The share price of the SGX-listed Manulife US REIT (SG:BTOU) has traded up by around 20% over the last five days. After recording a remarkable surge of 22% yesterday, shares declined by 11% today. The notable volatility in the stock is mainly due to the buzz around the company’s recapitalization plan. The stock lost around 27.5% in single-day trading on November 30 after the company announced its recapitalization plan of $236 million.
Manulife US REIT is a real estate investment trust (REIT) listed on the SGX. Its primary investment strategy is to invest directly or indirectly in income-generating office real estate in the U.S.
Over the last few years, the company has faced challenging times, with the COVID-19 pandemic and rising interest rates contributing to a difficult U.S. office market space. Consequently, the company is experiencing a decrease in asset valuations, leading to a rise in its gearing level. A high gearing ratio suggests a higher level of financial leverage.
Light at the End of the Tunnel: Recapitalization Plan
As part of this plan, the company’s sponsor, Canada-based Manulife, is set to extend unsecured loans amounting to $137 million and allocate around $100 million for the acquisition of the REIT’s two-building property in Arizona.
Additionally, the REIT aims to generate around $328.7 million by selling additional office properties. This effort is directed towards reducing the leverage on its balance sheet while supporting essential operations.
The company thinks that it could be strategically positioned for a recovery through a recapitalization process. It also underscored the potential for the next two to three years to be advantageous for the US office property market as interest rates stabilize and the normalization of work practices gains momentum.
Manulife US REIT Price Target
On TipRanks, BTOU stock has been rated as a Moderate Buy, backed by two Buys and one Hold recommendation. The Manulife US REIT share price target is $0.16, which implies a huge upside of 122.2% from the current trading levels.
