The manager of Manulife US REIT (MUST) BTOU announced on May 24 that it has entered into a letter of intent with The Manufacturers Life Insurance Company (Manulife, its sponsor) "in relation to the proposed sale of the property known as Phipps Tower" in Atlanta.
The sponsor will waive the divestment fee. The manager says that the transaction is "subject to satisfactory completion of due diligence and negotiation of terms of the definitive agreements the parties are targeting to enter into the definitive agreements in relation to the proposed divestment by June 30".
As at Dec 31, 2022, MUST's net asset value was US$1.02 billion. As such, the divestment requires unitholders' approval.
Phipps was valued at US$210 million as at Dec 31, 2022, at a capitalisation rate of 5.25%. In 2018, MUST acquired Phipps from its sponsor for US$205 million. Its net property income (NPI) in FY2022 was US$12.2 million, up from US$11.9 million in FY2021, and contributed 10.8% to MUST's total NPI in FY2022.
If MUST manages to divest Phipps for around US$190 million to US$200 million, it would take the REIT's aggregate leverage down to a more manageable 43% or thereabouts.
The manager also announced that the exclusivity period with Mirae Asset Global Investments has lapsed.
See also: Potential rescue by acquirer Mirae could dilute Manulife US REIT's DPU; DBS halves TP to 24 US cents
In November 2022, MUST's manager announced a strategic review by Citigroup. On Dec 30, 2022, MUST's manager announced that its portfolio valuation had declined by 10%, taking its aggregate leverage to around 49%. Its options to "cure" this included equity fund raising, divestments, and a new partnership.
Most market watchers believed that divestments were the best way to realise value, followed by a rights issue, where all unitholders would have equal rights.
As at 9.34am, units in Manulife US REIT are trading 0.3 US cents lower, or 1.71% down, at 17.2 US cents. Its units reached an all-time low of 13.3 US cents on May 16.
