Manulife US REIT (MUST) is divesting 400 Capitol Mall in Sacramento, California for US$117 million ($150 million).
The REIT intends to utilise the net sales proceeds and existing cash to repay all of its US$130.7 million loans due in 2025 by the end of this year. Post-repayment, there will be no loan maturities until 2026.
The sale price takes into account the independent valuation of US$118 million as at September 1.
The divestment is expected to complete within 4Q2024. Upon completion, MUST will own nine properties in the US with an aggregate net lettable area of approximately 4.6 million square feet.
Assuming that the estimated net sales proceeds from the divestment and existing cash are used to repay US$130.7 million of outstanding loans as at June 30, the REIT’s pro forma aggregate leverage is expected to improve to 54.2% from 56.3% while weighted average interest cost is expected to reduce by about 42 basis points to 4.16%.
MUST’s pro forma weighted average debt maturity will also be extended to 3.4 years from 3.0 years.
The divestment marks the first major step towards the “recovery” phase of the trust’s strategic roadmap, says the manager’s CEO and CIO John Casasante.
“Despite the ongoing challenges in US office market and the lack of debt availability that continues to hamper transactions, we were able to secure the sale of Capitol to an all-cash buyer, which provides us with the liquidity and flexibility to make an early repayment of the 2025 debt maturities and mitigate risks amid an uncertain environment.”
The divestment also demonstrates substantial progress towards the initial milestone set under the Master Restructuring Agreement (MRA).
Under the MRA, the divestment of Capitol will achieve 47% of the 2024 net proceeds target of US$230 million and 33% of the 2025 net proceeds target of US$328.7 million.
Units in MUST closed 0.1 cent lower or 0.8% down on Sept 27 at 12.4 cents.
