[SINGAPORE] The manager of Manulife US real estate investment trust (Reit) announced on Sunday (May 11) that it has agreed to sell Peachtree, a 28-storey Class A office building in Atlanta, Georgia for US$133.8 million.
The purchaser is an unrelated third party, and the purchase-and-sale agreement is subject to approval by the lenders of Manulife US Reit, among other conditions.
Manulife US Reit expects to get US$118.8 million as net proceeds from the transaction, excluding the seller’s credit and transaction costs.
This will result in an estimated net loss of US$52.5 million from the Peachtree divestment for FY2025. Net proceeds will be fully used to repay debt.
The rationale to divest Peachtree is to make early partial repayment of Manulife US Reit loans due in 2026. The proceeds will enable the Reit to pay down about 58 per cent of the US$203.9 million of loans maturing in 2026.
Including the US$40 million repayment in March 2025 from the Plaza divestment, Manulife US Reit will pay off about 78 per cent of the loans due in 2026, with about US$45.1 million remaining.
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Coupled with its previous divestment of Capitol and cash contribution from the balance sheet, total debt repayment will be close to US$290 million since Nov 2024.
The sale of Peachtree improves financial ratios, with Manulife US Reit’s pro forma aggregate leverage expected to improve to 57.7 per cent from 60.8 per cent and pro forma weighted average interest cost is expected to reduce to 4.07 per cent from 4.53 per cent.
Under the master restructuring agreement signed with Manulife US Reit’s lenders, the Reit is required to achieve minimum cumulative net sales proceeds of US$328.7 million by Jun 30, 2025.
With the sale of Peachtree, Capitol and Plaza, Manulife US Reit would achieve about 82 per cent of its net proceeds targets.
The heightened economic uncertainty surrounding trade policies and ongoing challenges hampering office transactions, such as remote and hybrid work arrangements and a lack of financing, has created a challenging environment for commercial real estate.
“We remain in active discussions on the divestment of additional properties. In view of current headwinds, we believe that disposing Peachtree would enable us to mitigate risks and achieve the best possible outcome for Unitholders,” said John Casasante, CEO and chief investment officer of the manager.
The manager plans to reposition the portfolio for growth through diversification by pursuing opportunities in other real estate sectors and permissible alternative real estate investments that have attractive and accretive cash yield and are less capital-intensive.
The Reit will also tap its sponsor’s global real estate platform and in-house capabilities to capitalise on opportunities in the US real estate market.
“We remain focused on moving Manulife US Reit towards recovery as soon as possible so that we may return to a growth trajectory,” added Casasante.
Units of Manulife US Reit closed up 5 per cent or US$0.003 to US$0.063 on Friday.