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Manulife US REIT’s management overhaul and share buyback indicates signal of ‘hope’, says RHB

Felicia Tan
Felicia Tan • 3 min read
Manulife US REIT’s management overhaul and share buyback indicates signal of ‘hope’, says RHB
Manulife US REIT’s property at 500 Plaza Drive, Secaucus, New Jersey. MUST has halted its distributions since 1HFY2023 ended June 30, 2023. Photo: MUST
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RHB Bank Singapore analyst Vijay Natarajan is keeping his “trading buy” with an unchanged target price of 12 US cents (16.17 cents) on Manulife US REIT (MUST) after its entire management team is to be replaced.

CEO William “Tripp” Gantt, deputy CEO Caroline Fong and chief financial officer (CFO) Robert Wong will step down on June 30.

Instead, John Casasante, who was from DWS (formerly RREEF), has been appointed as the new CEO cum chief investment officer (CIO). Mushtaque Ali, who was from Manulife Investment Management, will be the new CFO.

Natarajan observes that Casasante has over 25 years of commercial real estate experience with DWS, Cushman & Wakefield, and Lincoln Property.

While at DWS, he held various real estate management portfolios including those in the western US with a net asset value (NAV) of US$15 billion ($20.22 billion).

Ali, he adds, was also involved during the initial setting up of MUST and is familiar with the REIT’s structure.

See also: DBS 'surprised' by resignation of Manulife US REIT’s 'whole C-suite'

On March 21, after cleaning the slate, chairman Marc Feliciano, who is also the global head of real estate and private markets at the REIT’s sponsor, bought his first stake into the REIT, snapping up 3.6 million units at 6.45 US cents and another 0.8 million units at 7.8 US cents per share five days later.

Independent director Veronica Julia McCann also bought 4 million units at 5.93 US cents per share on March 21 and another 2.2 million units at 6.774 US cents a day later.

To Natarajan, the shares, which were purchased from the open market, denotes a “show of confidence”.

See also: OCBC increases Boustead Singapore’s TP to $1.47 after ‘stellar’ FY2024 results

In his view, the execution of its disposition plans with target asset sales of US$100 million by the 2QFY2024 ending June 30 or the 3QFY2024 to reduce its gearing to below 45%, is a key next step for the REIT.

“MUST has segregated its portfolio into three tranches, with Tranche 1 assets – which are in weaker submarkets and have contributed to the bulk of the valuation declines – as key focus for disposal. 

“Meanwhile, MUST will look at maximising returns for Tranche 2 and 3 assets via leasing and portfolio optimisation initiatives. It also recently paid down USD$50 million of loans from its cash reserves, which will reduce pro-forma gearing to 57%,” adds Natarajan, whose target price remains pegged at 0.35 times of MUST’s FY2024 book value.

“While the US office market remains challenging, there are signs of bottoming, with [a] continuing flight to quality trends based on JLL’s US office outlook report – a view similarly shared by the largest asset managers, e.g. Brookfield and Blackstone,” says the analyst.

Natarajan previously downgraded the REIT to “trading buy” from “buy” on Feb 9 as he sees a “long road ahead” in the recovery of the REIT. 

As at 2.30pm, units in MUST are trading 0.1 cent lower or 1.28% down at 7.7 cents.

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