Manulife US REIT Pivot: Need to Guard Against Unfair Value Transfer by the Sponsor (Manulife)

Following the AGM approval for Manulife US REIT (MUST) to pivot into other property segments such as retail, co-living, and industrial assets, the REIT has indicated that its sponsor, Manulife, holds a pipeline of assets in the US and Canada for potential acquisition. As MUST increasingly relies on sponsor-sourced transactions, minority unitholders must be vigilant against value transfer arising from acquisitions priced at materially weaker economics than those observable in comparable US market transactions.

The Litmus Test

In the waiver obtained from the Monetary Authority of Singapore MAS, in the event MUST's leverage is above 50%, it can only buy a property (i) funded with a capital structure of no more than 40% debt and (ii) ICR of at least 1.6 times.

This is a low bar to cross. First, an ICR threshold of 1.6x primarily ensures debt serviceability, but offers limited margin of safety against interest rate volatility, leasing risk, or NPI normalization, particularly when acquiring assets from a related sponsor. Second, US properties in a particular segment can be bought at a higher margin of safety. 

Therefore, the question is how fair will the sponsor, Manulife, be.

United Hampshire US REIT- The Fair Guage

MUST is allowed to buy retail US assets such as Strip Malls. And interestingly, there is one US REIT listed in SGX that is in this business. So, let's see how a few properties in this REIT stacks up assuming a 6% weighted average interest cost and a 40% debt funding （ironically United Hampshire is also geared close to 40%）

Property Name/ Valuation/ NPI/ ICR (assuming 40% debt at 6% interest weightage）

• St Lucie West /$101 million/$5.877 million/2.4x ICR
• Dover Marketplace /$17.2 million/$1.187million/2.87x ICR
• Albany （Divested）/$23.8million/$1.581million/2.76x ICR
• Hudson Valley Plaza （Divested）/$36.5million/$2.481million/2.83x ICR

Across multiple grocery-anchored strip mall assets, observable market transactions support stabilized ICRs between 2.4x and 2.8x under conservative funding assumptions of 40% leverage and 6% interest cost. This suggests that acquisitions clearing only the MAS minimum of 1.6x ICR would fall materially below prevailing market economics.

If Manulife is selling at too high a price, MUST management should just approach United Hampshire US REIT to buy its supermarket/mall assets at 2x to 2.4 x ICR. Given the availability of listed market benchmarks, it would be reasonable for MUST’s board to adopt an internal acquisition hurdle of at least 2.4x ICR for sponsor-sourced asset

The second layer of safeguard should be the Monetary Authority of Singapore (MAS）. While MAS’s waiver sets minimum prudent limits, the burden of ensuring valuation fairness rests primarily with MUST’s board, independent valuers, and unitholders. MAS’s role should be to ensure that sponsor transactions are accompanied by enhanced disclosures and robust independent review to ensure the property purchases from the sponsor is fair.