Manulife US REIT Falls 28% on Drop in Valuation, Covenant Breach

Dow Jones2023-07-19

By Sherry Qin

Manulife US REIT's units dropped in early trading after it guided for a first-half loss and said it had breached a financial covenant amid a slowdown in office-market activity in the U.S.

The REIT's units were down 28% at US$0.12 Wednesday morning in Singapore, on track for their biggest one-day loss since the company's listing in 2016.

Manulife US said Tuesday that it expects to post a loss in the first half, news that came after the value of its properties was assessed to have fallen 15% from the end of 2022. It attributed the decline to higher discount and terminal capitalization rates for some properties posed by "the volatile macroeconomic environment," as well as weak occupancy levels across the U.S. office market amid a slowdown in demand and leasing activity.

"U.S. office valuations remain under pressure and are likely to decline further in 2023," it said.

The valuation drop broke a financial covenant in some of the trust's existing loans, it said. The REIT said it is already in talks with lenders to seek a waiver for the breach to prevent a cross default in its interest-rate swaps.

It is also working to address liquidity needs, including by potentially selling some of its assets.

Singapore-listed Manulife US said that valuation of its properties had fallen to US$1.63 billion at the end of June from US$1.91 billion at the end of 2022.

The REIT has a portfolio of office real estate and related assets in the U.S.

Write to Sherry Qin at sherry.qin@wsj.com

(END) Dow Jones Newswires

July 18, 2023 23:24 ET (03:24 GMT)

Copyright (c) 2023 Dow Jones & Company, Inc.

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