Manulife US Reit denies reported 200 billion won figure for sale of its manager

MANULIFE US Reit on Friday (Mar 17) denied reports of a 200 billion won (S$206.4 million) figure for the sale of its manager to Korean asset manager Mirae Asset Global Investments.

In its latest statement, Manulife US Reit’s manager clarified that Mirae’s non-binding proposal “does not contain reference to such a figure” and that the only monetary amount in the proposal relates to the purchase price of the manager’s shares.

The real estate investment trust’s (Reit) manager was responding to an earlier report by The Business Times, which quoted Maeil Business News Korea saying that Mirae is the preferred bidder to buy Manulife US Real Estate Management for 200 billion won, as well as part of a stake in the Reit. The 200 billion won amount appears significant.

Manulife US Real Estate Management collected US$8.8 million in fees for the management of Manulife US Reit in FY2022, which it chose to receive in units.

In 2019, Vibrant sold a 51 per cent stake in the entity that wholly owns the manager of Sabana Reit for around S$20.5 million, with an adjustment sum of around S$1.3 million.

This implies a valuation of around S$42.7 million for the manager.

The manager, Sabana Real Estate Investment Management, collected S$4.6 million in fees for the management of Sabana Reit in FY2018, before the sale of the stake.

The Reit manager has also reiterated in its latest statement that the proposal from Mirae involves the subscription of new units of Manulife US Reit and does not include any offer to acquire existing units.

Due diligence is ongoing, which applies to the number of new units Mirae and its affiliates will be able to subscribe to in order for Manulife US Reit to maintain its US Reit qualification.

In order to be exempted from US withholding tax, no single investor can hold more than 9.8 per cent of all issued units.

Some Reits have overcome this hurdle by using multiple unrelated funds, said RHB analyst Vijay Natarajan in a report on Thursday.

Assuming Mirae subscribes for its maximum 9.8 per cent stake, which translates to 174 million new units, the deal could work out to a new issuance share price of US$0.48, which is a 13 per cent discount to Manulife US Reit’s net asset value (NAV).

This could result in an FY2022 distribution per unit and NAV dilutions of 9 per cent and 1 per cent respectively, Natarajan estimated.

Mirae’s potential bid for Manulife US Reit’s manager could be panacea for the Reit’s issues, RHB’s research team noted.

This comes after a challenging year for the US-focused office Reit, which experienced declines in both portfolio occupancy and asset values.

Mirae could also use its expertise, networks and US real estate assets to help the Reit diversify and strengthen its portfolio across different asset classes and locations in both the mid to long term, RHB said.