Manulife US REIT Announces US$92.5 Million Divestment of Figueroa Office Property in Los Angeles to City of LA

Manulife US REIT Announces Major Divestment: Sale of Figueroa Tower in Los Angeles

Key Points

Manulife US Real Estate Investment Trust (Manulife US REIT) is proposing to sell its 35-storey office property, Figueroa Tower, located at 865 South Figueroa Street, Los Angeles, California, to the City of Los Angeles (Department of Water and Power).
The sale price is US\$92.5 million, with net proceeds estimated at US\$82.4 million after deduction of divestment-related expenses, holdback amounts, and leasing costs.
The property was valued independently at US\$92.7 million as of 20 March 2026.
The sale is subject to approval by the City of Los Angeles’ Board of Water and Power Commissioners and City Council. The purchase and sale agreement has not yet been signed by the Purchaser and is expected to be fully executed around May 2026, pending necessary approvals.
Upon completion, Manulife US REIT will reduce its portfolio to six properties with an aggregate net lettable area (NLA) of approximately 2.8 million sq ft.
Proceeds will be used for early repayment of loans maturing in 2026 and partial repayment of loans due in 2027, as well as funding capital expenditures.
The divestment is expected to improve Manulife US REIT’s aggregate leverage ratio from 58.0% to 55.3%.
Estimated net loss from the divestment is approximately US\$10.1 million.
The transaction is classified as a major transaction under Singapore Exchange rules but does not require further unitholder approval due to an existing Disposition Mandate.

Detailed Analysis and Implications for Shareholders

Transaction Structure and Terms

The sale involves a purchase and sale agreement with the City of Los Angeles, which will only be executed after required municipal approvals. The initial deposit is US\$1.85 million, with an additional US\$1.53 million deposit if the completion date is extended by up to 15 days. The property is sold “as-is, where-is” and subject to existing leases and permitted exceptions. The Seller Leasing Costs and Holdback Amount, totaling approximately US\$6.8 million, will be deducted from the sale price.

Valuation and Pricing

The independent valuation by JLL Valuation & Advisory Services, LLC, places the property at US\$92.7 million. The net consideration meets the Disposition Mandate requirement that sale prices be no less than 90% of the latest independent valuation. The Manager is entitled to a divestment fee of US\$0.4 million (0.5% of net consideration).

Financial Effects

Distribution Per Unit (DPU): The DPU is expected to decrease from 1.44 US cents to 1.41 US cents after the Figueroa Divestment and further to 1.33 US cents after additional prior divestments and debt repayments. This represents a dilution of 2.1% and 7.8%, respectively.
Net Asset Value (NAV): NAV per Unit will decrease from US\$0.19 to US\$0.18 post-divestment and debt repayment.
Aggregate Leverage: Gross borrowings will decrease from US\$559.0 million to US\$486.6 million, and total assets from US\$963.2 million to US\$880.7 million. Aggregate leverage improves from 58.0% to 55.3%.
Net Loss: The divestment will result in an estimated net loss of US\$10.1 million, calculated by subtracting net proceeds from the book value of the property.

Strategic Rationale

The Manager states that the divestment forms part of efforts to strengthen the REIT’s financial position, repay debt, and prepare for portfolio diversification and growth. The sale is expected to pave the way for improved financial ratios and future expansion.

Regulatory and Governance Considerations

The divestment is classified as a major transaction under SGX Listing Manual rules (relative figure of 85.5% for aggregate consideration vs. market capitalization).
The sale is executed under the Disposition Mandate, which provides authority for the Manager to sell assets without additional unitholder approval, as long as conditions are met (including independent valuation, pricing requirements, and director approvals).
All directors of the Manager have approved the transaction, and no new director appointments are contemplated as part of this divestment.
The Purchaser is an unrelated third-party and not an interested person under SGX rules.
Documents related to the sale, including the purchase agreement and valuation report, are available for inspection for three months at the Manager’s Singapore office.

Potential Price Sensitivity and Shareholder Considerations

Execution Risk: The sale agreement has not yet been signed by the Purchaser, and completion is contingent on municipal approvals. There is no assurance the transaction will complete.
Impact on Financial Metrics: The divestment will reduce DPU and NAV per Unit, and shareholders should expect a dilution in income available for distribution.
Leverage Improvement: Reduction in leverage may be viewed positively by investors, improving balance sheet resilience.
Portfolio Change: The property was only 45.6% occupied as at 31 December 2025, so its sale may improve overall portfolio occupancy and financial health.
Loss on Sale: The net loss of US\$10.1 million may be viewed negatively, but is offset by strategic debt reduction.
Major Transaction: Classification as a major transaction under SGX rules indicates substantial impact and is likely to be closely monitored by investors.

Conclusion

The proposed divestment of the Figueroa Tower is a significant corporate action for Manulife US REIT, with direct implications for financial metrics and portfolio composition. While the reduction in debt and leverage strengthens the REIT’s financial position, the dilutive effect on DPU and NAV, as well as the net loss, are important considerations for investors. The transaction remains subject to execution and municipal approval risks, and its completion could be a catalyst for share price movement, either positive due to improved leverage or negative due to dilution and loss.

Disclaimer

This article is for informational purposes only and does not constitute investment advice, solicitation, or an offer to buy or sell any securities. Investors should conduct their own due diligence and consult financial advisors before making any investment decisions. The value of investments may fall as well as rise, and past performance is not indicative of future results. Manulife US REIT units are subject to investment risks and are not guaranteed by the Manager or Trustee.