Manulife US REIT warns of net loss amidst 9.3% portfolio valuation decline

The REIT plans to divest properties to repay debt.

Manulife US REIT expects to report a loss for FY2024 following a 9.3% decline in its real estate portfolio valuation, amounting to a drop of $159.5m (US$116.6m) to $1.55b (US$1.4b) from $1.7b (US$1.2b) in FY203.

The decline was attributed to higher discount rates and terminal capitalisation rates for certain properties, as well as weak occupancy in US office submarkets.

The four properties with the largest percentage valuation declines include Penn in Washington D.C., Plaza in New Jersey, Figueroa in California, and Diablo in Arizona, comprising 61% of the overall portfolio valuation decline.

The REIT is currently in talks to divest multiple properties to progress in its 2025 net proceeds target of $449.6m (US$328.7m). 

It also plans to deleverage its balance sheet with the repayment of $273.5m (US$200m) to lenders by 2025 and make accretive investments to grow the net asset value of the portfolio.

“As we progress through 2025 and beyond, gradual improvements in return-to-office rates and leasing demand are expected to contribute towards stabilisation or improvements in office values. However, not all submarkets are expected to recover at the same pace, as reflected in Manulife US REIT’s latest portfolio valuations. Prevailing market sentiment and capital market dynamics in each market are expected to play a critical role in shaping office valuations going forward,” Manulife US REIT said.