Manulife US Reit to acquire properties in Arizona and Oregon for $276m

Diablo Technology Park is a five-building collaborative office campus made up of flex-office buildings. PHOTO: DIABLOTECHNOLOGYPARK

SINGAPORE (THE BUSINESS TIMES) - Manulife US Real Estate Investment Trust (Manulife US Reit) said on Tuesday (Nov 30) that it will acquire three properties in Arizona and Oregon in the United States for US$201.6 million (S$276 million).

The purchase price comprises US$61.75 million for Diablo Technology Park in Tempe, Arizona, US$106 million for Park Place in Chandler, Arizona and US$33.85 million for Tanasbourne Commerce Center in Hillsboro, Oregon. The purchase considerations for these properties are lower than their valuations by 5 per cent, 0.8 per cent and 1.6 per cent, respectively.

Manulife US Reit intends to fund its proposed acquisition through a combination of loans and proceeds from a private placement.

Diablo Technology Park is a five-building collaborative office campus made up of flex-office buildings, while Park Place comprises two class A office buildings. Tanasbourne Commerce Center is a three-building office campus, with each building fully occupied.

Manulife US Reit said these acquisitions are in line with its post-Covid-19 themes and will enhance its portfolio while giving it access to properties with higher occupancies, longer weighted average lease expiry (WALE) and growth in technology and health sectors.

Post-acquisition, Manulife US Reit's portfolio occupancy will increase from 90.9 per cent to 91.3 per cent. The enlarged portfolio's WALE will increase from 5.1 years to 5.2 years.

The manager expects positive rental reversions from the properties post acquisition, as in-place rents are currently below market rents.

For illustrative purposes, the H1 FY2021 distribution per unit (DPU) of Manulife US Reit would have been 2.82 US cents instead 2.70 US cents, assuming that the acquisitions were completed on Jan 1, 2021 and that the Reit held and operated the properties through to end-June, 2021.

To partially finance the acquisition, Manulife US Reit's manager on Tuesday proposed a private placement to raise gross proceeds of no less than US$80 million.

US$73.9 million of the gross proceeds will be used to partially finance the total acquisition cost, while US$6.1 million will be used to pay fees incurred in connection to the acquisition and private placement. The balance, if any, will be used for general corporate and/or working capital purposes.

The Reit plans to issue 154.1 million new units, representing an increase of 9.6 per cent over the total number of units in issue.

The new units will have an issue price between US$0.649 and US$0.676 (both figures inclusive). This represents a discount of 5.1 per cent and 8.9 per cent to the volume weighted average price (VWAP) of US$0.7124 per unit for trades done on the preceding market day on Nov 29, up to the time the placement agreement was signed. It also represents a discount of 2 per cent and 5.9 per cent to the adjusted VWAP of US$0.6898.

The new units constitute 9.7 per cent of the base figure. Their offer will be made to eligible institutional, accredited and other investors.

The Reit expects the new units will be issued and commence trading on or around Dec 9.

To ensure fairness to holders of existing units, an advanced distribution will occur on Feb 17, 2022, for unitholders for the period between July 1 to Dec 8, at an estimated quantum range of 2.16 US cents to 2.36 US cents.

Units of Manulife US Reit ended at 71 US cents on Monday, down one US cent or 1.4 per cent, before trading halt on Tuesday morning prior to the announcement.

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