Manulife US Real Estate Investment Trust (BTOU) Earnings Call Transcript & Summary

FY '24 Results Briefing. My name is Wylyn, and I'm the Head of the IR team. This morning, we released MUST's financial results, and you can find all the relevant materials, including today's presentation slides on [indiscernible] website as well as the corporate website. Please note that this session is being recorded, and the recording will be uploaded on the website for investors' reference. So we are pleased to have with us today the management team. Allow me to introduce them. First, we have our CEO, Mr. John Casasante. We also have our CFO, Mr. Mushtaque Ali, and Head of Finance, Mr. Choong Yee. For today's briefing, John and Mushtaque will start off with the presentation and thereafter, we will open for Q&A. So let me now hand it over to John to kick off the presentation. John?

Thank you Wylyn. Good morning, everyone, and welcome to our financial year 2024 financial results briefing. Our current leadership team took the helm on June 30, 2024, focusing on the stabilization and recovery of MUST. So far to date, the divestment of 400 Capital has been completed. Proceeds plus $21 million from our balance sheet were used to pay off our 2025 debt. The divestment of Plaza was announced this morning with net considerations of approximately $40 million. Those proceeds will be used to pay down 19% of our 2026 debt. As of December 31, 2024, our occupancy was 73.6%. At year-end, we executed 611,000 square feet of leases for a total WALE of 5 years. Our valuations fourth quarter came in at 1, 137.2. Financial results, same-store net property income, $71.4 million. We had an aggregate leverage of 60.8%, and an income available for distributions, of 38.3%. And as of the end of the year, we're at 1.7x ICR. So with that brief overview, I will hand it over to Choong to go into more detail.

Thanks, John. So I'll keep the focus as I explain the financial results on a same-store basis. As you are well aware we have been pursuing disposition of assets as part of our recap strategy. The same-store results, which are shown here exclude Park Place, Tanasbourne as well as the time-weighted impact of the capital dispositions that we have done in 2023, and then capital was disposed of in October 2024. So on a year-on-year basis, our performance on a same-store basis from a gross revenue perspective was down 15%. And that's largely due to the drop in the occupancy. Most of this was announced or communicated earlier and relates to some of our larger vacancies such as TCW in 865 Figueroa, a financial institution in 10 Exchange, and the reduction of lease by Children's Place. And those also resulted in earnings of termination fees in 2023, resulting in higher revenues in 2023 in comparison to 2024. If we completely normalize our revenues, taking the effect out of the termination fees as well as the net impact on our revenue is just 10%. So taking out dispositions and termination fees, our revenue is down 10%, which is basically on a normalized basis. Income available for distribution was lower and a key factor included in that is a $2.3 million of one-time nonrecurring penalty that is linked to the master restructuring agreement. That was tied to the 2024 net disposition target, and then we have incurred that increased our financing cost. Excluding the effect of that, actually, our interest expenses were $200,000 lower attributable to debt repayments that we have been making. So in the year 2024, we made 2 large debt repayments, one in March for $50 million and one in November for $130 million. Moving on to the next slide. So just reiterating what I mentioned before, if we slice our financial results by tranches, you can see that it's Tranche 1 and Tranche 2 where we have experienced the most decline in our NPI. Most notably, I want to highlight Tranche 2 because Tranche 2 has 10 Exchange properties where we earned $9 million in termination fees in 2023, which is absent in 2024. Apart from that, there were some larger vacancies in 10 Exchange, which were in relation to a financial institution vacating that. When it comes to Tranche 1, most notably, it's Figueroa followed by Centre Point which witnessed the largest decreases. Figueroa is mostly attributable to one large tenant in TCW, which was previously communicated. The good thing is that Tranche 3 assets are actually performing quite well. And I would say they are showing stability in a relatively challenging market. So moving to the next slide. Now while financial results were on a declining trend, the key goal for the management team was to stabilize our balance sheet. And our key accomplishment, I would say, is to achieve a stronger financial position given the circumstances we are in. So as I highlighted, we repaid debt, and you can see that our debt has come down from June to December by $130 million, but on a year-over-year by $180 million. We also carry a healthy and adequate liquidity of $65 million to continue to meet our requirements as well as our capital requirements and if we have to manage risk and repay debt, we have the ability to do that. Our investment properties declined by 9% in valuation, mostly driven by market factors and the overall capital market situation in the U.S. where we are still seeing a lack of active market participants participating in transactions and the return to office has not shown its full impact on the recovery of certain markets. Moving to the next slide. So here, we have highlighted our unencumbered gearing ratio at 64% and aggregate leverage at 60.8%. Under the master restructuring agreement until December 31, 2025, I want to remind you that we have financial covenants relaxed up to 80%. So we are not anywhere near closing on a default from that perspective. And as we pay down more debt, which is the core of our strategy, we will be able to reduce this aggregate leverage from this point onwards. Today, we made an announcement of paying Plaza, as John mentioned, which will result in close to $40 million in debt repayment as well as our future sales, we intend to repay $204 million in our debt by this June. which will significantly improve our leverage, both from a bank gearing as well as aggregate leverage perspective. We are obviously keeping a close eye on our interest coverage ratio. I want to highlight here that this ratio is a trailing 12-month calculation-based. And what it does is, obviously, it does not take into account the debt repayment that we have done more recently as well as it includes the adverse impact of the $2.3 million one-time penalty that we paid under the MRA. Next slide. So we continue to manage our interest rate risk within the confines of our policy. As noted earlier, we try to keep our hedge ratio between 50% to 80%. And currently, we are at 69.4%. We'll continue to monitor the interest rate outlook, which has been recently showing that we may not expect as many rate cuts given the changes in the U.S. and the whole trade situation and inflation outlook. But we are keeping a close eye on that, and we'll continue to monitor our interest rate risk in accordance with our policy. So with that, I'll hand it over back to John for further comments.

