Manulife US REIT - UOB Kay Hian 2023-11-30: Breathing Space For Orderly Deleveraging

• The success of Manulife US REIT’s recapitalisation and deleveraging plan hinges on progress of divestments. Interest rates are expected to decline in 2H24, which make the environment more conducive for divestments. The first step towards revival is to obtain waiver from lenders.
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• Valuation of Manulife US REIT is attractive with 2026 distribution yield at 15.1% and P/NAV at 0.44x. Maintain BUY. Target price: US$0.13.

Recapitalisation plan to revive Manulife US REIT.

• Manulife US REIT (SGX:BTOU) has announced its Recapitalisation plan (see Manulife US REIT's announcement dated 29 Nov).
  • - Read this at SGinvestors.io -
  • six-year unsecured Sponsor-Lender Loan of US$137.0m with interest rate at 7.25% and exit premium of 21.16% (effective interest rate is 10% per annum), and
  • Manulife US REIT’s own cash holdings of US$50.0m.
  • Manulife US REIT intends to raise at least US$328.7m (excluding divestment of Park Place) through asset dispositions. The divestments will strengthen Manulife US REIT’s balance sheet and fund essential capital expenditure.

Balance sheet strengthened with lower gearing.

• Read more at SGinvestors.io.

Jonathan KOH CFA UOB Kay Hian Research | https://research.uobkayhian.com/ 2023-11-30 SGinvestors.io

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