US Office REITs - RHB Invest 2019-07-12: Comparison Of Manulife US REIT, Keppel-KBS US REIT, Prime US REIT

SGX Listed US Office REITs | SGinvestors.io MANULIFE US REIT (SGX:BTOU) KEPPEL-KBS US REIT (SGX:CMOU) PRIME US REIT (SGX:OXMU)

US Office REITs - Comparison Of Manulife US REIT, Keppel-KBS US REIT, Prime US REIT

  • Comparing MANULIFE US REIT (SGX:BTOU) with KEPPEL-KBS US REIT (SGX:CMOU), we find that Manulife US REIT has a very high-quality asset portfolio with higher occupancy, longer WALE, and bigger blue chip tenants – thus offering a more defensive and stable earnings profile.
  • On the other hand, Keppel-KBS US REIT’s campus-style portfolio offers more growth potential over the near term, with room for occupancy improvements and rental adjustments on the back of strong tech-driven office demand in its key markets like Seattle and Austin. Taking into account portfolio sizes, stock liquidity and historical track records, we believe Manulife US REIT’s portfolio deserves to trade at a 75-100bps yield spread over Keppel-KBS US REIT.



Key comparison of US office REITs


No. Factors MANULIFE US REIT (SGX:BTOU) KEPPEL-KBS US REIT (SGX:CMOU) PRIME US REIT (SGX:OXMU)
Asset and sponsor details
1 Total number of assets 8 freehold properties 13 freehold properties 11 freehold properties
2 Asset Size (USD bn) 1.9 1.1 1.2
3 Asset Class Trophy & Class A Class A & Class B Trophy & Class A
4 Market locations
(as % of AUM)
Atlanta (22% of AUM),
Secaucus (6%),
Jersey City (18%),
Los Angeles (18%),
Irvine (19%),
Fairfax (7%) and
Washington D.C. (10%)
Seattle (53%),
Denver (12%),
Austin (8%),
Orlando (9%),
Houston (11%),
Atlanta (4%) and
Sacramento (3%)
California (10%),
Utah (17%),
Denver
(19%),
Missouri (7%),
Dallas (6%),
San Antonio (6%),
Washington D.C. (13%),
Pennsylvania (8%) and
Atlanta (14%)
5 Key Tenants (Top 3) The William Carter Co. – 7.3%
TCW Group – 5.0%
Kilpatrick Townsend – 4.8%
Ball Aerospace – 2.9%
Oculus VR, LLC – 2.4%
Zimmer Biomet Spine – 2.3%
Charter Communications – 8.9%
Goldman Sachs – 6.0%
Sodexo Operations – 5.9%
6 Key Trade Sector Legal – 20.6%,
Finance – 20.1%,
Retail Trade – 14.5%
Professional Services –37.5%,
Technology – 24.1%,
Finance and Insurance – 18.9%.
Finance – 16.5%,
Legal – 13.3%
Communications – 11.9%.
7 Sponsor Manulife Keppel Capital and KBS Pacific Advisors KBS Asia Partners Pte. Ltd.
8 Sponsor stake (%) Manulife – 6.4% KBS SOR – 6.9% ,
Keppel Capital – 7.7%
KBS Units – 24.7%
9 Sponsor size AUM Global Real Estate AUM – USD 17.4bn KBS AUM – USD 11.6bn KBS AUM – USD 11.6bn
Operating metrics
10 Occupancy (%) 97.6% 92.1% 96.7%
11 Total tenants (based on latest available data) 138 422 180
12 Rent Escalations 2.5% - 3%p.a ~3%p.a 1 - 3%p.a,
Average 2.1%
13 WALE (years) - by cash rental income 6.1 years 3.9 years 5.5 years
14 Gearing (%) 36.8% 38.1% 37.0%
15 Debt Profile Fixed – 98.2%,
Floating – 1.8%
Fixed – 77%,
Floating – 23%
Fixed – 85.1%,
Floating – 14.9%
16 Weighted Average Debt Maturity 2.5 years 3.6 years 5.6 years
17 Debt Cost (%) 3.28%p.a 3.76%p.a 3.45%p.a
Valuation metrics
18 Market Cap (USD m) 1,238 644 813
19 Dividend Yield - FY19F (%) 6.7 7.9 7.4
20 NAV,
P/BV
NAV – 0.80,
P/B –1.1
NAV – 0.78,
P/B – 1.0
NAV – 0.84,
P/B – 1.05
21 Free Float (%) 91% 77% 75%

Note:
Manulife US REIT - Based on latest available data including acquisitions in May 2019.
Keppel-KBS US REIT - Based on 1Q19 data.
Prime US REIT - Based on IPO prospectus.







Vijay Natarajan RHB Securities Research | https://www.rhbinvest.com.sg/ 2019-07-12
SGX Stock Analyst Report BUY MAINTAIN BUY 0.980 SAME 0.980
BUY MAINTAIN BUY 0.880 SAME 0.880
NOT RATED MAINTAIN NOT RATED 99998.000 SAME 99998.000



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