Manulife US REIT - Maybank Kim Eng 2021-05-11: Eyeing Growth

MANULIFE US REIT (SGX:BTOU) | SGinvestors.io MANULIFE US REIT (SGX:BTOU)

Manulife US REIT - Eyeing Growth


Strong leasing masks lower occupancy in 1Q21

  • Manulife US REIT (SGX:BTOU) saw strong leasing momentum in 1Q21 at 5.8% of its NLA (up 4.6x q-o-q and 1.8x y-o-y), driven by renewals, as portfolio occupancy fell on the back of tenant downsizing and relocation activities.
  • We see tailwinds from improving market fundamentals, with DPUs cushioned by low FY21-22 lease expiries, supported by its strong assets and quality tenancies. We have kept forecasts intact and see valuations undemanding at ~8% FY21 yield, backed by high DPU visibility with stable income growth and low leasing risks, and upside with acquisitions set to pick up pace.
  • Maintain BUY on Manulife US REIT with DDM-based target price US$1.00 (COE: 7.6%, LTG: 2.0%).



Leasing activity jumped, on renewals

  • Manulife US REIT's portfolio occupancy fell q-o-q from 93.4% to 92.0% in 1Q21, due to higher vacancies at Michelson and 400 Capitol. However, its properties continue to trade above the US Class A average 82.0% market occupancy.
  • Management shared it had changed leasing agents, and thus executed 270k sf of leases (at 5.8% of its portfolio NLA), mostly from early renewals (at ~94% of leases), and at +2.1% rental reversion (from +4.7% in FY20), with demand mainly from the finance and insurance, administrative, advertising and legal sectors. 98% of rents were collected in 1Q21 (from 94% in 4Q20), with 0.6% of abatement provided to its F&B tenants.


Long WALE, rental recovery after FY21

  • Manulife US REIT's WALE stayed at 5.3 years, with 49.4% of leases by NLA expiring in 2026 and beyond. WALE for its top ten tenants, which contributed 36.3% of gross rental income, was likely higher (at 5.6 years). The expiring leases in FY21- 22 at 17.3% of NLA have fallen from 23.8% in 4Q20.
  • While new supply is seen in Atlanta and Washington DC, its well-placed, trophy assets should help cushion occupancies in FY21E, even as 12-month projected rental growth is at -2.5%, as the post-Covid recovery finds a firmer footing.

Growth upside from deals






Chua Su Tye Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2021-05-11
SGX Stock Analyst Report BUY MAINTAIN BUY 1.000 SAME 1.000



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