Manulife US REIT Secures Critical Extensions to MRA Concessions—Implications for Investors

Summary of Key Announcements

• Extension of Disposal Deadline: The deadline for the disposal of required assets has been extended from 31 December 2025 to 30 June 2026.
• Relaxation of Financial Covenants: The temporary relaxation of financial covenants has been prolonged, specifically:
  • Unencumbered Gearing ratio capped at 80% (up from 60%) until 30 June 2026.
  • Bank Interest Coverage Ratio (ICR) set at no less than 1.5 times (down from 2.0 times) until 31 December 2026.
• Ongoing Suspension of Distributions: Half-yearly distributions to unitholders will remain suspended until the later of the fulfilment of reinstatement conditions and the end of the Bank ICR relaxation period.
• Interest Reserve Requirement: Manulife US REIT must continue to maintain interest reserve accounts for both its lenders and the sponsor-lender throughout the extended relaxation period.

Details Investors Must Note

The latest announcement from Manulife US Real Estate Investment Trust (Manulife US REIT) provides crucial updates regarding the Master Restructuring Agreement (MRA) and its associated concessions. The manager has officially executed the document to effect these concessions, which were granted after securing all lenders’ approvals.

The extension of the Disposal Deadline to 30 June 2026 provides the REIT with more time to execute required asset disposals, alleviating immediate liquidity or covenant breach pressures. Notably, the extension of the relaxed financial covenants—particularly the Unencumbered Gearing ratio and the Bank ICR—offers the REIT improved financial flexibility as it navigates a challenging US office market.

Shareholder Impact and Potential Price Sensitivity

• Suspension of Distributions: Distributions remain suspended, which is significant for income-focused investors. The suspension will only be lifted after the REIT meets specific reinstatement conditions and the Bank ICR relaxation expires. This could negatively affect near-term investor sentiment, as income returns are a core attraction of REIT investments.
• Regulatory Compliance and Risk: The REIT must comply with ongoing interest reserve requirements and stricter financial oversight from lenders. If the REIT fails to meet the Bank ICR (2.0 times) requirement after the relaxation period, it could be in breach of lending covenants, with potential implications for refinancing, asset sales, or even solvency.
• Reinstatement Conditions: Before distributions can resume, Manulife US REIT must achieve the following:
  • Maintain consolidated total liabilities at no more than 50% of consolidated deposited properties.
  • Achieve an interest coverage ratio of at least 1.5 times.
  • Ensure there is no default continuing for at least one full financial quarter after demonstrating compliance with the above ratios.

  The market may react positively if the REIT demonstrates progress toward these conditions.

• Market Confidence: The ability to negotiate these extensions with lenders demonstrates ongoing lender support and gives the REIT more time to stabilize its financial situation. However, the continued suspension of distributions and requirement for strict financial monitoring may weigh on investor confidence until a clear recovery path is evident.

Conclusion

The extensions and concessions granted are critical for Manulife US REIT’s short-to-medium-term survival and provide an essential window for the REIT to recover amid sectoral headwinds. However, the suspension of distributions and the need to meet stringent reinstatement criteria may impact both investor sentiment and share price volatility in the coming periods. Investors should closely monitor subsequent quarterly reports for updates on asset disposals, financial covenant compliance, and any announcements regarding the resumption of distributions.

Disclaimer: This article is for informational purposes only and does not constitute investment advice or an offer to buy or sell any securities. The value of investments in Manulife US REIT may fluctuate, and there is no guarantee of returns. Investors should consider their own circumstances and consult professional advisors before making any investment decisions.

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