Manulife US REIT - DBS Research 2023-02-08: Someday, My Knight Will Come

• On 30 Dec 2022, Manulife US REIT announced that its portfolio valuation as at Dec 2022 will see a decline of 10.9% or US$237.4m to US$1,947m, vs US$2,184.4m as at Dec 21. This is the first of the S-REITs in this period to see a sizable decline in valuation, that has consequently resulted in a rise in gearing, to 49%, close to the MAS gearing limit of 50%.
• - Read this at SGinvestors.io -
• While this is considered a soft breach, as the increase in gearing was led by a valuation decline, the gearing level is too close for comfort, in our view. In addition, if its interest coverage ratio (ICR) was to dip below 2.5x, the MAS gearing limit would be 45% instead of 50%, meaning that Manulife US REIT will have to take active steps to lower gearing. In the announcement, Manulife US REIT highlighted that the financial covenants are not expected to be breached, despite the decline in valuation.
• - Read this at SGinvestors.io -
• Discount rate widened by 150bps.
• Figueroa had the largest decline (-33.1%), which makes up 44% of the portfolio valuation decline.
• Aside from the cap rates and discount rate expansion, Figueroa’s valuation was impacted by the lower occupancy following the departure of TCW Group and downsizing of Quinn Emmanuel (estimated to be ~77% occupancy).

Where does Manulife US REIT stand?

• Read more at SGinvestors.io.

Rachel TAN DBS Group Research | Derek TAN DBS Research | https://www.dbs.com/insightsdirect/ 2023-02-08 SGinvestors.io

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