SINGAPORE (Nov 8): Religare Institutional Research has started Manulife US Real Estate Investment Trust with a “buy” recommendation and target price of 95 US cents, given its exposure to the US office market which continues to recover from the global financial crisis.

In particular, Religare’s analyst Pang Ti Wee expects the trust’s three operating markets — Atlanta, Los Angeles and Orange Country — to see Class A occupancies increase by 1.5% and its new lease rentals to increase by 6.7% within the next two years.

In addition, the REIT is protected against any interest rate hikes by the Federal Reserve as all of its debt is borrowed under a fixed rate and does not need to refinance any of its debt until 2019.

To recap, Manulife’s portfolio has a weighted average lease expiry of 6.1 years. It has between 1.9% and 5.2% of leases expiring between FY16 and FY18, and 99.2% of all its leases have a built-in rental escalation of about 3.3% per annum.

The REIT also has a pipeline of potential acquisition targets arising from its sponsor’s US$8 billion (RM33.6 billion) in assets under management in US, where 75% of them are office properties.

The brokerage thus coined the REIT as one of the “best proxies” to the “growing US economy and appreciating US dollar” as it is said to be more tax-efficient than US-listed REITs.

Shares in Manulife are trading unchanged at 84 cents. — theedgemarkets.com.sg

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