SINGAPORE - Manulife US Real Estate Investment Trust (Must) posted a portfolio occupancy of 78.7 per cent for the first quarter ended March, down from 84.4 per cent as at end-2023.
On May 8, the pure-play US office real estate investment trust’s (Reit) manager said this was largely due to its major tenant TCW Group’s lease expiry at Figueroa, its 35-storey office building in Los Angeles, which amounted to 189,000 sq ft of space.
Notable leases executed over the quarter included motoring giant Hyundai’s expansion of 31,000 sq ft of space for an additional five years at Michelson in Irvine, and professional services group Deloitte’s executed new lease at Capitol (18,000 sq ft) in Sacramento for a period of 12 years.
At Plaza in Secaucus, New Jersey, apparel retailer The Children’s Place renewed its lease for 120,000 sq ft for 13 years, while French pharmaceutical group Pierre Fabre signed a new 24,000 sq ft lease for 12 years.
Must’s manager said it had 1.4 million sq ft in its leasing pipeline and has achieved “good activity across various leasing stages”.
The Reit’s portfolio weighted average lease expiry by net lettable area as at end-March was 4.3 years, with 71.2 per cent of in-place rental escalations by gross rental income having annual escalations of 2.6 per cent a year.
Based on gross borrowings as a percentage of total assets, the Reit’s gearing stood at 56.7 per cent with an interest coverage ratio of 2.3 times.
The Reit manager views demand for the US office space as “on a recovery path”, though it also remarked that “challenges remain”.
Must is in the midst of executing its recapitalisation plan to dispose of certain assets to pare down debt and fund capital expenditure.
Based on the mastering restructuring agreement signed, the Reit is to achieve minimum cumulative net sale proceeds of US$230 million (S$312 million) from the aggregate sale of up to four of its assets across two tranches by end-2024, or else incur a fee.
The Reit aims to achieve at least US$328.7 million worth of cumulative asset disposals by June 2025.
Addressing questions from investors in its business update on May 8, Must’s manager said it will determine the Reit’s updated portfolio valuation “closer to mid-year” as it monitors market conditions.
It highlighted that 96.5 per cent of the Reit’s loans are on fixed rates, or hedged to fixed rates with interest rate swaps, which it views will reduce Must’s exposure to interest rate fluctuations in the short term.
“While inflation may drive up property expenses, some of the higher costs may be recovered from tenants. We will also continue to focus on improving leasing and driving income,” said the manager.
Units of Must closed flat on May 7 at seven US cents. THE BUSINESS TIMES
