Manulife US Reit gets nod to extend asset disposal deadline to Dec 31

[SINGAPORE] The manager of United States office real estate investment trust (Reit) Manulife US Reit (MUST) on Friday (May 23) announced it has received approval from lenders to extend the deadline for the disposal of assets by six months to Dec 31.

The Reit will use US$25 million in cash, in addition to proceeds from the sale of Class A office building Peachtree in Atlanta, US, to partially pare down debts due in 2026, 2027 and 2028.

The extension will give MUST more time to meet obligations under the Master Restructuring Agreement.

Under this agreement, MUST can dispose up to four Tranche 1 and/or Tranche 2 assets, which are considered non-core assets, to third-party buyers, in order to raise minimum net sales proceeds of US$328.7 million by Jun 30.

These assets refer to the Reit’s existing properties, which were classified into different tranches.

The manager plans to procure the sale of certain Tranche 1 and Tranche 2 assets, which carry high-to-medium occupancy risks, capital expenditure requirements and low-to-medium return potential.

Tranche 1 assets included the Reit’s Centerpointe, Diablo, Figueroa and Penn properties, while Tranche 2 assets included its Capitol, Exchange, Peachtree and Plaza properties.

The Reit previously sold two Tranche 2 assets, Capitol and Plaza. In a bourse filing, its manager said it has received approval from lenders to amend the agreement to allow for the disposal of up to three Tranche 2 assets, as well as to divest Peachtree, another Tranche 2 asset.

“Based on the cumulative proceeds from the sales of Capitol, Plaza and Peachtree, MUST will have achieved 82 per cent of the net proceeds target, or US$60 million short of the net proceeds target,” said the Reit manager.

The extension also allows MUST time to maximise opportunities to sell Tranche 1 assets and engage with stakeholders and potential buyers in current market conditions.

This extension is conditional on the completion of the sale of Peachtree. The sale is expected to be completed by June this year.

Assuming that the Peachtree divestment was completed as at Mar 31 this year, and the estimated net sales proceeds and additional US$25 million of cash are used to repay existing loans, MUST’s pro forma aggregate leverage is expected to improve to 56.3 per cent from 59.4 per cent, said its manager.

The pro forma weighted average interest cost is expected to reduce to 3.9 per cent from 4.4 per cent, and the pro forma weighted average debt maturity will also be extended to 3.1 years from 2.7 years.

Units of MUST closed 1.6 per cent or US$0.001 higher at US$0.062 on Friday, before the announcement.