Manulife US Reit divests Oregon property for US$33.5 million; still in talks with Mirae for sale of manager

MANULIFE US Real Estate Investment Trust : BTOU 0% (Manulife US Reit) has divested its property, Tanasbourne, located in Hillsboro, Oregon for US$33.5 million.

The buyer is John Hancock Life Insurance Company (USA), which is a subsidiary of Manulife US Reit’s sponsor – The Manufacturers Life Insurance Company.

In an announcement on Wednesday (Apr 12), the Reit said it will book a net loss of US$400,000 from the divestment.

Tanasbourne is a 132,851 square foot office campus comprising three flex-office buildings. It was constructed between 1986 and 1995, and was refurbished in 2015, 2017 and 2020.

The property had a 100 per cent occupancy rate as at Dec 31, 2022, with a weighted average lease to expiry of 3.8 years.

The divestment comes as Manulife US Reit seeks to lower its leverage, which stood at 48.8 per cent as at Dec 31, 2022. Assuming all the net proceeds from the divestment are used to repay debt, the Reit’s gearing will fall to 48 per cent.

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In its announcement, Manulife US Reit said it continues to explore potential asset sales but faces near-term challenges in the United States market.

“Availability of credit continues to be limited for US buyers, thus resulting in low interest for any asset dispositions,” the announcement said.

DBS Group Research welcomed the move from Manulife US Reit, but noted that the sponsor had chosen the smallest asset within the Reit’s portfolio. 

Data from Manulife US Reit’s annual report for 2022 indicated that Tanasbourne was valued at US$33.5 million as at Dec 31, 2022, the lowest among all its assets. 

“Although the amount is small, it allows Manulife US Reit to buy time to implement the other options that are still within consideration following the strategic review,” added DBS.

In a separate announcement on the same day, offering an update on an ongoing strategic review to enhance unitholder value, Manulife US Reit’s manager also cited “prevailing negative sentiment around the US office sector” as a challenge. This sentiment included “uncertainty around tenant space requirements”.

Taking into account this challenging environment as well as the difficulty of raising funds by issuing equity, Manulife US Reit’s manager said its proposed deal with Mirae Asset Global Investments would provide “potential value-add”.

The manager said discussions continue with Mirae, and also noted Mirae’s US asset pipeline across various sector classes such as office, hospitality and logistics. This would allow Manulife US Reit to diversify into other asset classes. The Reit is currently exposed predominantly to the US office sector.

Units of Manulife US Reit closed US$0.012 or 7 per cent higher at US$0.184 on Wednesday.