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DBS positive on Manulife US REIT's latest acquisitions

Samantha Chiew
Samantha Chiew4/17/2018 03:11 PM GMT+08  • 2 min read
DBS positive on Manulife US REIT's latest acquisitions
SINGAPORE (Apr 17): DBS is maintaining its “buy” call on Manulife US REIT (MUST) with a target price of $1.00.
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SINGAPORE (Apr 17): DBS is maintaining its “buy” call on Manulife US REIT (MUST) with a target price of $1.00.

This came on the back of the REIT acquiring two office properties – namely 1750 Pennsylvania Avenue (Penn) in Washington DC and Phipps Tower (Phipps) in Buckhead, Atlanta – from its sponsor’s indirectly wholly-owned subsidiary, John Hancock Life Insurance, for a total of US$387 million ($507.8 million).

See: Manulife US REIT acquires two properties from sponsor for US$387 mil

Penn and Phipps were acquired on a cash NPI yield of 5.2% and 5.9% respectively.

Penn is a 13-storey Class A freehold office building located near the White House with a total net leasable area (NLA) of 277,243 sq ft. The building’s occupancy as at Dec 31 2017 was 97.2%, with a long weighted average lease expiry (WALE) of 6.8 years.

This property, which was acquired for US$182 million, is largely leased to the US government and global agencies, which accounts for 86.2% of the tenants.

Phipps is a 19-storey trophy quality office tower with 475,091 sifts of NLA, located in Buckhead, one of Atlanta’s primary and strongest business districts.

This property, which was purchased for US$205 million, is 97.3% occupied and has a long WALE of 10 years. Although currently a leasehold property, Phipps will be converted into a freehold property in two years’ time upon payment of US$100.

In a Tuesday report, analyst Mervin Song says, “We are generally positive on the acquisition due to the DPU accretion, increased resilience of the portfolio as MUST’s WALE has been extended with high quality tenants as well as potential upside in rents given the two properties are under rented.”

However, the analyst believes that some investors may question the relatively low accretion of 1.4% given the 2.2-2.3% accretion from the REIT’s other acquisitions.

As at 3.10pm, units in MUST are trading at 92 cents.

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