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Manulife US Reit to undertake rights issue to partly fund property acquisition

MANULIFE US Real Estate Investment Trust (Manulife Reit) will undertake a rights issue of over 299 million new units at the issue price of US$0.695 per rights unit to raise about US$208 million to fund a proposed acquisition in New Jersey.

The Reit on Sunday said in a release that it will acquire from John Hancock Life Insurance Company the 30-storey Class A office building in Jersey City known as 10 Exchange Place, for US$313.2 million.

Manulife Reit, the first pure-play US office reit listed in Asia, said the estimated total cost of the acquisition, comprising the purchase consideration, acquisition fee and professional and other fees and expenses, is about US$332 million. This will be funded through debt financing and proceeds from the rights issue. The reit's manager's acquisition fee will be paid in the form of units of Manulife Reit.

At an issue price of US$0.695 per rights unit, the rights issue provides an opportunity for unitholders to subscribe for their pro rata entitlement to the rights units at a discount of 28 per cent to the closing price of US$0.965 per unit on the Singapore Exchange on Aug 31, 2017.

The property to be acquired is located on the Hudson River waterfront in New Jersey and has unobstructed views of the Manhattan, New York Cit skyline and the Statue of Liberty.

"According to independent market research consultant, Cushman & Wakefield, the Hudson Waterfront District is considered to be the strongest office market within Northern New Jersey, having historically outperformed the greater regional market in terms of occupancy levels and rental rates. The Hudson Waterfront District is a highly desirable location for world-class financial institutions that seek close proximity and accessibility to Manhattan at substantially lower rents. In recent years the market has continued to mature and attract other types of businesses, including technology firms," said the reit.

With a net lettable area (NLA) of over 730,000 square feet, the property will be the reit's largest acquisition to date.

As at end July 2017, the property was 93.1 per cent leased with a weighted lease expiry (WALE) of 5.7 years by NLA. It has a total of 25 tenants and the top five tenants by cash rental income are Amazon Corporate LLC; ACE American Insurance Company; Rabo Support Services, Inc; Kuehne & Nagel, Inc and Opera Solutions, LLC.

The agreed-upon purchase price of the property of US$313.2 million represents a discount of 6.8 per cent to RERC, LLC's appraised value of US$336 million and a discount of 5.1 per cent to Colliers International Valuation & Advisory Services, LLC's appraised value of US$330.0 million. These discounts exclude estimated settlement adjustments.

Upon completion of the acquisition, the reit's aggregate appraised value and NLA will be enlarged by 34.2 per cent and 32.5 per cent, respectively.

Jill Smith, chief executive of Manulife US Real Estate Management said: "This acquisition demonstrates our ability to grow inorganically through the addition of another yield accretive property at the right price. In just over one year, our assets under management have grown by 68.1 per cent from US$777.5 million to US$1.3 billion."

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