Manulife US REIT - OCBC Investment 2023-02-10: Ceasing Coverage

• Manulife US REIT's 2H22 and FY22 DPU fell 18.6% and 10.9% y-o-y.
• +0.7% rental reversion in 2022.
• Exploring options to bring down gearing.

US$3.8m of distributable income was retained, leading to 10.9% dip in Manulife US REIT's DPU in FY22

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• Manulife US REIT retained US$3.8m of distributable income (US$0.0022 per unit) for general corporate and working capital purposes. As a result, 2H22 DPU dropped 18.6% y-o-y to US$0.0214. Full-year DPU came in at US$0.0475 (-10.9% y-o-y), above our expectations by 5% as we had assumed a higher cost of debt.

Leasing activities in 4Q22 was weaker in Manulife US REIT’s submarkets

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• Leasing activities remained weak and declined both y-o-y and q-o-q in Manulife US REIT’s submarkets while tenant incentives continued to increase in 4Q22.
• According to Jones Lang LaSalle (JLL), office tenants in the US remained cautious and investor appetite for large-scale transactions was subdued amid rising financing costs. In 2H22, only 59 sales over US$100m closed, equating to US$20b, compared to 186 office sales over US$100m with a combined US$51b in investment volume in 2H21.

Higher risk profile but seeking solutions

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Chu Peng OCBC Investment Research | https://www.iocbc.com/ 2023-02-10 SGinvestors.io

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