Thank you, Mushtaque. Let's move to the next slide. So this leasing performance, I want to reiterate to the group. We are continuing to stay on course with our strategy as we started off with, and that was using capital very strategically and looking at deals from a liquidity and accretive standpoint within our portfolio. So again, at this point in time, we do not see the value in doing commodity leasing and do not see it as a good use of our capital, but rather looking for strategic deals in the market that we can find to help us create liquidity in our asset base and are accretive to overall value. So to run through some of the numbers in the year, we signed 611,000 square feet of leases. Fourth quarter, we signed a few leases at Phipps, Figueroa, Michelson, and Exchange with a long WALE of 5 years. Our rent reversions for the quarter were negative 5.1% year-end, 7.4%. I'd like to point out again that 5 out of those 9 leases that were signed in the fourth quarter, we were above market from a total value standpoint based on the rents. These situations are difficult. We don't know depending on the space that's becoming vacant or on the renewal scenario, again, sometimes the annual increases within the leases within the U.S. market, the growth within that lease can outpace market growth. And within the U.S., we have ups and downs in our office market. So depending on the term of the previous lease, it can be very challenging to achieve a positive reversion unless you're in a very, very strong landlord-favored market. Fourth quarter, we achieved 37,000 square feet of leases. Again, I'd like to point out, in the U.S. in the fourth quarter, it's typically a slow period of time for leasing. We have 3 major holidays that fall within that time period. And it's not the normal leasing cycle to see big numbers in fourth quarter leasing. So with that, let's move to the next slide. So again, we approach this from a very strategic standpoint, optimizing our capital, as I mentioned before. We're proactively marketing all our assets that are available at vacancy. We pursue every deal in the market irregardless of the upfront impression of the deal. Typically, in the leasing negotiation, we are able to determine if there's the ability to leverage our real estate to create an accretive and strategic deal as I've described before, or if we're simply chasing a commodity deal, which is simply a race to the bottom and the winner gets to do a lease at the lowest rate possible. So it's finding the opportunity within the deal for us to create value. We are able to leverage our competitive advantage by using our sponsors' global real estate platform in the U.S. and our strong relationships with brokers within the market. Again, we're pursuing accretive low TI deals that generate higher NERs. Our priority is debt repayment and the use of our CapEx to go towards debt repayment, again, focusing on strategic deals that will maximize liquidity and optimize capital. So with that, let's go to the next slide. Again, this is just showing our expiries across the portfolio. Penn stands out at 4.1%. U.S. Treasury -- we're anticipating a short-term extension with the U.S. Treasury, it's still in the works. So there's not a lot to report on that. But for the most part, we're focused on these, and we're trying to find creative ways to renew tenants, whether it be short-term or long-term. But again, sticking to our overall strategy of creating liquidity, being accretive, and low CapEx requirements. Next slide. Just our top 10 tenants with -- amongst that group, a 5-point year WALE sort of listing down here. I'm not going to spend a lot of time on here. Let's save more time for Q&A at the end on any of these issues. Here, this sort of ties to what Marc was saying as well as it relates to the different tranches and the performance. Keep in mind, when you look at the performance within these tranches, it directly correlates to our valuations. And I think that's a key component in the messaging here is as we continue to see positive movements in the market on the leasing side, last quarter was the first quarter of positive absorption that we've seen in a while. So we'll talk more about that when we get into the marketing section. But again, I think it's important to draw the connection between the leasing than the valuation side of this because there is a direct correlation and you need the leasing to pick up and become stronger to allow buyers to have the confidence to push their underwriting, which in turn creates a more competitive environment and yields you a higher price. With that, let's go into market. Again, I think we're feeling positive about the market. We're seeing a pickup. We saw pickups in a couple of our assets from a valuation standpoint. We're seeing pickups on the