MANULIFE US Real Estate Investment Trust (MUST) posted a portfolio occupancy of 77 per cent for its third quarter ended September, down from 78.4 per cent in the previous quarter.
This follows the divestment of an office property located in Sacramento, California, for US$117 million. The asset involved 501,308 square feet (sq ft) of net lettable area.
Some 261,000 sq ft of leases were executed in Q3, making up 5.2 per cent of the portfolio’s net lettable area, said the manager of the pure-play US office Reit in a business update on Wednesday (Nov 6). Year to date, more than 689,000 sq ft of leases were signed.
MUST’s manager said the weighted average term of leases signed in Q3 “remains long” at 6.5 years, although rental reversion in the period was negative at minus 1.7 per cent, excluding leases in the divested asset.
As at end-September, the Reit’s gearing stood at 54.3 per cent, after the divestment of its California asset. Its weighted average debt maturity was 3.1 years.
Some 59 per cent of loans remained hedged or fixed as at end-September. “This will increase to 69.4 per cent with the repayment of 2025 debt maturities in November 2024,” said the manager.
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It added that the Reit aims to maintain an “optimal hedge ratio” of 50 to 80 per cent as it repays its debts with proceeds from the expected sale of its assets. MUST intends to cut borrowings by about US$200 million next year, said the manager.
The Reit is in the midst of executing its recapitalisation plan to dispose of certain assets to pare down debt and fund capital expenditure.
Based on a master restructuring agreement, the Reit is to raise a minimum of US$328.7 million through asset divestments by Jun 30, 2025.
Two of its remaining nine properties are on the market, said the manager, which added that it is exploring various ways including transacting with off-market buyers and evaluating alternative transaction structures.
John Casasante, chief executive officer and chief investment officer of the manager, is optimistic about the US office sector as more workers are required to return to the office. The outlook is also supported by interest-rate cuts.
However, he cautioned that the environment for selling office properties remains challenging, due to 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,” he added.
Units of MUST were trading up 0.9 per cent or US$0.001 at US$0.11 as at 9.36 am on Wednesday.
