Manulife US REIT (MUST) in explosive rally

With an acronym like MUST, it seems like investing in Manulife US REIT will not go wrong. Indeed, the unit price had been surging from USD0.80 since the start of the year to the current USD0.94. Listed in May 2016, this REIT has a strong sponsor in Manulife Insurance Company, a leading Canada-based financial services group. Despite having a strong pedigree, it has not always been a bed of rose for this REIT.

Like many of its peers, Manulife US REIT unit price had been lacklustre in the initial year of listing. Looking back, the counter had been trading below its offering price of US0.83 per for most of 2016 and 2017. Then the unit price took on a life of its own when Temasek Holdings, through DBS Bank, increased its stake from 3.78% to 5.49% in July 2017. Subsequently, Manulife US REIT unit price enjoyed a splendid run, surging from US0.80 in July 2017 to hit a high of almost USD1.00 in February 2018. The bull run in unit price created plenty of wealth for unitholders.

Manulife US REIT

However, in 2018, Manulife US REIT suffered a torrid run. This is because in that year, the US Federal Reserve raised interest rates by four times. Most REITs are heavily leveraged and Manulife US REIT is no exception. Therefore, the increase in interest rates meant higher interest expenses and affected the outlook for REITs’ growth. It didn’t help that the trade war between USA and China reached a peak in 2018. Being a pure-play US office REIT, Manulife US REIT was located at the epicentre and its unit price was hit left, right and centre.

To compound matters further, Manulife US REIT launched a preferential offering of USD0.865 per unit through issuance of 227,935,981 new units in June 2018. All these events combined to cause this counter to reach a low of USD0.73 in December 2018.

But as the saying goes, no winter lasts forever. 2019 saw US Federal Reserve cutting the interest rates three times. Consequently, the REIT sector in Singapore currently enjoys a splendid rally. And Manulife US REIT is one of the REITs riding on this wave. Is this a turning point for Manulife US REIT?

Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. Furthermore, I am not vested and have never invested in this counter before. Whether Manulife US REIT unit price will surge or collapse has no impact on me. Thus, this article is not meant to induce readers to make any form of investment decisions.


Bullish on Manulife US REIT

Currently, Manulife US REIT’s portfolio comprises nine prime, freehold and Trophy or Class A office properties located in California, Atlanta, New Jersey and Washington D.C. Metro Area. At the point of IPO in 2016, Manulife US REIT only had three properties in USA. Within the span of three years, this REIT has increased its assets three fold. The latest acquisition was the 400 Capitol Mall that comes with purchase price of USD198.8 million. Capitol is a 29-storey top Class A office building with 500,662 sq ft of NLA, located in Sacramento, California.

Looking at the macro-economic and business fundamentals, I am quite bullish on Manulife US REIT in the coming months. This is because [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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