Manulife US Reit refinances US$296m at lower interest rate

MANULIFE US Real Estate Investment Trust (Reit) has raised US$296 million to repay its current bridge loan facilities from John Hancock Life Insurance Company (USA).

The loan, made through John Hancock's commercial mortgage lending division in the US, was to partially finance the acquisition of the Reit's initial public offering portfolio.

It has a term of two years at a fixed interest rate of 2.8 per cent a year.

The new loans, raised separately from Wells Fargo Bank, National Association and Royal Bank of Canada, will lower the Reit's weighted average interest rate to 2.46 per cent a year.

The Reit's debt maturity will be staggered and extended to a weighted average maturity of four years, with no refinancing required till 2019, it said.

The three new lenders have also provided a facility up to a total amount of US$31.8 million at prevailing market interest rates to finance the Reit's budgeted capital and leasing costs. This will replace a US$10 million bridge loan that John Hancock had earlier granted for the same purpose.

The Reit also separately entered into a three-year US$10 million revolving credit facility with DBS for working capital purposes.

Manulife US Real Estate Management CEO Jill Smith said that the reduced financing costs are expected to translate into an increase in distributable income to unitholders.

"The loans have fixed interest rates over an average of four years, removing any near-term interest rate volatility and providing stable distributions," she explained. "This refinancing is indicative of our prudent capital management strategy of optimising funding costs and reducing interest rate and refinancing costs."