OPERATIONAL REVIEW As at 31 December 2024, Manulife US REIT’s portfolio comprised nine office buildings with an NLA of 4.6 million sq ft, a long WALE of 5.0 years and an occupancy rate of 73.6%. Following the divestment of Plaza in Secaucus, New Jersey in February 2025, the portfolio consists of eight assets located in Arizona, California, Georgia, New Jersey, Virginia and Washington, D.C. spanning 4.1 million sq ft in NLA. POSITIVE SIGNS EMERGING FOR U.S. OFFICE SECTOR 2024 marked a year of stabilisation and gradual recovery in the U.S. office market. According to JLL1, U.S. office occupiers had their most active quarter in 4Q2024 since the pandemic onset, leasing 52.9 million sq ft, a post-pandemic high for the third straight quarter. This reflected a 4.9% growth QoQ and 17.6% growth YoY. The market also experienced its first quarter of positive net absorption since 4Q2021 at 276,400 sq ft in 4Q2024. In terms of supply, office groundbreakings have averaged 10% lower than the previous historical low for the past six quarters, and deliveries will begin to decline sharply after the first half of 2025. Approximately 30 million sq ft of new offices were delivered in 2024 out of a total inventory of about 4.8 billion sq ft. Out of the ~500,000 sq ft that broke ground in 4Q2024, most projects were small-scale, precommitted developments. Meanwhile, the momentum continues for return-to-office, with several major employers establishing or increasing requirements, or announcing new ways of enforcement in 4Q2024. More companies have also established fiveday attendance requirements, namely Amazon, AT&T, Washington Post, Dell Technologies and JPMorgan Chase. MUST: STABILISATION IN PROGRESS IN 2024 In line with MUST’s Recapitalisation Plan, the Manager has begun its disposition of assets, starting with Capitol in 1 JLL U.S. Office Outlook 4Q2024. 2 Based on the respective purchase and sale agreements, and subjected to closing adjustments. 3 The divestment consideration took into account the independent valuation of the property. Using the income capitalisation approach, which consists of the discounted cash flow method and direct capitalisation method, CBRE, Inc. valued the property at US$118.0 million as at 1 September 2024. 4 The divestment consideration took into account the independent valuation of the property. Using the income capitalisation approach, which consists of the discounted cash flow method, Cushman & Wakefield of New Jersey, LLC valued the property at US$43.7 million as at 31 December 2024. DIVESTMENTS Property City, State Net Consideration2 (US$ million) Valuation (US$ million) Buyer Completion Date (U.S. time) Capitol Sacramento, California 1103 118.0 400 CM OWNER, LLC 28 October 2024 Plaza Secaucus, New Jersey 404 43.7 500 Plaza Ground Lessor LLC 25 February 2025 Total 150 October 2024, followed by Plaza in February 2025. Proceeds, along with US$21 million cash from MUST’s balance sheet, have been used to pay off 2025 debts and 20% of 2026 debts. The Manager continues to focus on asset dispositions while maximising sales proceeds to prioritise debt repayment, which will bring the REIT closer to its recovery and growth phase. It also continues to engage in divestment discussions on additional properties in order to pay down the remaining 80% of loans due in 2026. As at 31 December 2024, MUST’s same-store occupancy declined YoY to 73.6%, from 84.2% as at 31 December 2023. This was a result of significant vacates and downsizes such as TCW Group's non-renewal in Figueroa, a financial tenant’s vacate in Exchange, and The Children's Place downsize in Plaza. Approximately 611,000 sq ft of leases were executed in FY2024, representing 13.4% of its portfolio NLA. Average rent reversion came in at –7.4% for leases signed for the full year. STRATEGIC ASSET MANAGEMENT TO OPTIMISE CAPITAL In 2024, the Manager continued to proactively manage the portfolio with a focus on strategic deals that maximise liquidity and optimise capital. In the current tenant's market, many leasing deals come with significant tenant concessions, resulting in long payback periods without providing any meaningful uplift to valuations. The Manager is therefore strategically prioritising leases where it has a competitive advantage. Rather than solely pursuing occupancy, it is focused on structuring leases that are accretive to MUST. Despite the challenging conditions, the Manager executed ~611,000 sq ft of leases, mainly from the Information, Retail Trade and Real Estate sectors. It also maintained a well-spread lease expiry profile. 9.5% of the leases based on NLA are expiring between 1 January 2025 and 31 December 2025. ANNUAL REPORT 2024 | 25
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