“We continue to favour MUST for its DPU visibility supported by stable income growth and low leasing risks,” says analyst Chua Su Tye in a Wednesday report.
Chua says the four properties he visited were either well located within the CBD or command prime spots in their respective micro-markets.
The analyst also came away impressed by the quality of assets, strong tenancies, and the leasing and AEI know-how demonstrated by its property manager John Hancock.
The properties are well-equipped with on-site amenities which should help in tenant retention, even as there is a 5-14% yield gap between existing and market rents, mainly for its Atlanta properties.
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“We see its assets as well-placed and for rents to rise by up to 3-5% in 2019- 20E on tight supply,” says Chua.
Driven by strong macro-economic fundamentals, the US office sector has been on an expansionary mode with the net absorption in many of its key cities matching rising new supply.
Meetings with property brokers also suggest long-term growth prospects for Atlanta, as continued population and job growth supports occupancies and rents, albeit at a moderating pace in 2019.
While the New Jersey market remains competitive, MUST’s assets are best-in-class on location and 10 Exchange Place should see yields rise post-AEI with co-working, technology and finance sector tenants leading leasing activity.
Maybank has kept forecasts and DDM-based target price intact at US$1.00 ($1.38).
“MUST’s valuation remains compelling with DPU yields of 6.9- 7.2% FY19-20E vs 4.6-5.7% offered by its office S-REIT peers,” says Chua.
“Post its Centerpointe deal, low 36.8% gearing should support acquisition growth opportunities and DPU upside. ‘Buy’,” he adds.
As at 3.27pm, units in Manulife US REIT are up 0.5 cent at 86 cents.
