US Office S-REITs - DBS Research 2020-03-06: Your American Heroes

US Office S-REITs - DBS Research | SGinvestors.io PRIME US REIT (SGX:OXMU) MANULIFE US REIT (SGX:BTOU) KEPPEL PACIFIC OAK US REIT (SGX:CMOU)

US Office S-REITs - Your American Heroes

  • US Office REITs with a yield spread of 6%, almost double SREITs, is an attractive alternative to SREITs.
  • Long WALE of c.5 years signals strong income visibility; expiring leases at 5-10% discount to market rates.
  • Acquisitions to drive upside to our estimates.
  • Manulife US REIT is the leader of the pack, Prime US REIT and Keppel Pacific Oak US REIT offer better value.



Singapore-listed US focused Office REITs offer attractive yield spread of 6.1% vs SREITs’ 3.4%.

  • Given the run up of SREITs in the past 2 years, US Office REITs are an attractive alternative with a yield spread of c.6% to 10-year US yields, which is almost double that of SREITs.
  • Supported by strong sponsors and visible growth engines, we project US Office REITS to deliver an average DPU growth rate of c.5.4% in FY20-21, with upside from acquisitions.
  • With tailwinds from the strengthening USD-SG exchange rates, we believe US Office REITs offer attractive total returns.


Manulife US REIT is the leader of the pack; Prime US REIT and Keppel Pacific Oak US REIT offer better value.

  • With an established track record and recent inclusion into the EPRA NAREIT Global Developed Index, Manulife US REIT (SGX:BTOU) is seeing increased liquidity and visibility among investors and trades at a premium (6.6% yield) to the other two younger REITs. We expect Manulife US REIT to lead its peers in terms of valuations.
  • With ambitions to deliver accretive acquisitions, we see longer runways for both Prime US REIT (SGX:OXMU) and Keppel Pacific Oak US REIT (SGX:CMOU) which offer better value at yields of c.7.2% and c.8.7% respectively.


Solid yields, backed by long WALEs and improving metrics.

  • US Office REITs typically have long WALEs ranging 4- 6 years unlike its Singapore focused peers. We note that only 5-7% of leases are expiring in FY2020 and 7-14% in FY2021. The US Office REITs thus display steady organic growth trends underpinned by positive leasing spreads for roll-over leases in the coming 2 years.
  • With acquisitions on the horizon, we anticipate upside to our estimates.


Downside risks from lower GDP growth with prolonged COVID-19; lower dividend payout ratio.







Rachel TAN DBS Group Research | Derek TAN DBS Research | https://www.dbsvickers.com/ 2020-03-06
SGX Stock Analyst Report BUY MAINTAIN BUY 1.050 SAME 1.050
BUY MAINTAIN BUY 1.150 SAME 1.150
BUY MAINTAIN BUY 0.900 SAME 0.900



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