Q3 AMushtaque: As a result of the decline in portfolio valuation, MUST's aggregate leverage increased to 60.8% as at 31 December 2024. Our trailing 12-month ICR declined to 1.7x, partially due to the one-off US$2.3 million fee paid to lenders, and does not reflect the full-year impact of the US$50.0 million and US$130.7 million debt repayment in March and November 2024, respectively. We are actively pursuing the disposition of certain Tranche 1 and 2 assets to enable MUST to discharge the remaining US$163.9 million of debt well in advance of its maturity in 2026. The planned debt repayment, together with the potential recovery in MUST's portfolio valuation, will eventually help improve the aggregate leverage ratio. Following the completion of our Recapitalisation Plan, we also intend to grow the REIT through a portfolio repositioning by re-deploying existing capital and What is MUST's plan to improve its aggregate leverage and interest coverage ratio (ICR)? How are you managing 'higher-for-longer' interest rates? advantage, allowing us to negotiate an accretive deal which we would consider a strategic transaction. We chose not to consummate 'commodity' leases, which are essentially a race to the bottom because these tenants are looking for a lease with the lowest rental and highest tenant improvement allowance, with no specific preference amongst competitive buildings. Since our current priority is debt repayment, we want to focus on pursuing strategic deals that are accretive, create liquidity, and improve our valuations. This will help us move into the recovery and growth phases more quickly. In 2024, the decline in MUST’s portfolio value narrowed from more than 20% YoY in 2023 to 9.3% IN CONVERSATION WITH MANAGEMENT Going forward, we will continue to optimise and enhance the portfolio performance to support sustainable cash flows, returns and distributions. We will also be undertaking necessary steps to broaden our strategy to include other real estate sectors and permissible alternative real estate investments that offer attractive and accretive cash yields and are less capital intensive. in 2024. The valuation decline was due to higher discount rates and terminal capitalisation rates applied by valuers for certain properties, reflecting weak leasing demand due to tenant downsizing, along with idiosyncratic property-level risks such as higher vacancy or weak submarket fundamentals. By tranches, MUST’s Tranche 1 properties declined by 15.3%, while Tranche 2 and 3 properties recorded smaller declines of 7.1% and 3.9%, respectively. That said, the latest valuations reflect signs of stabilisation in select submarkets. Although properties in softer submarkets such as Washington, D.C. and Los Angeles CBD saw larger declines in values, two properties, Centerpointe (+0.1%) and Phipps (+2.4%), recorded flat to higher valuations as a result of stable discount and terminal capitalisation rates and better market leasing assumptions applied by the valuers. Going forward in 2025, gradual improvements in return-to-office rates and leasing demand are expected to contribute towards stabilisation and improved office values. 12 | MANULIFE US REIT
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