US Office S-REITs - DBS Research 2020-06-23: Avengers! Assemble!

PRIME US REIT (SGX:OXMU) | SGinvestors.io PRIME US REIT (SGX:OXMU) KEPPEL PACIFIC OAK US REIT (SGX:CMOU) MANULIFE US REIT (SGX:BTOU)

US Office S-REITs - Avengers! Assemble!

  • Rental collections strong at > 90% despite lockdown; operational metrics remain healthy.
  • US corporates preparing to return; safe distancing and safe working environment could lead to positive spillover to short-term leases.
  • Certainty of at least 90% payout and yield spread to remain favourable with low Fed rates.
  • Acquisition opportunities is a catalyst.



Rental collections unaffected; operational metrics remain healthy.



Back to office but stay in your own cubicle.

  • As easing starts in various stages across the United States, we understand corporates are planning a return to offices with appropriate safety measures in place. Although tech companies may still hold off their return plans, we are already hearing Wall Street firms slowly making their way back.
  • Landlords are stepping up to ensure increased cleaning along common areas and even looking at new technology to ensure safety of tenants such as automatic cleaning etc. Corporates on the other hand are putting in safe distancing measures to create a safe working environment for their employees, which may lead to signing of more short-term leases.


Confident of at least 90% payout; yield curve to remain favourable with low Fed rates.

  • Rest assured! It is mandatory for US Office SREITs (via trust deed) to have a minimum 90% dividend payout. Prime US REIT (SGX:OXMU), as a newly listed REIT, has given a commitment to pay out 100% of its distributions in FY20F.
  • Given the recent run-up in share prices, the US Office SREITs are trading at c.0.9x P/NAV, slightly below historical mean. With Fed rates to remain low for a longer period, yield spread should remain favourable at these prices. See
  • Key risks include
    • second wave of COVID-19 infections, and
    • economy taking longer-than-expected to recover.
  • See peer comparison tables of US Office S-REITs in PDF report attached below.


Acquisitions the next catalyst.

  • Every crisis presents opportunities. We believe transaction markets could eventually pick up as activities return to normalcy. As share prices remain at these level or higher, opportunities will eventually arise.






Rachel TAN DBS Group Research | Derek TAN DBS Research | https://www.dbsvickers.com/ 2020-06-23
SGX Stock Analyst Report BUY MAINTAIN BUY 1.00 DOWN 1.050
BUY MAINTAIN BUY 0.85 DOWN 0.900
BUY MAINTAIN BUY 1.00 DOWN 1.150



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