leasing side. And again, I think it's important to understand that a positive absorption is the beginning of the process of recovery. And so even though some of these markets still have relatively high vacancy percentages, you need absorption to fill that vacancy. And as absorption continues on the positive track and as you fill these vacancies, what you'll see is you'll see a more competitive environment and a more competitive environment, you'll see rents start to rise as we've seen in some of our submarkets, and you'll see concessions start to decline. So I think this is a very positive takeaway that we are moving in the right direction as of today. I'd also like to mention, as we've talked about in our previous briefings, back to office has definitely picked up. As we've commented in the past, a big issue with that previously has been the federal employees not being required to be back in office. So under this new administration, that has changed and federal employees are required to come back. And again, as we pointed out, that was the first step to back in the office. And so everything is playing out as we had anticipated. Now that the federal government has made this announcement, we're seeing other major employers following suit. Most notably, just recently, JPMorgan came out with a 5-day a week back in the office. So I think we have finally gotten to the point where we've all wanted to be, which is getting back to normalization back in the office. And we're going to be moving and I think in a very positive direction going forward. Again, I touched on this earlier. We're seeing a pickup. Obviously, it all starts with absorption. Your first indicator in a leasing cycle and in a capital market cycle is recovery is through absorption. And so we're seeing that there. So as absorption hopefully continues to be positive, we will see the benefits across the spectrum. This slide is just talking more specific within our submarkets, and I think we can move past this. I'll take Q&A specific to individual assets. This, I think, is a very interesting slide. I want to spend a few moments on this. As you see, it's a cluster of where assets are falling. And again, this is from a leasing standpoint, but it also ties directly into capital markets. So this directly correlates to our asset base. And you can see the movements. For example, Atlanta has moved out of the bottoming phase into the rising phase. And we're seeing this in real-time in the marketplace. So this is a very positive slide and we anticipate this trend will continue. We're sticking to our road map, prioritizing a recapitalization plan. We're very focused on dispositions. We announced one this morning. There is another in the works and we have several in discussion as well. So again, we have stuck to our original plan and that is creating as much optionality as possible as it relates to dispositions, whether it be on market, whether it be off-market, we are having multiple conversations amongst the portfolio with multiple buyers looking for opportunities to optimize the portfolio. Again, we continue with our strategic CapEx spending and liquidity management when we move into the recovery -- as we move into the recovery, I should say because we're getting very close to that point. We have implemented strategies to improve cash flow, achieve long-term sustainability, and resume distributions to unitholders. Through the repositioning and growth, we're going to be diversifying the portfolio to a less CapEx-intensive asset class that provides higher yields and optimizes the ability to mark-to-market in shorter terms and ultimately create longer, more sustainable value with risk-adjusted returns. Next slide. Again, this is just a recap. This is part of the stabilization and progress. Obviously, the sale of 400 Capital, which we've talked about in the past, 500 Plaza, which we announced this morning. We've fully repaid our 2025 debt in November with $130.7 million payment that we made. And the proceeds from Plaza is going to go down to pay 2026 debt. We anticipate having the 2026 debt paid off by June. And we're going to continue prudent capital expenditures and strategic leasing strategy in the use of our $65 million budget. And again, we are in other divestment discussions on additional properties as well. Recovery, next steps, asset disposal paydown $204 million in June. That will cover our 2026 maturities and create a road map to improve financial metrics and liquidity stability, as I mentioned before, by diversifying into other asset classes. The strategy for growth. Diversify and reshape the portfolio, focus on low capital deals, attractive risk-adjusted returns, and continue to leverage our sponsor support and global real estate platform as we move through these cycles of growth.

