Manulife US REIT - DBS Research 2023-11-06: Worth A Shot?

• Kilpatrick Townsend, Manulife US REIT (SGX:BTOU)’s fourth largest tenant, has renewed their lease early and extend it by another five years to expire in 2030, following Manulife US REIT’s commitment to a US$18m AEI, as previously announced. As such, we noted that Manulife US REIT recorded strong rental reversions of +24% this quarter (9M23: +10%).
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• Gearing and unencumbered ratios remain relatively stable q-o-q, at 56% and 59.9%, respectively.
• Interest costs continued to inch up, by 0.3ppt q-o-q to 4.38%, and the interest coverage ratio declined to 2.4x vs 2.6x in 2Q23.
• Manulife US REIT's hedging ratio has declined to 69% vs 80% in 2Q23.

Key operational highlights during Manulife US REIT's briefing

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• The Children’s Place is re-engaging Manulife US REIT;
• Some top 10 tenants may renew and/or expand leases
• Post the announcement of the Peachtree AEI, rents at Peachtree have been on a rising trend, from mid-US$20psf to close to US$30psf.
• The Children’s Place, Manulife US REIT’s third largest tenant, is re-engaging Manulife US REIT for discussions on its lease. This would be a positive development should it result in a potential renewal, after The Children’s Place had chosen to terminate the lease early in Mar 23.
• Management highlighted that they are engaging with tenants, especially the top 10 tenants, and some have indicated their intention for some expansions and/or renewals. The realisation of potential renewals would bode well for Manulife US REIT.
• Physical occupancy has inched up but remains in the mid- 30% to 40% range.

Discussions between Manulife US REIT, sponsor, and lenders are ongoing, working on holistic sponsor package

• Read more at SGinvestors.io.

Rachel TAN DBS Group Research | Derek TAN DBS Research | https://www.dbs.com/insightsdirect/ 2023-11-06 SGinvestors.io

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