MANULIFE US REIT (SGX:BTOU)
Manulife US REIT - Easing Into A Stronger 2H
Occupancy, rents bottoming out for Manulife US REIT
- Manulife US REIT (SGX:BTOU)’s 1H21 DPU fell 11.5% y-o-y and was in line with our expectations, with revenue and NPI lower by 7.9% y-o-y and 9.8% y-o-y, due to higher vacancies (at Michelson, Centerpointe, and Capitol), rent abatements, and lower carpark income.
- Leasing momentum however remains strong, with tailwinds from improving US fundamentals; we expect a better 2H21 and have kept our forecasts unchanged.
- Manulife US REIT's DPU visibility is high, and well cushioned by its low FY21-22 lease expiries and quality tenancies. We see valuations undemanding at ~7% FY21 yield, with upside from acquisitions, which are expected to pick up pace.
- Maintain BUY on Manulife US REIT with DDM-based target price US$1.00 (COE: 7.6%, LTG: 2.0%).
Stable occupancy, strong leasing pipeline
- Manulife US REIT's portfolio occupancy was stable at 91.7% (vs 92.0% in 1Q21), however the decline moderated from 93.4% in 2H20 and 96.2% in 1H20, and remained above the US Class A average 80.9% market occupancy.
- While ~35k sf of leases were executed in 2Q21 (vs ~270k sf in 1Q21), its pipeline remains strong with ~127k sf expected to be signed in 3Q21, of which 18.0% was attributed to new leases, up from 3.3% in 1H21.
- Rental reversion was at - 3.7% in 2Q21 (vs +2.1% in 1Q21) due to weaker reversions at Michelson and Plaza, but management expects this to stay flat or improve moderately in 2H21.
Long WALE, rental recovery from 2H21
- Manulife US REIT's WALE stayed at 5.3 years, with half of its leases by carpark income, as 60% of its tenants have indicated plans to return to the office from Sep.
Targeting AUM growth; upside from deals
- Manulife US REIT's gearing was stable at US ‘magnet cities’ including the Sun Belt, to boost its ‘high-growth tenancies’ from 10% now to ~20%.
- See
Chua Su Tye
Maybank Kim Eng Research
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https://www.maybank-ke.com.sg/
2021-08-12
SGX Stock
Analyst Report
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