Manulife US REIT - RHB Invest 2023-05-29: On The Road To Redemption; BUY

• Keep BUY rating on Manulife US REIT (SGX:BTOU) with US$0.40 target price, 126% upside and 23% yield.
• We think the Phipps Tower disposal to Manulife US REIT’s sponsor is another positive step, demonstrating much-awaited sponsor commitment and brightening its longer-term prospects amid a very challenging near-term US office outlook.
• - Read this at SGinvestors.io -

Disposal of Phipps Tower

• Phipps Tower in Atlanta (Built in 2010) is the second sale in two months to Manulife US REIT’s sponsor (purchased from the sponsor in 2018 for US$205m).
• - Read this at SGinvestors.io -
• Note: Child apparel retailer William Carter – the largest tenant in Phipps and Manulife US REIT’s portfolio (~5.7% of FY22 income) – downsized its space by 25% in 1Q23 but signed a longer lease (till 2035) on the 209k sq ft balance at higher rent rates (+18%). While this is one of the better asset in Manulife US REIT’s portfolio, we think the sale will likely result in weaker overall metrics.
• The downside of potential sales of weaker assets like Figueroa in the current market is that valuations are extremely stressed and may not fully reflect the longer-term potential once the market bottoms and recovers.

Gearing to fall to ~43%, rights issue still possible.

• Read more at SGinvestors.io.

Vijay Natarajan RHB Securities Research | https://www.rhbgroup.com/ 2023-05-29 SGinvestors.io

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