Manulife US Real Estate Investment Trust ($BTOU)

Hi, very good afternoon, ladies and gentlemen. Welcome to Manulife US REIT's webinar. So we'll be having John, the CEO, do the presentation for us. And later, if there are any questions and answers, we will have it in the chat box where you can type your questions in and we would then read it out accordingly. Thank you. May I hand it over to management to start the presentation. Thank you.

Good afternoon, and welcome, everyone, to our investor briefing. I'll start off by giving some highlights from our fiscal year 2025 financial results before sharing some updates on our MRA progress as well as our outlook and strategy. Operationally, our occupancy has held relatively steady at 67.7% with a portfolio WALE of 4.5 years. We executed about 407,000 square feet of accretive leases in 2025, which is about 11.5% of our portfolio NLA. Our portfolio valuations dipped slightly at negative 1.6% to USD 913.8 million, while aggregate leverage increased to 58.4%. As of December 31, 2025, our weighted average interest rate was 4.58%, slightly improved from 4.69% in third quarter of 2025. In December 2025, unitholders approved our Growth and Value Up Plan, and our lenders also approved the master restructuring agreement concessions, paving the way from us to exit the MRA and diversifying the portfolio and improving long-term value creation for unitholders. In March, we announced the sale of 865 Figueroa in Downtown Los Angeles for a gross sales price of $92.5 million. After seller credits, this brings us to a net consideration of around $85.7 million. The sales proceeds will be used to repay outstanding loans, which will help improve our aggregate leverage and pave the way for our strategy towards diversification and growth. While the Manager has signed the PSA and agreed to the terms, I'd like to highlight that the buyer is a municipality entity and in order for them to execute the PSA, they need to go through an approval process, which includes Board meetings and City Council meetings, where members of the public may attend. The Board meeting was held on April 14, and I'm pleased to share that the acquisition was approved by all Board members. There is now a series of 5 City Council meetings need to be held to address comments, if any, on the acquisition. This has commenced as of last week, and there were no comments raised at the first City Council meeting. Although there is no assurances at this point, but it seems things seem to be progressing as they should, and we remain optimistic that the sale will be able to complete by June 2026. We'll now hand it over to Mushtaque to elaborate on the financial performance in the subsequent slides.

Thank you, John. I will now walk you through with the financial performance for the fiscal year 2025. So full year net property income on our total portfolio declined by $27 million, of which $19 million was attributable to the assets that were disposed off in the past 1.5 years, namely Capitol, Plaza and Peachtree. On a same-store basis, our NPI was down $7.8 million, which was 13.7% decline on a year-over-year basis. Most of this decline was attributable to higher vacancies, particularly in our Tranche 1 assets, Diablo and Figueroa as well as some low termination income that was reported at Diablo and Exchange. This was partially offset by tighter cost controls as our overall operating cost for properties declined mainly due to property tax net of the recoveries from tenants. Due to the loan repayments that were achieved out of disposition of assets, our interest cost was also lower by $11.6 million, which helped reduction in overall finance costs. Moving to the next slide. On a same-store basis, our portfolio NPI was mainly decreased or declined in Tranche 1 assets. Tranche 1 assets recorded an $8 million decrease, which is 35% on a year-over-year basis. Tranche 3, on the other hand, which are our assets that showed a growth in NPI. And both of the assets in Tranche 3 recorded 8% and 10%, respectively, of growth. Overall, 9% growth. Moving to the next slide. From a financial position perspective, our key highlight was significant reduction in debt, which was possible because of repayment of $186 million of debt in the financial year 2025, of which $40 million was paid from sale of Plaza, $121 million was repaid from the sale proceeds from Peachtree and another $25 million was paid from cash on the balance sheet. With these repayments, there are no debt repayments due until July 2026. And in July 2026, we owe $35.6 million to our lenders. Next slide, please. So as I mentioned, our debt repayments now, the debt that is outstanding is, for 2026, $35.6 million, and thereafter, '27, '28 and '29 debt maturities. The color coding here shows mainly the debt that is owed externally versus the debt that's owed by our Sponsor in 2029. One thing to highlight here is that the externally owed debt is $376 million, which makes around 39% of our total assets. Our overall aggregated leverage stood at 58.4%, and our weighted average interest rate was 4.58%, a slight improvement from Q3. Next slide, please. So as of December 31, 2025, close to 75% of our loans were either hedged our fixed rate loans. However, this ratio is going to decline as our hedges will mature. We continue to monitor the interest rate outlook to make decisions on hedging of our loan portfolio, and we will take the actions to hedge as our hedges roll over, depending on the outlook of the interest rates. Next slide, please. So these slides provide our interest coverage ratio and the sensitivity of the ICR to various factors. As of December 31, 2025, our MAS ICR were 1.7x, which includes both cash and noncash interest costs. If we exclude noncash interest costs, which is mainly the exit premium on our Sponsor loan, on a cash basis, our ICR is 2.0x, which is in line with our bank covenant, which requires us to track ICR on a [indiscernible] basis. In order to improve this metric further, we'll continue to proceed with our Growth and Value Up Plan, which would basically result in repayment of loans and acquisition of high-earning assets to improve this ICR. With that, I'll pass it back to John for further comments. Thank you.

