MANULIFE US Real Estate Investment Trust (Manulife Reit) bucked the softer overall market trend on Tuesday to trade higher.
The Reit - Singapore's first focusing purely on income-producing office real estate assets in key markets in the US - closed 3.5 US cents or 4.2 per cent higher at US$0.86. More than 9.1 million units changed hands.
On Monday, DBS Group Research initiated a "buy" call on the Reit in a report entitled From Strength to Strength. Analysts Mervin Song and Derek Tan said that the Reit offers investors a unique opportunity to invest in high quality freehold properties in the US, where the property market outlook is favourable and the economy is recovering.
The Reit's initial portfolio comprises three Class A or Trophy buildings - Figueroa, Michelson and Peachtree located in the prime areas of downtown Los Angeles; Irvine, Orange County; and Midtown, Atlanta.
With 15.6 per cent of leases due to expire over FY16-17F, Manulife US Reit is well positioned to capture the improvement in market rents which according to Colliers is projected to rise by 1.5-23 per cent over 2015-2017 in the areas where its properties are located, they said.
"Manulife US Reit offers an attractive combination of high yield (6.8-7.3 per cent) and growth. (It) is projected to deliver 8 per cent distribution per unit growth which compares favourably to the average 2 per cent growth on offer by the S-Reit market," the analysts said. Their target price for the Reit is US$0.91 a unit.
Deutsche Bank also recently initiated a "buy" call on the Reit. In a June 22 report, its analysts Joy Wang and Chien-Fie Man see the Reit benefiting from a steady office demand in the US and acquisition pipeline by its sponsor, Manulife Financial Group. The latter operates a fully integrated real estate management platform, with US$8 billion in real estate assets under management, of which 82 per cent is in office properties.
"A robust deal pipeline by the sponsor and a rigorous asset allocation process could help Manulife US Reit with its acquisition growth," Deutsche analysts explained. They have a target price of US$0.90 for the Reit.
"We believe that Manulife US Reit offers an attractive implied annualised yield of 7-7.5 per cent FY16E/FY17E, and 1.04x historical book," they added.