[Operator Instructions] So I do see one question on the Q&A chat box. So maybe I'll just start off with that. So the question is, based on the recent statements from the Fed, it seems that the U.S. is not going to cut interest rates anytime soon. Are you concerned that this might have a negative impact?

I'll take that first, and I'll let Mushtaque add his opinion. I mean clearly, it would be a benefit if they were to cut rates. I don't know if I'd see it as a negative. I think at this point, given the positive absorption we're seeing on the leasing front, I would see it probably a little bit more as a neutral. Again, this is a brand-new administration that's come in. I think there could be a lot of things that could happen. We're seeing a lot of things happen within the first couple of months. I know there is anticipation there will be one more cut, but the comment is well taken. I think originally, we're anticipating 2. But I don't see it as a negative. I think it's very manageable and we're prepared to work through that. And I don't think that's going to have an immediate impact. And again, just to remind everybody, when we had the last rate cut, it was a positive in the sense that it was moving things to the right direction. But it didn't have a direct impact on our day-to-day business. It didn't affect lending. It didn't create more liquidity on the debt side. It didn't have a direct impact on our real estate. And I'll just add to that comment. One of the other positives we're seeing on the capital market side is we're seeing more debt available for multi-tenant office buildings. And the last time we had a briefing that wasn't evident at that point in time. But today, I will tell you, we've absolutely seen more available debt for buyers of office and multi-tenant. So that is a positive, albeit the rates are the rates. But access to debt is the first step to allow us. And the rest is simply just the analysis around it. So I think it's manageable and I don't see it as a direct negative, but I'll let Mushtaque offer his opinion.

No. I think, John, you have laid out very well. And to just answer this question in a different way, the hedging strategy that we have put in place is designed to address this risk. And we currently are close to 70% hedged. And what does that mean is that we do not get impacted by the rate changes as quickly. We will keep an eye on that. This is something that's keeping obviously an important focus for us. But I'm not concerned about it because we are on the path to a significant debt repayment, as we have noted earlier. So we have made a lot of debt repayment in 2024. There will be further debt reduction in 2025. Together with that, we have 69% of our portfolio hedged allows us to manage interest rate risk in an effective manner.

I have another question here. So your asset base is shrinking due to sales and devaluation. What will be left that can help the REIT recover and grow?