Thank you, Mushtaque. As of December 31, the valuations of 4 out of 7 assets saw improvements compared to the previous year, portfolio valuation dipped by 1.6%. However, if we exclude Figueroa from this, which has been reclassed as an asset held for sale, portfolio valuations would have improved by 0.5% to $815.7 million as of December 31, 2025 compared to $811.9 million a year ago. Overall, portfolio valuation reflect signs of stabilization and varying degrees of improvement in leasing fundamentals across the different submarkets across the U.S. Next slide. Our leasing performance portfolio occupancy remained fairly stable at 67.7% compared to 68.2% in third quarter 2025. Quarter-over-quarter, the slight decline was a result of a couple of tenants vacating at their natural expirations at Exchange and which was offset by an increase in occupancy at Phipps due to the signing of a new lease. We continue to focus on signing accretive and strategic leasing. Of the 407,000 square feet of leases we signed in 2025, gross rents averaged about $45 per square foot versus the market average of $44 per square foot in our submarkets. This is in the actual submarkets where our real estate is located. And more than 70% of our leases that we signed had no tenant improvements. For the leases signed with TIs, those tenant improvement allowances averaged about $43 per square foot, which is significantly below the submarkets where our assets are located. We also made it a point to ensure that all leases signed were accretive against most recent valuations. The WALE of our leases executed at 2025 was 3.6 years at a rent reversion of negative 6.1%. The negative rent reversion is also partially due to some long-term leases with rents that have outpaced the market over time. By NLA, 67% of our leases signed in 2025 were renewals, 26% were new leases and 7% were expansions. In fourth quarter, one notable renewal we executed was the U.S. Treasury, which was 120,000 square feet at Penn. I will share more about this renewal in a later slide. Next slide. We remain on the course with our strategic leasing strategy. From the outset, our approach has been to deploy capital strategically, looking at deals based on liquidity and accretive value within our portfolio. We currently have 1 million square feet of leases in the pipeline in various leasing stages ranging across tours, proposals and negotiations. This makes up about 28% of our portfolio NLA. In fourth quarter 2025, we saw more leases in the lease negotiation stage progress to the lease executed stage, which shows a healthy conversion rate from negotiations to signed leases. Next slide. Here is an example of a strategic lease that we signed. We announced last November that we had executed a 2-year lease renewal with our 5th largest tenant, U.S. Treasury. The tenant substantially retained its 120,000 square foot space and renewed at its existing rent, which is in line with other U.S. Government Administration leases signed in the market. There was no TI allowance and the lease was extended Penn's WALE from 1.4 years to 2.3 years as of year-end. While U.S. Treasury had earlier informed us of its decision to relocate, it's decided to sign a short-term extension of its existing lease of Penn, which helps to provide us with greater cash flow certainty amidst ongoing challenges in the D.C. office market as it continues to recover. This is an example of our local asset management team remaining in close contact with the tenant and their brokers to show flexibility and opportunity to be able to accommodate any potential needs that they have whether today or going forward. We remain focused on sourcing and executing strategic and accretive leases where we hold a competitive advantage and can create a scenario that benefits both landlord and tenant rather than competing purely on rent and tenant concessions so as to create value for unitholders. Next slide. This slide illustrates our portfolio lease expirations, which is well spread out over the next few years. Of the 4.4% expiring by NLA this year, so far, 14% is expected to be renewed while we continue to engage the remaining in renewal negotiations. This slide shows our top 10 tenants with a 4.6-year WALE by NLA. We have highlighted some of the top 10 tenants in blue. These are the 7 tenants who have renewed or expanded with us since 2023. We continue to have further conversation with some of these tenants on this list to continue these efforts to turn more of these lines into blue, having worked with our larger tenants to be able to retain them in our buildings. Next slide. This GLL property clock shows which phases must submarkets currently lie. As you can see, it shows Atlanta well positioned in the rising phase, indicating improving leasing activity and fundamentals, while MUST other submarkets are clustered in the bottoming phase, signaling some ongoing challenges. Nevertheless, some markets are approaching stabilization and appear to be moving into recovery. This property clock is extracted from our independent market report, which is also available on our website. The Growth and Value Up Plan, which unitholders approved in December of 2025, will enable us to maximize returns from disposition proceeds through acquisitions, reinvestment in existing assets and/or repayment of debt. Our strategy to growth comprises 4 components: risk management, capital markets, asset level strategy and portfolio optimization. Post default in 2023, we prioritized risk management given that we had upcoming debt maturities in '25 and '26. We have since made significant debt repayment progress, and we'll continue to manage our liquidity and our financial covenants. Under capital markets, we plan to continue managing our debt maturities, and when the time is right, access capital market solutions for growth. On our asset level strategy, we conduct wholesale analysis to determine how we optimize our capital allocation to improve asset performance. And finally, portfolio optimization involves capitalizing on value opportunities created by market dislocations. We plan to diversify the portfolio to achieve sustainable, risk-adjusted returns to create value for unitholders. Next slide. As a recap, the goal of the Growth and Value Up Plan is to revitalize MUST portfolio to improve diversification and long-term value creation to pave the way for us to exit the MRA and resume income distributions as soon as possible. We have broadened our investment mandate beyond the U.S. office sector to principally invest in income-producing real estate in the U.S. and Canada as well as real estate-related assets. The broadened mandate took effect January 1, 2026. Our focus will be on industrial assets, including new economy assets, living sector assets as well as retail assets in the U.S. and Canada. We aim to revitalize our portfolio through the sale of up to 3 office assets with proceeds to be used to acquire new assets, repay debt and fund capital expenditures, tenant incentives and leasing costs. Our end goal is to lower MUST's aggregate leverage and provide a future runway for growth. With this in mind, our priorities are quite clear this year. Firstly, we target to achieve the minimum sales target by June 30, 2026, and utilize sales proceeds to repay our loans maturing in '26 and '27. Our divestment at Figueroa is on track. Secondly, we aim to execute further asset sales to acquire initial focus assets to revitalize our portfolio, repay debt and fund CapEx, TIs and leasing costs. We continue to evaluate investment opportunities that can help us to lower aggregate leverage and improve our ICR by year-end while maximizing our returns by executing strategic leases and optimizing our capital allocation to create value in our portfolio. This brings me to the end of my presentation. I will hand it back for the Q&A session. Mushtaque and I will be happy to take your questions.

