Manulife US REIT - DBS Research 2023-11-30: Throwing A Lifeline; Downgrade To HOLD

• Manulife US REIT announced a proposed recapitalisation plan involving:
  • Funding support of US$235.7m from the sponsor involving an asset sale (Park Place for US$98.7m) to the sponsor and a six-year sponsor loan of US$137m.
  • - Read this at SGinvestors.io -
  • Raising US$328m in sales proceeds from the asset sale post the adoption of a disposition mandate for existing properties on the balance sheet.
• Post this series of transactions, Manulife US REIT, as part of a holistic plan involving its lenders, sponsor, and REIT manager, hopes to steer itself back towards financial stability and sustainability for unitholders.

Withholding distributions till December 2025

• In addition, the manager has highlighted that as part of these strategic actions, Manulife US REIT will be withholding distributions till December 2025 or earlier should early reinstatement conditions are met. The early reinstatement conditions are:
  1. - Read this at SGinvestors.io -
  2. Consolidated total liabilities to consolidated deposited properties is more than 45% but not more than 50% and interest coverage ratio is more than 2.5x; and
  3. There are no potential events of default continuing for at least one financial quarter.
• Given distributions are halted, Manulife US REIT may have to incur withholding tax of up to 43% on amounts retained and allocable to Unitholders who fail to supply the US withholding forms and certificates. Historically, on average 1.5% of the Unitholders fail to supply the US withholding forms and certificates (US IRS FormW-8)

The 3 steps

• Read more at SGinvestors.io.

Rachel TAN DBS Group Research | Derek TAN DBS Research | https://www.dbs.com/insightsdirect/ 2023-11-30 SGinvestors.io

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