MANULIFE US REIT (SGX:BTOU)
Manulife US REIT - Resilient Operational Performance
- Manulife US REIT's portfolio occupancy remained healthy at 94.3%.
- YTD rental reversions of 7.9%.
- Downside protection from minimal lease expiry profile.
Portfolio occupancy remained healthy despite soft leasing momentum in 3Q
- Manulife US REIT (SGX:BTOU)'s Portfolio occupancy remained healthy at 94.3% in 3Q20, albeit a 1.9ppt decline from 2Q20. The decline in occupancy was due to known expiries unrelated to COVID-19, primarily from Peachtree and Centerpointe as two tenants rationalised operations and changed their operating model.
- Leasing momentum was muted in 3Q20 despite a strong 1H20 as tenants are taking a wait-and-see approach. YTD rental reversions remained at 7.9% with no leases signed/renewed in 3Q.
- While leasing momentum is likely to remain soft in 4Q20 and 2021 due to the pandemic, the minimal leases expiry profile of Manulife US REIT could limit downside risk and provide income stability.
Stable rental collections of 98% YTD
- As at 30 Sep 2020, 1.9%/6.7% of Manulife US REIT's leases by gross rental income were due to expire in 4Q20 and 2021 respectively, mainly from Capitol, Figueroa and Michelson. With rents 6% below market (excluding Michelson), management sees the flexibility for Manulife US REIT to negotiate and renew leases on creative terms to support leasing.
- In terms of rental collections, Manulife US REIT has collected 94% of rents for 3Q20 and 98% YTD Sep 2020. Based on YTD Sep 2020 income, only a small percentage of rental deferment and abatement by GRI were provided to tenants, i.e. 0.3% of rental deferment and 0.2% of rental abatement, largely from F&B and retail sectors.
Healthy balance sheet
- As at 30 Sep 2020, Manulife US REIT’s gearing stood at 39.9% with debt headroom of US$200m and US$400m, assuming a gearing limit of 45 and 50% respectively. There is no further refinancing requirement for the rest of 2020.
- For 2021, Manulife US REIT has US$223.7m of debt maturing. Management added that they have started negotiations and secured loans to refinance it at lower rate of 1.85% (3.2% for existing loans). As such, we could see cost savings of ~US$3m from exiting loans.
- See Manulife US REIT Share Price; Manulife US REIT Target Price; Manulife US REIT Analyst Reports; Manulife US REIT Dividend History; Manulife US REIT Announcements; Manulife US REIT Latest News.
- We continue to like Manulife US REIT’s resilient portfolio, quality tenants, stable income streams from built-in escalations and minimal lease expiry profile which could help Manulife US REIT ride over the market turmoil.
- We retain our fair value estimate at $0.84.
Chu Peng
OCBC Investment Research
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https://www.iocbc.com/
2020-11-06
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