Okay. So thanks for the presentation. So we've got an investor who has gone through reading your annual report, and he would like to have some questions. The valuation of DTLA asset. Why did the valuation of Figueroa drop further in 2025 after securing leasing from Bank of California?

Yes. So that lease, albeit it was a great lease for us, there were a lot of positives in the way it was structured. It was a minimal amount of capital that was required to achieve that lease. It was definitely an accretive lease. Unfortunately, relatively small lease to the total square footage of the building. In total it was 40,000 square feet against a little over 715,000 square foot building. So it was a small piece. Total occupancy is still below 50% on that building. So that is basically why the valuation is -- this is part of it. The other part of the story is from a capital market standpoint, the buyers that are, for the most part, in that market are basis buyers and investors are looking for a certain level of return. There's been some comps. Most of the comps are supportive of where we're transacting at the moment. But all in all, the valuation was a function of the comps that they had to work with at that point in time, remember, as a year-end valuation. So they were working with comps as well as a building that is 50% occupied.

Okay. Following that, is there any reason it was held and sold this moment, although it's been classified under Tranche 3 and bottoming phase? And also, what would be the contingency plan if the sale of this asset has not been approved?

So I'm sorry, which asset were you referring to?

The same one, Figueroa.

Okay. So Figueroa is a Tranche 1 asset, just to be clear.

Sorry, I think the investor got it wrong, yes.

Yes. So the Tranche 1 asset, again, we have contingency plans, clearly. But we can't go into detail, obviously, on that. Those are confidential. These calls are public. We are under contract currently with a buyer. That is progressing as we would expect, as noted earlier and in our announcement. So there are backup plans. But we feel that things are moving accordingly, and we continue to monitor it as well. And I'll point out another part of this, too, is this buyer is going to be occupying the building. They're currently going to be occupying 350,000 square feet of that building. So from their standpoint, there's also an occupancy need to be in that building.

Okay. Just to clarify, the sale would be completed by end of June, right, you mentioned?

Yes.

Okay. The occupancy rate -- what is the root cause that the occupancy rates of Manulife US REIT are not recovering while occupancy rates and that of the peers such as PRIME, Keppel Pacific Oak have been sort of outperforming U.S. REIT? Is there any reason for the discrepancy in the performances?

