Manulife US REIT 2025 Full Year Financial Briefing: Key Highlights for Investors

1. Overview and Context

Manulife US Real Estate Investment Trust (MUST) held its investor briefing on April 21, 2026, setting out its FY2025 results, strategic updates, and outlook. The presentation comes as MUST continues efforts to execute its turnaround plan amid continued challenges in the U.S. office market. The Trust is navigating a period of portfolio transformation, debt management, and the implementation of its “Growth and Value Up Plan,” which was approved by unitholders in December 2025.

2. Key Financial Highlights

• Sharp Decline in Revenue and NPI:
  • Gross revenue for FY2025 declined 32% year-on-year to US\$113.9 million, while net property income (NPI) fell 33.4% to US\$53.2 million.
  • Same-store NPI (excluding divested assets) fell 13.7% to US\$49.3 million.
  • Key reasons: Loss of income from the disposal of Capitol, Plaza, and Peachtree properties; higher vacancies especially at Diablo and Figueroa; lower lease termination income; partially offset by successful property tax appeals.
• Distributions Remain Suspended:
  • Income available for distribution (DI) dropped 33.2% to US\$25.5 million, with DI per unit at 1.44 US cents (down from 2.15 US cents).
  • Half-yearly distributions to unitholders remain suspended, as required under the Master Restructuring Agreement (MRA). Resumption will depend on meeting the MRA’s Reinstatement Conditions including bringing aggregate leverage below 50% and bank interest coverage ratio (ICR) above 1.5x.
• Debt and Leverage Concerns:
  • Aggregate leverage stands at a high 58.4% (well above MAS’s 50% guideline, but with a waiver in place).
  • US\$186 million of debt was repaid in 2025, largely from asset sales. No major debt due until July 2026.
  • Weighted average interest rate is 4.58% (or 5.25% including Sponsor-Lender loan exit premium), with 74.6% of loans fixed or hedged.
  • Temporary covenant relaxations remain in place, including unencumbered gearing up to 80% and Bank ICR as low as 1.5x until 31 Dec 2026.
• Asset Sale in Progress:
  • Sale of Figueroa (Downtown LA, 35-storey office, 45.6% occupied) for US\$92.5 million is underway. Net proceeds after adjustments expected at US\$85.7 million.
  • Completion expected by 2Q 2026; proceeds to be used to repay loans and improve financial ratios, paving way for further portfolio diversification.
• Portfolio Valuation and Occupancy:
  • Portfolio valuation declined marginally by 1.6% year-on-year to US\$913.8 million (as at 31 Dec 2025).
  • Excluding Figueroa (held for sale), valuation would have shown a 0.5% increase, reflecting some stabilisation in select submarkets and assets.
  • Portfolio committed occupancy is low at 67.7% (down from 73.6% a year ago); WALE stands at 4.5 years.

3. Strategic and Price-Sensitive Updates

• Growth and Value Up Plan Execution:
  • Plan approved in Dec 2025 expands MUST’s investment mandate to include industrial, living sector, and retail assets in the U.S. and Canada, in addition to office.
  • Up to three office assets may be sold, with proceeds to be used for debt repayment, portfolio diversification, and revitalization.
  • The aim is to lower aggregate leverage, improve ICR, and create a future growth runway.
• Divestment Discipline and Protection of “Trophy” Assets:
  • All asset sales must be at no less than 90% of the latest independent valuation and require unanimous board approval, to avoid “fire-sale” losses.
  • While sale of “trophy” assets is not currently intended, it cannot be ruled out if mandated by lenders. However, both lenders and unitholders have an interest in retaining these assets for stability and future upside.
• Manager’s Fee Structure and Unitholder Alignment:
  • Management base fee is pegged to distributable income (10% of DI) and has fallen by over 67% since FY2022.
  • Manager has not voluntarily waived fees, arguing the need to retain key personnel to manage the turnaround.
• Resumption of Distributions:
  • Distributions will only resume after MUST exits the MRA, achieves lower leverage (target below 50%), and improves its cash flow position via asset sales and new investments.
  • This is a critical issue for retail investors who have seen distributions halted for nearly three years.

4. Portfolio and Market Performance Details

• Leasing Activity:
  • 407,000 sq ft of leases signed in 2025, with average gross rents at US\$45 psf (above market average of US\$44 psf).
  • Rent reversion was negative at -6.1% for the year, signaling continued pressure on rental rates.
  • Leasing pipeline of ~1.0 million sq ft (~28% of portfolio NLA) is being actively pursued, with a focus on accretive deals and low tenant incentives (TIs).
• Tenant Profile, Lease Expiry, and Stability:
  • Top 10 tenants contribute 51.4% of GRI; 7 of them have renewed or expanded since 2023, including the US Treasury (recent 2-year renewal at Penn, no TI provided).
  • WALE for the portfolio is 4.5 years, with limited expiries in 2026.
• Market Outlook:
  • Leasing activity in the U.S. office market has picked up, with transaction volumes rising year-on-year for seven consecutive quarters.
  • Atlanta (Phipps) is in the “rising” phase, while other core markets are bottoming out, showing early signs of recovery.
  • No new competitive supply is entering MUST’s markets, reducing future supply risk.
• Sustainability and Governance:
  • 75.5% of borrowings are green or sustainability-linked loans. MUST scored 5 Stars (GRESB), with strong rankings for governance and ESG disclosure.

5. Risks and Potential Share Price Drivers

• High Leverage Remains a Key Overhang: Aggregate leverage is well above regulatory norms and will remain a share price concern until asset sales and portfolio repositioning are completed. Any delay in asset sales or a failure to meet MRA conditions could further depress prices.
• Asset Sale Execution: Timely and value-accretive disposals (especially the Figueroa sale) are crucial to restoring financial flexibility. Fire-sale risks, though mitigated by process safeguards, still exist in a weak market.
• Distribution Resumption: Restoration of distributions is a potential catalyst but depends on successful execution of the Growth and Value Up Plan.
• Portfolio Diversification: Any acquisitions into industrial, living, or retail assets will be closely watched by the market for their impact on yield, risk, and long-term growth prospects.
• Market Recovery Risk: The U.S. office market shows tentative signs of stabilisation, but persistent high vacancies and negative rent reversions remain risks.

6. Conclusion for Investors

MUST’s 2025 results underscore the ongoing challenges from high leverage, weak office fundamentals, and the imperative to reposition the portfolio. The next 12 months are critical: successful execution of disposals (especially Figueroa), lowering leverage, and resuming distributions are key re-rating catalysts. However, risks remain elevated, and investors should closely monitor upcoming asset sales, management’s adherence to process discipline, and any updates on portfolio diversification.

The Trust’s unit price trades at a steep discount to NAV, reflecting market skepticism about the execution risk of the turnaround. Any positive surprises in asset sale prices, earlier-than-expected distribution resumption, or better-than-expected leasing could drive a rerating, while setbacks could further pressure the price.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should review official announcements, financial statements, and consult their own advisors before making investment decisions. Past performance is not indicative of future results. The writer accepts no liability for any losses arising from reliance on this article.

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