Manulife US REIT - CGS-CIMB Research 2023-11-06: Still Work In Progress

• 3Q23 portfolio occupancy slipped q-o-q to 84.7% (from 85.1% at end-2Q23). Manulife US REIT (SGX:BTOU) leased/renewed 193k sq ft of space in 3Q23 (9M: 636k sq ft), including early renewal of its fourth largest tenant, Kilpatrick Townsend at Peachtree.
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+24.2% rent reversion in 3Q23

• Overall, Manulife US REIT posted a +24.2% rent reversion in 3Q23 (+10% in 9M23).
• Manulife US REIT has a balance of 5.6%/13.4% of leases expiring in 4Q23F/FY24F.
• According to property consultant Jones Lang Lasalle, although leasing volumes in Manulife US REIT’s submarkets continue to be slow, lease terms are lengthening. Net effective rents appear to be stabilising, and tenant incentives are moderating. That said, sub-leasing activities continue to inch up q-o-q as tenants sub-lease their under-utilised spaces.

Gearing should remain elevated

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• With its interest rate hedges progressively rolling off, the proportion of fixed rate loans dipped to 69.2% in 3Q23 (from 80.2% in 2Q23), while interest cost rose q-o-q to 4.38%.
• With US office values still under pressure for 2023F, we believe gearing should remain elevated in the near term.

Assembled Sponsor package, identified non-core assets for sale

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LOCK Mun Yee CGS-CIMB Research | Natalie ONG CGS-CIMB Research | https://www.cgs-cimb.com 2023-11-05 SGinvestors.io

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