Yes. So I think it's important to recognize that our assets are all in different submarkets. The United States is not one market, even though it's commonly looked at that way. There's different submarkets, and even within the different submarkets, there's different micro markets as we would call it. And so just as an example, Downtown LA, still the leasing market is not great. It's still struggling. Capital markets is not a great story in Downtown LA either at the moment. However, you go 10 miles away from Downtown LA and you're in Century City. And the Century City leasing market is through the roof. It's doing amazing. We're actually building a brand-new office building because occupancy levels are so high. So not everything is equal across the U.S. I do know some of our competitors have lost some occupancy as well. There's lots of reasons for it. One of the primary reasons is we're in different submarkets, right? So Atlanta, our Phipps asset has a much higher occupancy, we see much more leasing activity than, for example, Diablo, which is a very slow leasing market right now and having to sort of redefine the user that would be interested in our building since COVID has occurred. So there's a story for every submarket. It's very explainable. The other part of this, too, is we've been very disciplined on our leasing. And so when I say disciplined, we have a finite amount of capital to work with, and we've chosen to pay down debt as a priority, which everyone is aware of. And it's left us with capital that we need to make sure -- in any situation, any advisers should be deploying capital in an accretive manner and in the best efforts to create value for their unitholders. And so we haven't done any leases for the sake of just buying occupancy as we see in the U.S. Every deal we have done has been accretive against our most recent valuation. Now that accretion doesn't always translate directly to valuation accretion, and that has a lot to do with the conditions of the marketplace. But within the parameters of the valuation for our property, we run the deal through that model to make sure it is creating value within the confines of that model. Now in lots of cases, as you've seen in our Tranche 3 assets, the leasing that we've done has proven to be positive. And even in one of our Tranche 1 assets, we've seen some positive movements as well. So every submarket is different. And we're using our capital in a manner to create value today or potentially long-term value for the real estate.

Okay. I think there's a follow-up question on this, is that due to your low occupancy rates, what are the active measures that management is taking to actively fill up this low occupancy rates? And when can we see Manulife reach market occupancy rate for your assets?

Yes. So again, the office leasing market in the U.S. in general is not good. Now there's some submarkets, as you've seen on one of our slides, that is doing well. Century City is doing well. But I will tell you, there's more markets in the U.S. that are not doing well that, on a leasing standpoint, the markets that are doing well. So it's a recovering leasing market, which, again, we look at. And again, I know this is hard for a lot of folks because they're not in the driver's seat and they're not seeing what we see. But we look at every single deal that comes to our building. So every one of our buildings have leasing brokers set in place that do not get paid unless we do a lease on that building. So they're absolutely incentivized to bring a deal to us on our buildings. In addition to that, we have an asset management team that are working with the brokers on the real estate as well. And in addition to that, I am intimately involved with every single one of our assets with our asset managers and with our leasing teams to try to find deals that make sense for our buildings. So we are absolutely doing everything we can to improve leasing. Unfortunately, the market needs to cooperate and you need to have someone willing to do a lease. And some of the cases, we'll have someone that's willing to do a lease, but their expectations are just completely not in line with where we need to be for that building. And when I say not in line, what I mean is doing that lease would be detrimental to the future valuation of that building. So if you do a lease that's below where the valuer has previously set expectations for that building, what's going to happen is the next time you do a valuation, they're going to use that as the target of where the rent should be for that building. And essentially, by doing that lease, you drag down the value of your building. So there's a balance between doing deals that are accretive, creating occupancy, creating liquidity and making sure that you preserve valuations or improve valuation situations. But it's all market-driven. And I think that's really important to understand is it's not like there's deals that are coming to us that we want to make that we don't make. We make every single deal that makes sense, that's accretive that comes to our buildings. There's just not a lot of activity. And there's going to be an announcement that's going to come out in the next week of a lease that we've done. And it's an early renewal of a very large tenant. It's very accretive. It was a good deal for the tenant and the landlord, but it doesn't improve occupancy. It just improves the long-term value of the building by increasing the WALE, and it demonstrates to the market that a large credit tenant would want to stay longer term in one of our buildings. But there's just not a lot of new deals. I mean, there's deals that we're working on. Most of those deals are either in Irvine, at Michelson or at Phipps is where we see most of the new deal activity. I will say things are starting to improve in Arizona and Tempe at Diablo. We currently have 4 proposals that we're working with now. And if we can make sense out of the economics, as I mentioned before, we will do our best to compete to make those deals.

Okay. Growth and Value Up Plan. Manulife US REIT continue to execute. The valuation continue to drop for the remaining office properties. If yes, how would Manulife execute it with the leverage? There's some leverage constraints. Is that correct? Is your leverage a bit constrained at this quite elevated levels?

Do you want to take that, Mushtaque?

Yes. So I think that's a good question. The one thing to note here is that if we look at the trend of our valuations, our valuation on a same-store basis excluding Figueroa was quite flat, which is an indicator that when we have the assets in our portfolio that are holding the occupancies and where the submarket conditions are improving, the market is holding up and the valuation declines have either kind of like in a state of bottoming out, which is a positive sign. In terms of the leverage, the leverage obviously can be reduced through debt repayment, which can come from generation or raising of capital or by selling assets. So in our Growth and Value Up Plan, we have a disposition mandate and an acquisition mandate. And the purpose of having the disposition mandate renewed was to continue to look for opportunities where we can dispose of assets, but not with an objective of disposing assets for the sake of disposal and paying down debt, but rather than do it in a manner where we also acquire assets, which can potentially grow our portfolio. And the growth will basically support reducing the leverage. So that execution of the Growth and Value Up Plan will exactly tell you how we will come out of this total leverage situation. But it depends on the recovery that we are hoping in our good assets that we are keeping on the balance sheet, continue to do the strategic leasing and then executing on the Growth and Value Up Plan in a manner that reduces the debt in a phased manner, but will allow us the ability to invest in further growth factors.