What will be left? So let me answer that a little differently. So the ultimate goal is to diversify. And our #1 priority is paying down debt. And we will get to a point where we will be able to balance recycling capital as well as paying down debt. So as mentioned before, come June, our intent is to pay off our 2026 maturities. And that will give us some additional runway. Through continued focus on recycling capital, that will then allow us to move into the growth phase and ultimately diversify, which will then move us into the direction of sustainability. What was the other part of the question? Sorry?

How will -- I mean, what is left for the REIT to be able to recover? What will we do?

Yes. So the other part -- I guess -- I'm sorry, I lost my [indiscernible]. I apologize. So the other part of this, too, is we do believe that we're going to see a recovery in the valuation side, too. So keep in mind, a lot of this is that we took a very straightforward approach to our valuations, which resulted in a 9% decline. Given our straightforward approach that we took when the market signals recovery, and we feel we've definitely hit the bottom and we're moving off the bottom, we'll still wait to see the speed of moving off the bottom. But I do think there's a potential for an uptick in valuations, which would counteract what we've previously seen. So I think between recycling capital and there's -- we have the ability to grow the asset base through recycling capital.

[Operator Instructions] Otherwise, there's one more question here. How confident are you in meeting your MRA targets by June? Do you think you'll be requesting for an extension?

So our plan is to make a $204 million payment in June, which will in total cover our 2026 maturities, which will enable us to have paid $334 million in total payments towards debt. We also have -- as I mentioned before, we have several assets currently that we are in talks with on dispositions. Just to remind everyone, June 30 is roughly 4.5 months away. So we are continually working towards meeting our debt repayment obligations.

So there's a question in the question-and-answer chat box. Can you comment on the lower-than-national average occupancy rate -- sorry, national average office occupancy rate. Are our properties competitive in local markets?

Let me just try to answer that question as easily as I can for you. I mean one, as I mentioned from the start, every submarket is behaving differently. And so where Atlanta, Midtown, and Buckhead are doing much better, Downtown L.A. is having its issues, Phoenix is having. So not everything is equal. So when you look at national averages, it's an average across everything. And so it's -- if our assets fall into a market that is doing significantly on the high end versus the low end. And so I think it's really more of a numbers calculation. We have assets in several markets where the leasing is extremely slow right now. D.C. is very slow. Phoenix is very slow. Downtown L.A., lots of activity, very expensive to make those deals. So that's one part of the answer to your question. I think the other thing that you need to keep in mind is when you see absorption, that doesn't mean those deals are all accretive. Those could be negative NER deals. Those could be commodity leasing. Those could be someone that has lots of CapEx and they want to fill their buildings, and they're buying occupancy. So again, it's a little deceiving when you look at positive absorption because I think everyone's a natural reaction of those are deals that we would all want to make. But everyone makes deals for different reasons. As I stated, we're not in a position nor would we want to compete in the commodity leasing standpoint, especially at this point in the cycle where we feel things are starting to turn around. So again, it's important to have positive absorption because that's the beginning of the recovery from a leasing standpoint. But sometimes we just can't compete with commodity leasing because it's just -- it's going to use too much of our capital, and we don't get a return on the capital, and we haven't created value and we haven't created liquidity.

Thank you. Another question is relating to the Trump administration. So what's the expected impact of Trump's policy so far in the U.S. office sector? What are your views on that?

I think overall, it will be positive. Keep in mind, Trump's background is real estate. So I think everyone should keep that in mind. I think that's important. I'm not able to talk on the impact of Trump's administration on policies in general. But I will sort of speak to some of the things as it directly relate to our real estate. So I think one important thing that we've been waiting for, and we discussed this in our last briefing was the federal employees being required to return to office. And clearly, Trump gets credit for putting that mandate in place for federal employees to come back to office. So that is a huge positive. And as I mentioned at the beginning of this briefing, we would then see large corporations following behind that announcement, which we did shortly thereafter. We saw JPMorgan making the announcement to 5 days back in the office. So I think it's going to be positive.

All right. Thank you. Again, any questions from the audience? I have Joey here.

