Manulife US REIT Sells Its Best-Performing Office Property

Article originally posted on CoStar on December 20, 2023

Manulife US REIT, a Singapore-based real estate investment trust, sold its best-performing office property to another of its sponsor’s affiliates as part of a $236 million debt reduction and recapitalization plan.

Manulife US REIT completed the divestiture of its two-building, 274,700-square-foot Park Place in Chandler, Arizona, to John Hancock Life Insurance Co., a subsidiary of the REIT’s sponsor, Canada-based Manulife Financial Corp.

John Hancock paid $100 million for the property for which Manulife had paid $106 million just two years ago.

Rent growth in the past 12 months at Park Place hit 4.2% and was the best performer in that category among its 11 U.S. office properties, according to the REIT. The property is fully occupied.

The sale is the first step in Manulife US REIT’s recapitalization with its sponsor. Additional steps are to include the sponsor providing $137 million in loans. The moves are an effort to reduce Manulife US REIT’s debt leverage, which currently exceeds standards set for REITs in Singapore.

The REIT will also try to sell other offices to raise at least $328.7 million to deleverage its balance sheet and fund essential operations, the company said in a statement.

“Manulife US REIT’s much awaited sponsor-led debt restructuring package fell short of our and market expectations,” Vijay Natarajan, a stock analyst with RHB Group based in Kuala Lumpur, Malaysia, wrote in a report. “Still, the deal — in our view — presents the best path to restore long-term value for unit holders amid a lack of other viable options.”

RHB considered the Park Place acquisition value “a fair price,” considering the challenging U.S. office market conditions. In addition, with Manulife US REIT being a listed entity across various regulatory regimes, its options to get a sweeter deal were limited.

Following the Park Place divestment, Manulife US REIT’s portfolio consists of 10 office properties in Arizona, California, Georgia, New Jersey, Virginia and Washington, D.C.