So just to conclude, the leverage is -- you don't see your leverage has any near-term issues given that the interest rate environment is likely to stay quite stable. So your current leverage, you are quite comfortable with?

No, we are not comfortable with the current leverage. The current leverage is high. And the precise reason, as I said, the Growth and Value Up Plan would basically be executed in a manner that will allow us to reduce the leverage in a phased manner, but not just reducing the size of our portfolio because if we keep paying debt only without any acquisition would result in shrinking the portfolio and lead towards an unintended liquidation. So the strategy would be to balance between acquisition and debt repayment to allow us to basically grow and grow in other asset classes outside of office, which basically help to contribute growing the value of the portfolio and reducing the leverage down.

Okay. The next question is on the Middle Eastern crisis, which just happened about a month ago. How is this affecting the tenant sentiments, whether it's new existing or the ones that potentially could be in the pipeline? And how would this affect the U.S. commercial real estate condition? And also, would it have any indications on the timeline of your move into other asset classes outside of the commercial sector?

So for starters, we have not seen to date a direct impact from the conflict in the Middle East. Now having said that, no one knows the length of time that this will continue. If you believe what you see on TV, what's been communicated in the U.S. is that this won't last for that much longer. So there is a thought within the U.S. that if this is short-lived, things get resolved, things could snap back pretty quickly in the U.S., and we'll continue on the path that we were before this conflict and maybe things slightly better. So that's one thought pattern that you see in the U.S. If this drags out, clearly, we're already seeing some potential early signs of inflation that create other issues, create the potential for rates to stay flat, rates to potentially increase. Those all have potential negative impact within itself. But again, just to be precise in answering your question, there's been no direct impact as it relates to leasing now. Could we speculate that it has slowed leasing demand down a little bit? Sure. I don't know if I would say it's more that the impact of the war or the subsequent things that come from the potential unknown of the length of time of the Middle East crisis, i.e., inflation rates, right? So I would tell you, inflation and potential rate increases has a bigger impact on tenants' decision-making as in any business. Tenants tend to hit the pause button and wait and see. Having said that, as I mentioned earlier, we're still seeing new leases. We have 3 deals right now that are in proposal stage at Diablo. Two months ago, before the Middle East crisis was even happening, we had zero activity, nothing. So I think you can probably find a situation where someone has hit the pause button, but you can probably find 3 other situations where it's business as usual and tenants are still negotiating renewals and potentially taking more space. So again, just to reiterate, there's been no direct impact at this time. Now I'm not saying it couldn't have an impact if this goes on for a lengthy period of time, but we'll have to evaluate that when we get to that point in time. As it relates to the other part of the question, how does this impact our ability to do the Value and Growth Plan. On the acquisition side, I think it's great. I think it actually helps us because there's potential people that may sit on the sideline. As we've said in the past, any dislocation in the market gives us opportunities. Now on the flip side of that, if the assumption is that the capital front acquisition is going to come from recycling capital, then we need to sell something. So we need to execute on a sale. So I think it's all interdependent. But all in all, I haven't seen really -- we haven't seen an impact on the capital market side either, just to be clear. I know I commented on the leasing side. But today, I haven't seen any deals that have -- I don't mean our deals. I'm not just talking about on the platform of MIM, but just within the real estate market. Because, obviously, I'm in the U.S., and I stay in tune with what our competitors do as well as what we do. And I haven't heard any stories of any deals not transacting as a result of what's going on in the Middle East to date.

Okay. Just also a quick question when you mentioned about your competitors just now. For example, PRIME U.S. restarted paying dividends to shareholders and indications are that they are looking to also increase the payout ratio and absolute dividend amount going forward. So as you are all operating in the commercial real estate market in the U.S., so investors would naturally do a comparison of yourself versus someone like PRIME U.S. REIT. So the question is how soon do you think you could reinstate the dividends or start maybe considering some buybacks in the market, too? I think one of the questions is that your unit price is trading quite a fair bit below the net asset value of the company. So this question also goes to ask about a potential for buybacks rather than going out to look for new acquisitions because your unit price is trading at quite a depressed level relative to your net asset value.

Yes. So that's a great question. First, I'd like to point out that our competitors are not under an MRA. So they're in a slightly different situation than we are. And as we've said in the past, as I'm sure everyone is aware, we're not able to pay a distribution until we're out of the MRA. It's obviously a priority for us to do it as quickly as we can. But first we need to be out of an MRA and, secondly, we need to implement when we can do it in a responsible and sustainable manner for the unitholders. I'll let Mushtaque chime in on this as well, but I want to answer the other part of it. I mean, from a growth standpoint, given our asset counts, it's a fair comment about buying back stock. But at this point, we need to grow the base of the real estate to create more NPI and to create more. So right now, from a growth standpoint, the focus is going to be primarily, as we've said in the past, it's going to be on buying more real estate or investing in our existing real estate that we deem to hold long term to create value. But I'll let Mushtaque chime in as well.

