Manulife US REIT

Manulife US REIT Foregoes H1 Distribution

USA – Manulife US REIT, a Singapore-listed real estate investment trust (S-REIT) that owns office properties in the United States, announced that its revenue dipped by 0.8 percent year-on-year to US$99.6 million during the first half of the year, reported The Business Times on Monday morning (14 August, SGT).

Over the same period, its net property income (NPI) declined by 3.9 percent to US$55.4 million, while distributable income fell by 17.4 percent to US$37.9 million.

The large drop in net property income was mainly due to the “lower rental and recoveries income from higher vacancies along with the sale of Tanasbourne in April 2023, higher property operating expenses such as repair and maintenance, property taxes and utilities, as well as higher finance expenses,” explained Manulife US REIT’s manager.

Moreover, Manulife US REIT’s portfolio occupancy slid to 85.1 percent at the end of June 2023 from 88 percent at end of 2022 largely because of non-renewals at its office properties Diablo and Capitol.

At the end of Q2 2023, the REIT’s aggregate leverage ratio reached 56.7 percent due to a fall in portfolio valuation. While the Monetary Authority of Singapore (MAS) said the trust has not floated the central bank’s gearing limit, it has exceeded its lender banks’ unencumbered gearing ratio of 60 percent.

This has resulted in Manulife US REIT’s loans to be reclassified as current liabilities. This has also resulted in the trust to announce that unit holders will not get distribution payment for the 1H 2023.

To rectify the breach of financial covenant, the REIT needs to obtain an expressed waiver from its lenders, and the negotiations are ongoing.

“Together with our sponsor, we are negotiating with our lenders to address the breach and embark on a plan to bolster the REIT’s liquidity needs, be it the potential disposition of Phipps Tower or a potential alternative method,” said Tripp Gantt, CEO of Manulife US REIT’s manager.

The resumption of distribution payment in H2 2023 is “predicated on the successful negotiation with the lenders, as well as making sure that we have the liquidity to address all our current obligations going forward,” added Robert Wong, Chief Financial Officer of Manulife US REIT’s manager.

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