THE portfolio value of Manulife US Real Estate Investment Trust (MUST) as at Dec 31, 2024 fell 9.3 per cent or US$116.6 million to US$1.1 billion.
The decline was driven by higher discount rates and terminal capitalisation rates for certain properties, alongside weak occupancy performance across certain US office submarkets, said the manager on Friday (Jan 10).
The portfolio valuations were obtained through independent valuations.
The higher discount and terminal capitalisation rates indicated risks posed by lower leasing demand, driven by macroeconomic headwinds and downsizing.
This was due to lower use of office space and idiosyncratic risks at the property level, such as higher vacancy or weak submarket fundamentals, the manager noted.
Occupancy across US office submarkets – including Washington DC, Los Angeles CBD and Secaucus, New Jersey – weakened on low return-to-office rates and/or the financial distress of landlords unable to capitalise on lease deals.
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This caused the properties located in those office submarkets to experience higher vacancy levels and concession package assumptions, leading to higher leasing costs.
Given the fair value losses from its properties arising from valuation declines, the manager expects the Reit to report a loss for FY2024.
Its net asset value as at Dec 31, 2024, is expected to fall by US$116.6 million, the amount by which its portfolio value fell, as portfolio value is a key determinant of net asset value. Its aggregate leverage is expected to be about 61 per cent.
The manager said MUST is currently in divestment talks regarding multiple properties, which “should move the Reit closer to its 2025 net proceeds target of US$328.7 million”.
It added that it plans to deleverage its balance sheet with the repayment of US$200 million to lenders by 2025, and to make accretive investments to enhance distributions and grow its portfolio’s net asset value.
Units of Manulife US Reit finished 1.1 per cent or US$0.001 higher at US$0.093 on Thursday, before the news.
