ON THE final trading day of 2022, the manager of Manulife US Real Estate Investment Trust (MUST) put out an announcement headlined: “Aggregate leverage to remain within regulatory limit based on updated asset valuations”.
The announcement was, in fact, a warning that MUST’s aggregate leverage as at end-2022 had risen to 49 per cent because of a double-digit percentage decline in the valuation of its property portfolio.
Singapore-listed real estate investment trusts (S-Reits) are subject to an aggregate leverage cap of 45 per cent, but they are allowed to raise their aggregate leverage to 50 per cent if they have an interest coverage ratio (ICR) of at least 2.5 times.