Yes. So just to recap, the background of distribution hold was tied to entering into the Master Restructuring Agreement in 2023. And MRA precludes us from distributing any cash. But at the same time, the portfolio has continued to generate income -- distributable income, and that has been either utilized in reinvesting [Technical Difficulty] for leasing or it has been used for debt repayment as part of our risk management strategy. So that's how we have been using the cash. Now as soon as the REIT is able to exit the MRA, our key priority is to resume distribution and do it as soon as we can practically after exiting from the MRA. And one of the largest, obviously, condition to exit from the MRA was to meet the net disposition targets. And the sale of Figueroa will allow that condition to be met. Now there are other conditions as well to be a certain level of leverage and ICR to be able to exit from the MRA. And those will remain in discussion with our lenders, that how do we proceed further because we have achieved the primary goal of the MRA, which was tied to the disposition target, generating enough net proceeds and then see where we are. So those discussions will continue with our lenders. As we exit from the MRA, there will be no restriction on the REIT to not distribute, and that will basically allow us to resume distribution. Now it could not be as high as what it used to be in the past, which is 90% of our distributable income. It will be rationalized to a level which will remain sustainable for us going forward. But we will resume distribution after exiting from MRA.

Okay. Just a follow-on up question on that. There's no timeline for the exit. There is a strategy for the exit, but there's no timeline given.

We are targeting to exit the MRA by the end of this year.

Okay. So the strategy has been set in place for that. Okay. For every 25 basis point change in interest rates, how would that change your financial dynamics?

Yes. So we are facing approximately an impact of every 50 basis point impact our DI by $700,000. So if I take 25 basis points, that would be $350,000 to the income available for distribution. And that's based on our current hedging percentage, which is 75% hedged as of end of December.

Okay. Also, what is the management's plan for 2026, 2027 to roll loans over? And what kind of interest rates are you looking to fix those at, the roll-over loans?

So our 2026 debt will be remaining debt of $25.6 million. We expect to repay in full from the disposition of Figueroa. The remaining proceeds from disposition of Figueroa, which is close to $37 billion, will also repay a portion of 2027 debt. And that would then leave the remaining 2027 debt that is due in April of 2027, which will be subject to discussion with the lenders that how do we deal with and it's all part of exiting the MRA, executing on our growth plans and seeing where do we take this portfolio going forward. So the 2027 debt will be -- it's early to say what will be the outcome of that. But we will be looking to address that as part of our next phase of discussion with the lenders.

Okay. The shareholder is asking, well, thanks management for working hard to pare down your debts. And the question is, how is it that the occupancy rate at Figueroa actually dropped to a low of 45%?

I guess what the question is, is how did we drop. So we lost a major tenant, TCW. What year was that, '22? I think it was in 2022. So we have a major tenant that was in there that took. It was a stabilized occupancy. I think they were 350,000 to 400,000 square feet, if I remember. I'm going off of memory so please don't quote me. But they were a very large tenant, TCW, and they moved out of that building. And again, I wasn't here to negotiate that deal. So I can't go into detail. But I'll tell you, when you have a tenant that's that large, and I've been through their existing space, it was very dated, they want a new space, lots of times, tenants, it's easier. There's a lot less pain to just move to another building that's renovated, ready for them to go and to just move in. Now there's economics, and so far, there could be savings. But even putting that aside, if the economics were equal, a tenant would typically choose to move into a new building that's ready to go versus living through a remodel, as we would say. So my guess is it was very, very tough and probably not possible to keep them in that building.

Okay. Overall average occupancy is just under 70%. So assuming post sale of Figueroa, would this average occupancy be around the same or would improve?

It actually goes up. It actually goes above top of my head, I think it goes 74%. So Diablo is going to go up as well. Not to say we're selling Diablo right now, but I'm just saying. We're getting anchored down by some of the buildings that aren't performing on the leasing front. And I mean, it takes away from the other buildings which are performing and are at a stabilized occupancy.

Okay. Like for example, just a follow-up question on that. The investor also is asking like, for example, the underperforming building that you just mentioned, Diablo. How would it be that if it's underperforming that you say, the incoming buyer, what would be the attraction given that it's underperforming for a buyer to potentially come in? What would be the considerations for that?

