“This translates to an 8% DPU growth in FY17 on an annualised basis, one of the highest among REITs in Singapore,” says lead analyst Mervin Song in a Tuesday report.
Song says Manulife US REIT’s strong FY16 results and double-digit rental reversions show that its properties in Midtown Atlanta and Downtown Los Angeles submarkets continue to see steadily increasing rents, continued expansionary tenant demand, increased employment opportunities and also a lack of competitive new supply.
And part from upside when leases are due, about 84% of leases (by net lettable area (NLA)) have annual rental escalations of about 3%, adds the analyst.
With the recent decline in gearing to 33-34%, Song says Manulife US REIT is well placed to execute on DPU-accretive acquisitions.
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Apart from that, Manulife US REIT expects any acquisitions to diversify the REIT’s geographic earnings base and tenant concentration.
Markets that are of interest are core submarkets that enjoy demand from a diversified type of industries (i.e. manufacturing, financial, technology and law firms) which imply stability across market cycles. We have not assumed any acquisitions in our forecasts.
Units of Manulife US REIT are trading at 86 cents as at 10.59am.
