Manulife US REIT registers lower first-half performance

Distributions for the first half of the year will be halted.

Manulife US Real Estate Investment Trust (MUST) saw its gross revenue slightly fall 0.8% year-on-year (YoY) to US$99.6m during the first half of 2023, according to a local bourse filing.

The company also registered a lower net property income, which fell 3.9% YoY to US$55.4m, whilst distributable income slid 17.4% YoY to US$37.9m.

MUST attributed the decreases to smaller rental and recoveries income from higher vacancies across its portfolio. Further, the sale of Tanasbourne back in April caused some effects.

Supplemental to the previous drags were “higher property operating expenses such as repair and maintenance, property taxes and utilities as well as higher finance expenses,”

However, this was balanced out by the higher lease closing fee income and higher income from parking.

Distributions for 1H 2023 will be paused due to two main reasons:

1. A previously disclosed breach of a financial covenant in MUST's financing documents led to the reclassification of REIT's loans as current liabilities.
2. The Manager's inability to ensure that after the distribution, MUST can meet its upcoming liabilities using the property fund's deposited resources.

The Manager is actively working to secure funds for loan repayments, capital expenditure, and leasing expenses. 

ALSO READ: Manulife US Reit requests a trading halt

Despite economic uncertainty, MUST's portfolio, with an 85.1% occupancy rate and a 4.9-year weighted average lease expiry (WALE), is well-prepared for market challenges. 

The Manager remains dedicated to asset, lease, and capital management, as well as enhancing ESG practices for long-term unitholder value. 

Negotiations with lenders are ongoing to address the financial covenant breach and enhance liquidity. Asset sales and strategic options are also being explored to reduce debt and strengthen the REIT's balance sheet.