Yes. So that's a great question, right? So I think you have to take a step back and look at, as we would say, so remember, in the U.S., we have lots of different types of buyers. There's not just one buyer. For example, just to name a few, you have a core buyer that's simply just looking to park money in a building that's 90% to 95% occupied and they just do the day-to-day stuff and they chip away at a return, right? That's a core buyer. They're just riding the market. They're keeping it occupied. They're doing the day-to-day. And then you have value-add buyers. You have operators, right? You have developers. There's all different kinds of buyers then that look at buildings differently, right? So just as an example, if you look at an operator. So an operator is someone that runs a building that either will redevelop it, they'll do a partial redevelopment or they'll just want a building that has a lot of vacancy. And the reason why an operator wants a building with vacancy or needs to be remodeled is because their equity partner who's putting in pretty much all the equity is going to pay them a fee. So they're going to collect a fee. They're going to get a leasing override for any leasing they do. If they renovate the lobby, they're going to collect a fee. And so an operator is not going to want to buy a building that's 90% occupied because the operator can't really make much money off of them, right? So there's 2 ways an operator makes money, off the exit value or off the fees that they collect along the way. And an operator typically will have a co-invest, but it will be a relatively small co-invest. An operator, typically, their co-invest, if they structure their deal correctly and everything goes well, an operator can basically breakeven on their co-invest within the first 12 to 18 months based upon the fees they generate out of the building from their equity partner to do that. So I give that background a little bit to sort of set the stage of what that buyer would look like. And so the buyer that I would tell you we would have, that would be interested in our building would be someone that probably wanted to redevelop it because the building is in a great location, fronts on a freeway, has lots of parking. So that project could be redeveloped to industrial. At one point, we actually looked at potentially a data center on that building. That's a whole another story, but it proved to not be possible on that building. So there's a repositioning part of this, too. And repositioning takes capital, takes someone that's got a vision that has capital that wants to reinvest into the building and spend money on the building on their vision to prove it out.

Okay. That's very comprehensive. Have any EQDP funds approached you? And what is the strategy to get more funds given the current cheap valuations and that the worst could be almost over?

Want to take that one?

Can you repeat that?

Okay. Does this EQDP equity program that is currently underway in Singapore, so there are funds that has received money from the government and from our MAS and they're looking to deploy funds into the Singapore market. So the question is, have any of these funds looked to potentially deploy funds into Manulife given that valuations are cheap and the worst of the crisis could be over for the company?

So when we did our December ECM, we had interactions with a lot of our investors and obviously, we have presented to them the Growth and Value Up Plan, which was in concept, the same thing as you are alluding to, is how do this REIT go forward from the point that what it has achieved after its initial phase of recovery or restructuring. And what we reminded our investors is that it was always part of the strategy that we will move from stabilization to recovery and ultimately to grow. Now there is obviously a recovery, which is the recovery in the market that will happen, but then the recovery through the growth tools that we will use. And that is why and that is how we develop that strategy. There were a number of investors, our Investor Relation team tracks all of the interactions at various stages of conversations, but there is definitely interest in broad investments and from investors to see how we progress and execute our Growth and Value Up Plan. I don't know if you want to add anything, John, to that.

Yes. I think that covers it. I mean, I think your question was also getting funds from the Singapore government, right?

From the funds that are doing that EQDP program, which basically to incentivize, to improve the market condition and liquidity in the market, especially for medium to small caps.

Yes, we've not been approached by those funds, just to be clear.

Okay. So this follow-up question is about when will you be able to restart the payment of dividends? So based on what you mentioned, MRA program, you'll be exiting the MRA program towards the end of this year. So potentially, dividends could start maybe next year. Is that a fair assumption?

Yes. So just to reiterate what I said, our goal is to exit the MRA within this year. And as I mentioned, we have made a lot of progress toward completing the milestones of the Master Restructuring Agreement. But then we have not met all the conditions yet. So when we achieve the goal of exiting the MRA, that removes the condition, which is stopping us from distributing our cash -- whatever cash the portfolio is generating. So my comments should be looked at from that perspective, that what is holding us up, we remove that barrier, which is exit of the MRA, and then would be a clear basically mandate or clear path for us to resume distributions. Timing cannot be associated with this at this point because we do need to do more work to be able to exit the MRA.

Okay. Your portfolio will be down to 6 following the sale of Figueroa. How do you see the quality and risk profile of your remaining portfolio post the sale?

So just to be clear, the sale is not going to affect -- is not going to change anything in the balance of the portfolio. When the MRA was put together in 2023 December, they categorized each one of these assets by tranches. So Tranche 3, Tranche 2 and Tranche 1. As it would have it, as things demonstrated over time and as you've seen in some of our presentations, it lines up with the tranches that were associated with the real estate. So our Tranche 3 has performed the best. We've seen most leasing occur in Tranche 3. We've seen valuation appreciation in Tranche 3 and, accordingly, in 2 and in 1. So nothing has really changed after the sale. Each asset is in a different submarket, and the submarket also reacts differently. But there's not going be any material change. So the asset classes will still be considered Tranche 3, Tranche 2 and Tranche 1.

