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Manulife thinking of IPO for a USA REIT in Singapore

The news today is that Manulife, the Canadian Financial Services firm is thinking of IPO a US$488 mil REIT in Singapore.

Fair value has been estimated at $488 million to $530 million. This equates to a forward price to book range of 1.1 to 1.2 times and post tax 2016 dividend yield of 5.5% to 5.9%.

The Reit’s portfolio comprises three Grade A commercial properties in Washington DC, Los Angeles and Irvine, Orange County.

The most important in terms of NAV is Michelson in Orange County, which accounts for 43% of the total, followed by Figueroa in South Park, Los Angeles, which accounts for a further 38% and finally M Street in Washington DC, at 19%.

The average weighted lease to expiry stands at 5.1 years, with an average occupancy ratio of 97.7% and 83 tenants in total. The top 10 tenants account for 58% of income.

Its balance sheet has an average debt duration of 10.3 years and at a cost of 3.75%.

There are annual escalations in rental payments of between 2% and 3.5% for 83.1% of all the leases. This should help revenues grow by an estimated compound annual growth rate of 4.8% between the 2014 and 2016 financial years.

The dividend yield, versus the Singapore Commercial REITs on the Dividend Stock Tracker, looks less appealing except when compared against CCT’s 5.4%.

However the properties are free hold, comes with a 10 year fully hedged debt. The cost of debt at 3.75% looks on the high side in Singapore, but in USA, by historical standards, it seems very low for such a long duration loan.

The WALE is also long with escalations.

If I have misgivings about this listing is that, why, with a futile REIT market in the USA, do they not list there, but come over to Singapore to list.

The only plausible explanation is that, like IREIT, the German REIT which listed in Singapore, so that Shanghai Tong can get invested in this part of the country, where a large part of his money is residing.

 

 

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