I'm Joey. So I just have one. Apologies. This was really covered earlier, but how should we think about the 3 tranches moving forward? Because both divestments, Capital and Plaza were Tranche 2 properties. So how would you describe Tranche 1 properties right now in your view?

So I mean, it's a portfolio of real estate. A year ago, they were put in tranches with a very specific mindset of how to and why to put them in tranches. And we're seeing that those tranches are reacting to the design that was created when they were put in there as the performance slide sort of indicate, which is why we've broken them out by tranche. Now having said that, Tranche 1, which by virtue of being put in Tranche 1 was indicated that it was a lesser of an asset compared to Tranche 3. And we're seeing that from a valuation standpoint. We're seeing it from a leasing standpoint. We're seeing it from an income standpoint. So everything is tying to the original plan of the tranches that was in. But the one thing that we can't ignore is liquidity in the market. And so it's no surprise that undervaluing, underperforming Tranche 1 assets don't have liquidity. So again, I'm not saying all of them don't have liquidity. I think from that standpoint, that's why you're seeing the current dispositions being in Tranche 2. Having said that, there are discussions that are going on for Tranche 1 potential dispositions. It's harder and it's harder by virtue. The market sees Tranche 1 kind of the same way that the previous team saw Tranche 1 when they put the assets in Tranche 1. So I'm not sure if that answers your question, but I hope that gives you the clarity of how we see it.

Thanks, Joey. I hope that answers your question. Do you have another one? Do you have another question?

So I think just 2 questions here. By liquidity, do you mean just speaking about the submarket transaction activity in those areas?

Yes. Being able to sell the asset.

So further on this then, how would you maybe rearrange the properties in your portfolio right now in terms of Tranche 1, 2, and 3, if you were to rank them based on such transaction activity in the submarket?

Well, so let me think about how to -- so first off, I think the tranches and how they were designed are actually proving themselves out in real time as we're seeing it within the results in the slide that Wan just put up on the screen. So I think from that standpoint, I'm not sure I would really move much around. I mean there might be a little tweak here, a little tweak there. But for the most part, I wouldn't really move anything around. It's actually playing out exactly the way it was originally laid out. Now if your question is where is the most liquidity within the portfolio, I would -- clearly, that's going to be in Tranche 3 is where the most liquidity is going to be. And then Tranche 2 and for the most part, Tranche 1. But we do have some activity in Tranche 1 that we're having discussions with. But again, I think what you're going to see -- and again, the good news about us having this conversation at this moment is things are getting better. And so activity is picking up on leasing, activity is picking up on capital markets. And as I mentioned before, we're seeing more access to debt for multi-tenant offices. So everything is improving. Now again, that's going to prove in sort of the same order that we're seeing here. Tranche 1 will improve, I'm sorry, Tranche 3 will improve quicker. Tranche 2 will follow. Now the one outlier that I would say is Peachtree could be a little closer to maybe a Tranche 3 than a Tranche 2. But it's still in Tranche 2. It's not far off. As we saw, we were able to execute on Exchange, which is in Tranche 2. So I'm hoping that answers your question, but feel free to ask it again or differently, and I'm happy too.

I think just one last one here. So I hear your point about Tranche 3 being the most liquid. And of course, you still need some strong core properties in your portfolio. So would you say Tranche 3 is completely off the table in transaction talks going forward?

So first off, I just want to qualify something. So when you say most liquid, let's be clear, we're talking most liquid within this portfolio or most liquid within an office disposition standpoint. Because again, I don't want to imply that offices are flying off the shelf and people wanting to buy them. So the office market on capital markets and leasing is still recovering, we're seeing positive movement. So within the portfolio, I would say those would be the most attractive for someone to own would be Tranche 3. And then what was the other part of your question?

Would you say it's completely off the table for transaction talks going forward?

