Manulife US REIT - UOB Kay Hian 2023-06-23: All Bad But Negatives Largely Priced In; Reinitiate Coverage With BUY

• Manulife US REIT (SGX:BTOU) has endured a series of downsizing and non-renewals by key tenants. We estimate that Manulife US REIT's portfolio occupancy could deteriorate by 9ppt to 79% by end-24 if vacant spaces are not backfilled. We expect valuation of investment properties to decline 15%, or US$250m, and aggregate leverage to hit 51.5% at end-23.
• - Read this at SGinvestors.io -

Deleveraging through divestments.

• We estimate Phipps’ valuation dropping US$48m to US$162m after factoring in the downsizing by William Carter (occupancy dropped 14.5ppt to 80.0% in 1Q23) and cap rate expansion of 25bp to 6.1%.
• - Read this at SGinvestors.io -

Portfolio occupancy affected by downsizing and non-renewals.

• Quinn Emanuel had downsized by 71,000sf at Figueroa in Los Angeles in 3Q22, while William Carter had downsized by 68,880sf at Phipps in Atlanta in 1Q23.
• TCW Group will not be renewing when its lease for 188,835sf at Figueroa expires in Dec 23.
• The Children’s Place has exercised its early termination option and will vacate 197,949sf of space at Plaza in Secaucus in Jun 24.
• We estimated that Manulife US REIT’s portfolio occupancy could deteriorate by 9ppt to 79% by end-24 if vacant spaces are not backfilled.

Low physical occupancy could cause more downsizing.

• Read more at SGinvestors.io.

Jonathan KOH CFA UOB Kay Hian Research | https://research.uobkayhian.com/ 2023-06-23 SGinvestors.io

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