

The property is located directly between Fair Oaks Mall and Fairfax Towne Center, two prominent retail centers in Fairfax Center. Centerpointe is reportedly operating at 98.7% occupancy as at 31 March 2019.

Centerpointe is being leased to 21 tenants, including several large companies and a government agency, such as ASM Research, Edelman Financial Services, Board of Supervisors for Fairfax County, Salient Federal Solutions and ECS Federal.

“Over 50% of the tenants by NLA use this building as their headquarters location,” the firm highlighted, adding that 100% of the leases in the building have built-in rental escalations ranging between 2.5% and 3.0%, providing organic growth to the rental income for the Manulife US REIT.

Centerpointe is said to be the highest building in Fairfax Center, visible to approximately 220,000 daily passengers commuting along Route 50 and Interstate 66, two of the most travelled highways in the region. Centerpointe II was also renovated with a brand-new lobby, a 3,500 sqft fitness centre, an outdoor recreation area, and a café.

In addition, the property has a long weighted-average lease expiry (WALE) of 6.9 years as at 31 March 2019, which will lengthen the WALE of Manulife US REIT’s existing portfolio from 6 years to 6.1 years post-acquisition.

Also read: Manulife US REIT NPI rose 27.7% to $34.19m in Q1

“The acquisition is in line with the REIT’s investment strategy and business model, and will be financed by a combination of loans and issuance of new units in Manulife US REIT via private placement of new units in Manulife US REIT to raise gross proceeds of no less than $127.97m (US$94m),” the firm highlighted.

The acquisition of Centerpointe will increase Manulife US REIT’s aggregate portfolio value by 7% from $2.31b (US$1.7b) to $2.59b (US$1.9b) and net leasable area (NLA) by 11.2% from 3.7 million sqft to 4.2 million sqft as at 31 December 2018.

According to Jill Smith, CEO of Manulife US Real Estate Management, the acquisition is 3.3% accretive based on FY2018 pro forma distribution per unit (DPU).

The acquisition is expected to be completed on 10 May.