Manulife US REIT Secures Two-Year Lease Renewal with US Treasury, Its Fifth Largest Tenant

Key Highlights

• Major Lease Renewal Secured: Manulife US Real Estate Investment Trust (MUST) has announced a significant two-year lease renewal with the US Treasury, its fifth largest tenant, occupying approximately 120,000 sq ft at 1750 Pennsylvania Avenue (“Penn”) in Washington, D.C.
• Lease Terms: The lease renewal is for a 24-month term starting August 2025, with a 12-month firm period and a tenant termination option after 12 months. No tenant improvement allowances were provided, and rents remain at the existing rate.
• Stability for Investors: This renewal extends the property’s Weighted Average Lease Expiry (WALE) from 1.4 years to 2.3 years, enhancing income visibility and stability for MUST.
• Immediate Financial Impact: As of 30 September 2025, the US Treasury accounts for 5.3% of MUST’s total gross rental income, underscoring the importance of this tenant to the REIT’s revenue base.
• Background on Tenant Decision: The US Treasury had initially indicated plans to relocate but opted for a short-term extension, providing cash flow certainty during challenging market conditions in Washington, D.C.
• Strategic Leasing Approach: CEO John Casasante emphasized that MUST is focusing on strategic, accretive leases that create mutual value for both landlord and tenant, rather than simply competing on price and concessions.
• Market Outlook: Federal mandates for employees to return to the office are expected to support the city’s office demand over time, potentially stabilizing or improving market fundamentals.
• Penn’s Strategic Location and Certifications: The Penn property is a 13-storey Class A office building located one block from the White House and close to major institutions such as the IMF, World Bank, and Federal Reserve. The building boasts sustainability certifications, including LEED Gold, WiredScore Silver, and Fitwel.
• Broader Portfolio Overview: As of 30 September 2025, MUST’s portfolio consists of seven freehold office properties across key U.S. markets, with a combined net lettable area of 3.5 million sq ft.

Important Information for Shareholders

• Cash Flow Certainty: The lease renewal provides MUST with greater short-term cash flow certainty, a critical consideration given the ongoing volatility in the Washington, D.C. office market.
• Tenant Retention and Risk Mitigation: The US Treasury’s decision to remain, even on a short-term basis, mitigates the risk of a major vacancy in the portfolio and supports the REIT’s income base during a period of market softness.
• Potential Price Sensitivity: Given the US Treasury’s significant contribution to gross rental income, any changes in its tenancy status (such as exercising the 12-month termination option) could materially impact revenues and, by extension, share price. Investors should monitor future announcements regarding the lease beyond the 24-month term.
• Market Recovery Potential: The federal government’s push for a return to office may improve office demand in Washington, D.C., which could benefit occupancy rates and rental yields for MUST’s properties over time.
• Ongoing Leasing Initiatives: The CEO highlighted ongoing efforts to secure more strategic and accretive leases before year-end. Successful execution of these leases could further support income stability and investor confidence.
• Operational Performance: The lack of tenant improvement allowances in the renewal enhances the net benefit of the lease to MUST, as there is no additional capital expenditure required.
• Delayed Execution Context: The renewal had been delayed due to the U.S. federal government shutdown, and the US Treasury had been on a month-to-month lease since August 2025, which previously increased uncertainty.

About Manulife US REIT and Sponsor

Manulife US REIT is the first pure-play U.S. office REIT listed in Asia. Its investment strategy is focused on income-producing office real estate in key U.S. markets. The REIT’s sponsor is The Manufacturers Life Insurance Company (Manulife), a leading Canada-based financial services group with global operations and a robust product suite across insurance, retirement products, asset management, and banking.

Conclusion

The renewal of the US Treasury lease, despite its short-term nature and the tenant’s initial intention to relocate, is a positive development for MUST. It secures a major revenue stream, provides near-term cash flow certainty, and buys time for the REIT to pursue additional leasing opportunities. However, investors should remain attentive to the tenant’s future intentions and broader market trends, which may influence share performance as lease terms approach expiry.

Disclaimer

This article is provided for informational purposes only and does not constitute investment advice or an offer to buy or sell any securities. Investments in Manulife US REIT or any REIT carry risk, including the possible loss of principal. Please consult your financial advisor for advice suited to your individual circumstances. Past performance is not indicative of future results.

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