Manulife US REIT (MUST) is aiming to cut borrowings by approximately US$200 million ($263 million) in 2025, its manager announced in its 3QFY2024 ended Sept 30.
MUST announced in September the divestment of Capitol in Sacramento, California for US$117 million. The divestment, along with existing cash, has enabled MUST to fully repay US$130.7 million of outstanding loans maturing in 2025 while lowering its gearing from 58.2% to 54.3%.
Two of the REIT's nine remaining properties are on the market. The manager says it is exploring various opportunities, including transacting with off-market buyers and evaluating alternative transaction structures.
CEO and CIO of the manager John Casasante says the outlook for the US office sector is more positive compared to a year ago, supported by the rising trend of big companies mandating return-to-office, and recent cuts in interest rates.
However, the environment for selling office properties remains challenging, with limited debt availability and institutional investors staying on the sidelines. There are signs that buyers are becoming more active in some submarkets as lower valuations make acquisitions more attractive and economically viable, Casasante adds.
Under a Master Restructuring Agreement (MRA) signed with lenders in December 2023, MUST is obliged to raise a minimum of US$328.7 million through asset divestments by June 30, 2025. “We are encouraged by the level of interest that we have received at this point [for the properties on the market] and believe we should be in a position to achieve the milestones of the MRA,” says Casasante.
Year to date, over 689,000 sq ft of leases have been signed.
For its 3QFY2024, the REIT reported occupancy of 77% with 261,000 sq ft of leases signed, or 5.2% of its portfolio net lettable area.
The weighted average term of leases signed in the third quarter remains long at 6.5 years. Rent reversion stood at -7.4%, or -1.7% excluding leases in Capitol. Six of nine office leases were signed above market rents.
