Manulife US Real Estate Investment Trust (MUST) FY2025 Financial Results Analysis

Manulife US REIT (MUST) released its FY2025 financial results, providing a comprehensive overview of an extremely challenging period for US office real estate. This article analyzes the REIT’s key financial metrics, portfolio trends, divestment activities, and strategic outlook, offering clarity for both existing and prospective investors.

Key Financial Metrics

Quarter-on-Quarter Financial Comparison (2H 2025 vs 2H 2024)

Asset Revaluation and Divestments

The portfolio saw a slight decrease in valuation, with total investment properties valued at \$913.8 million as of December 31, 2025, down 1.6% from the previous year. This change followed the sale of Plaza and Peachtree in 2025, which raised \$161 million for debt repayment. While four out of seven assets saw valuation increases, the portfolio overall reflected market headwinds, particularly in the office sector.

Divestment Activities and Portfolio Performance

MUST executed a divestment strategy, selling Capitol (Oct 2024), Plaza (Feb 2025), and Peachtree (May 2025) to raise liquidity and repay debt. Proceeds were used to pay down \$186 million in debt, improving the REIT’s balance sheet, though aggregate leverage remained high at 58%.

Portfolio occupancy fell to 67.7% (from 73.6% a year ago), with vacancies at Diablo and Figueroa weighing on net property income. Leasing momentum was maintained, with 407,000 sq ft of leases executed in FY2025, although rent reversions remained negative (-6.1%).

Exceptional Items and Cash Distribution Halt

Distributions to unitholders remain suspended as required by lenders under the Master Restructuring Agreement (MRA), with reinstatement dependent on meeting covenants: aggregate leverage below 50% and interest coverage ratio (ICR) above 1.5x. The Manager has indicated distribution resumption will be considered only after these are achieved and MUST exits the MRA.

Strategic Initiatives and Outlook

In December 2025, unitholders approved the Growth and Value Up Plan, broadening the investment mandate to include US and Canadian industrial, living sector, and retail assets, alongside office properties. The aim is to lower portfolio concentration in offices, reduce leverage, and restore financial resilience.

Key priorities for 2026 include:

• Accelerating asset sales (with a Minimum Sale Target by 30 June 2026)
• Utilizing proceeds for debt repayment and selective acquisitions
• Improving portfolio diversification and cash flow stability

The operating environment for US offices remains challenging, but select submarkets (notably Atlanta/Buckhead and Irvine/Orange County) are showing early signs of recovery. No new competitive supply is expected in MUST’s markets, which may help support occupancy and rents going forward.

Management Remuneration

The Manager’s base fee is directly linked to distributable income (DI). As DI declined, the Manager’s base fee fell by more than 67% from FY2022 to FY2025. No voluntary fee waiver has been made, with the Manager citing the need to retain critical talent for managing the portfolio.

Macroeconomic and Market Environment

The US economy slowed in late 2025, with GDP growth at 2.1% for the year and the unemployment rate rising slightly. The Federal Reserve cut rates three times in 2025, which may ease financing costs. US office market conditions remain soft, with high vacancies, but leasing activity and transaction volumes showed sequential improvement.

Conclusion and Investor Recommendations

Overall Assessment: MUST’s FY2025 results reflect substantial headwinds: sharp declines in revenue, NPI, and distributable income, with high leverage and suspended distributions. The strategic shift towards portfolio diversification and debt reduction is positive, but execution risks remain high given macro and sector uncertainties.

For Current Holders: Investors already holding MUST should exercise patience but remain cautious. The REIT is prioritizing debt reduction and asset recycling, but until leverage is brought under control and distributions resume, downside risks remain. Consider holding only as a small, speculative position unless there is clear progress on asset sales, leverage reduction, and/or resumption of distributions in 2026.

For Potential Investors (Not Holding): Those not currently invested should wait for concrete evidence of successful asset sales, lower leverage, and a clear pathway to dividend resumption before considering an entry. The risk-reward is currently skewed towards risk, given sector challenges and high gearing.

Disclaimer: This analysis is based solely on information provided in MUST’s FY2025 financial report and does not constitute investment advice. Please consult with a licensed adviser and consider your own risk tolerance before making investment decisions.

View ManulifeReit USD Historical chart here