Manulife US Reit aims to raise $196m to buy California building

Sum to partially fund US$198.8m acquisition of 29-storey office block in state capital Sacramento

Manulife US Real Estate Investment Trust (Manulife US Reit) aims to raise about US$142.1 million (S$195.8 million) via a private placement and preferential offering to partially fund its US$198.8 million acquisition of a Class A office building in Sacramento, California.

It is the third Reit this week to announce equity fundraising to fund new acquisitions, after Keppel DC Reit and Mapletree Industrial Trust.

Manulife US Reit has proposed a private placement of new units at an issue price of between 84.9 US cents and 87.6 US cents a unit to raise gross proceeds of no less than US$65 million, subject to an upsize option to issue additional units to raise a further US$80 million, it said yesterday.

Its proposed fundraising also includes a preferential offering to eligible unitholders at an issue price of between 83.3 US cents and 86 US cents a unit to raise proceeds of about US$77.1 million, less the amount raised from the upsize option.

The private placement issue price represents a discount of between 3.6 per cent and 6.6 per cent to the counter's volume-weighted average price on Wednesday, the full market day before the underwriting agreement was entered into. The preferential offering issue price range represents a discount of between 5.4 per cent and 8.4 per cent.

The manager intends to use about US$134.8 million, or 94.9 per cent, of the proceeds to partially finance the acquisition of the property - 400 Capitol Mall - in Sacramento's central business district.

A further US$7.3 million will be used for placement and acquisition-related expenses.

The US$198.8 million purchase price represents a 0.9 per cent discount to the US$200.5 million valuation by Cushman & Wakefield as of Aug 27.

The 29-storey office block occupies a net lettable area of 500,662 sq ft. It has an occupancy rate of 94.9 per cent with 44 tenants.

As the capital city of California, near San Francisco and the major tourist destinations of the Napa Valley and Lake Tahoe, said Ms Jill Smith, chief executive of the Reit manager, "Sacramento is a premier business hub with low business and living costs, and a flourishing economy driven by healthcare, government and tech.

"Towering above the CBD (central business district), and benefiting from the US$2 billion rejuvenation of sports, entertainment and hospitality developments plus a residential boom, 400 Capitol Mall is an address of choice to many leading international and professional service companies."

A version of this article appeared in the print edition of The Straits Times on September 20, 2019, with the headline 'Manulife US Reit aims to raise $196m to buy California building'. Print Edition | Subscribe