Manulife US REIT disclosed on 5 January that its portfolio valuation for the end of 2023 has declined by 8.0% or USD123.1 million to USD1,411.8 million.

The portfolio was valued at USD1,534.85 million as at 30 June 2023.

This decline has been attributed to higher discount rates and terminal capitalisation rates for certain properties, said the REIT.

Additionally, there was continued weakening of occupancy performance across the U.S. office market due to a slowdown in demand and leasing activity.

This led to higher vacancy levels and higher concession package assumptions needed to attract new or retain tenants, giving rise to higher leasing costs, the REIT added.

The four properties with the largest percentage valuation declines, namely, Figueroa, Plaza, Penn, and Diablo, comprised 54.2% of the overall portfolio valuation decline.

“US office valuations remain under pressure and may continue to decline further in 2024”, warned the REIT.

“Evidence from the public US office real estate investment trust market indicates that US office REIT unit prices are priced at upwards of a 30% discount to net asset value”, it added.

Stemming from the decline in valuations, Manulife US REIT expects to report a loss for FY 2023.

“Notwithstanding that, taking into account the property rental income, Manulife US REIT is
expected to be able to pay its interest payments and expenses as they fall due since fair value losses are non-cash items in profit or loss” it added.

Manulife US REIT’s net asset value is expected to decrease by approximately USD0.07 per unit.

The REIT’s expected aggregate leverage will be approximately 58%.

Factoring in the USD50.0 million debt repayment by 31 March 2024, the aggregate leverage and unencumbered gearing ratio are approximately 57% and 60:100 respectively.

Manulife US REIT was last done on the Singapore Exchange at USD0.078.

By Ridzwan Rahmat

Ridzwan has been analysing REITs and business trusts since 2008, and personally manages a portfolio comprising mainly of SGX-listed REITs. He founded REITsWeek in 2013.