Look, nothing is completely off the table. It would be much more challenging, but our goal is recovery. Our goal is growth. And our #1 objective is to have the unitholders' best interest in mind. And so nothing is off the table, but it's clearly not one of our -- yes, it would be more complicated for us to do something in Tranche 3. But again, we're not excluding it. We are looking at everything from a very holistic standpoint to an act recovery.

There is another question in the chat box. So there are some news that DOG is considering shedding a portion of the office space that the government owns and nationwide. Does management expect to be affected?

So no, I do not expect it to be affected. Our large tenant, the U.S. Treasury at Penn, as we've stated in the past, will vacate at some point. So that would have been a potential impact. Just to remind everybody in that deal that we had at Penn with the U.S. Treasury, I mean, they were downsizing. I mean they were going to, for round numbers, say, 50% of their footprint. So that was pre-new administration. So I do not see any impact on it. I actually see it as a positive. I know this is more than the answer to your question, but I'm sure this question will come up. And so what the administration has initially proposed and keep in mind, this administration changes things quite quickly. So what I'm telling you today may not be accurate tomorrow, but the initial plan, as I know it, is their intent to dispose of federal-owned buildings. And to be clear, a majority of federal buildings we would consider Class C, so older deferred maintenance, something the private sector would not more than likely not be interested in leasing. So it's inventory that we do not compete with from a leasing standpoint. And just if I were to read into some of the signals that we've received from the new administration on how they would handle this, I anticipate what they will do with these older antiquated buildings, as I described as Class C, is that they'll most likely dispose of them. And then you'll have private sector developers that will purchase them for redevelopment. And the majority of those will get redeveloped more than likely into multifamily and not redevelop office, not to say there will be 1 or 2. But right now, most of the development that we're seeing in the U.S. is going to be on the multifamily side. So again, no direct impact, and you could probably draw a conclusion that there might actually be a positive impact for us on as well.

I don't see any raised hands. I'll just give it a lot more. And one other question is, is there any change to your time line on resuming distributions?

Sure. Thanks. So as part of the recapitalization plan, the distributions are halted until December 31, 2025. Having said that, we are intending to repay a sizable portion of the debt by June of this year as we dispose off assets. Now that in itself will obviously allow us more flexibility in the second half of the year for the use of our capital. But at the same time, we are also very focused on strategic leasing and growth opportunities. So everything will happen step by step. We are in the stabilization phase, and we are moving towards recovery as we make those debt repayments and then we'll be addressing the part of growth. And obviously, growth is a bit tied to distribution. So I would not want to kind of like give a definite time line, but the current time line that was previously proposed that it will remain halted to December 31, 2025, is there that allows us to use capital flexibly after the debt repayments that we are expecting.

I would just add to it. I mean it is a priority for us, and we're continually looking at ways to be able to reimplement that.

I'll just wait for one more to see if there are more questions coming in. There is another question in the chat box. So with a lower NPI and more than 50% reduction in your net income before tax, fair value changes, and reduction in cash holdings, does MUST foresee an actual net loss and liquidity crunch in the coming year?

So the loss that we are seeing in the financial results is primarily attributable to the valuation loss and that we have seen in the prior year as well, which is totally tied to our appraised values. As I explained in the financial results, we have disposed off a sizable portion of our portfolio, and that's why you see a headline higher decrease in the revenues and the NPI. When we break it down on the same asset basis and when we normalize it, our NPI is down only 19%. So the other thing you raised about liquidity, and I mentioned earlier that our key priority is to manage risk while we are going through this transitory phase of our operations. As we are distributing disposing assets, we are focused on debt repayment that reduces our financial risk. At the same time, we are preserving and prudently using the capital in our leasing to allow us to remain sufficiently liquid to meet our obligations. So we are addressing that very proactively in our liquidity management, and that's why you see that we're keeping a healthy cash balance to meet our obligations.

[Operator Instructions] I don't see any further questions. So we can wrap up this session. I just want to thank everyone for your time today. We look forward to sharing results with you again in the first quarter. So thank you. Have a good day. Take care. Bye.