Okay. In the interest of time, maybe we will take another 2 or 3 questions. Okay. This one is a bit sensitive, but the question is regarding the Manager's collection of fees. So since distributions to shareholders have been suspended, why is the Manager still collecting fees where unitholders receive 0? And also why has the Managers not followed the lead of other distressed REIT managers by voluntarily waiving or taking 100% of fees in units until distributions resume?

Take that one.

Yes. So our management fees is tied to generation of distributable income, and it is 10% of distributable income. So as the generation of DI reduces, the fee reduces. Our fees as manager fees has reduced significantly as the DI has gone down. Now there is definitely a baseline cost to operate the manager, including the talent that we have to be hired and in place to serve the REIT, to protect the REIT, to grow the REIT, to come up with all the risk management and growth strategies that we are driving to drive the value up of this REIT. So there is this cost that cannot be ignored, and we just reimbursed through the managers' fees. But as far as the alignment is concerned, we are aligned that as the REIT is not performing or not generating that kind of DI, it is also taking a hit on its fees. As far as other measures are concerned, in the past, the Sponsor has waived fees on interested-party transactions. That was done in the past in 2023. And also to remind the unitholders that our Sponsor has provided a massive package at the time of the restructuring to basically protect the interest of the unitholders, not in the form of buying an asset, but also providing a Sponsor loan that basically provided the backbone for this restructuring to be successful. So the Sponsor has, one way or the other, provided a lot of support directly and indirectly to basically support the REIT in the times when the times were tough so that it can complete its restructuring and move back to the path of recovery and growth.

Okay. On portfolio valuations, right? So this investor doesn't understand that portfolio valuation only fell by less than 2% in 2025 despite a significant drop in occupancy as well as a 32% decline in revenues. So why was the portfolio valuation dropped very moderately? And also, can you share more insights on this? And also, if you were to mark-to-market your assets to current market valuations, are we in line with market valuations? Or do we need to take bigger portfolio valuation hit?

So first off, the assets are valued individually and they're put together for a total value. So there's a slide, I don't know if we can flip to the slide, but several of our assets were in the positive. So the positives -- so if you see on the slide that we just put up, so as I mentioned before, the Tranche 3 assets were up by 5.8%. So the asset appreciation that occurred at Phipps and Michelson. We also were slightly positive at Centerpointe and slightly positive at Penn. And I would say Diablo was neutral. So the 2 big negatives that stand out here are Exchange and Figueroa. So it's simply the math and the size of the building. So Phipps and Michelson are large buildings and, hence, large values. And so the positives outweigh the negative to get us to a negative [ 0.16 ]. And if you pull out Figueroa from this, you'll see that across the portfolio, we were positive. So another way of looking at this, if our other 4 or 5 assets were all in Atlanta and Irvine, we would have been positive, right? So this is kind of what I was saying before with the submarkets across the U.S., how they react differently. So each one of these buildings is not the same and it's in a different location. And as a result, the valuations come in accordingly based upon how the submarkets are behaving. And again, as I've said in the past, the underlying factor to a recovery in a market is positive leasing. And so where you have positive leasing and a decent volume of leasing, you'll see a quicker recovery in the market, which is what we're seeing in Atlanta and Irvine. So that was the first part of the question. And the second, I drew a blank on the second with answering that. Would you mind repeating the second half of that question?

The second part is if you were to mark-to-market your assets to, say, the current market valuations, are we in line? Or would our portfolio valuation require more markdowns?

Well, we do what the market requires and we do annual valuation. So those annual valuations by third-party valuers are valuing to market. Now I'm not sure what the person means by mark-to-market because essentially, these would be considered a market valuation. Now spot value is maybe what they're alluding to. Spot value is not part of the process or how you look at this nor would it be appropriate given the fact that this is a valuation from a portfolio standpoint. So these values are put together by a third-party valuer that looks at it holistically on a long-time current hold value of the real estate. Now if you pick any one of these assets and say, I need to sell them in the next 30 days, the market will determine what the clearing price is at. And it could be at valuation, it could be less than valuation. It all depends on the demand in the market, the buyer pool in the market, the profile of the buyers in the market and their desire to own that asset.

Okay. Just 2 final questions. One is, generally, the unemployment rate has been trending upwards. Do you see any impact from layoffs or unemployment rates moving upwards having a negative sentiment on your tenants? And secondly, what is still the impact of this work from home phenomenon on your assets? Those are the final 2 questions.

Yes, those are great questions. I mean, we constantly look at that across our portfolio. I would tell you, in general, work from home is kind of going away. We look at traffic patterns within the cities that we own real estate. We look at our parking lots and kind of where things are at. All in all, I think those have improved, now albeit there's still situations where we get a phone call from a tenant that says they're not renewing, they're going completely virtual. Those are typically the smaller tenants that we see that in. So for the most part, we're seeing people return to the office. The sentiment in the U.S. is that employers want people in the office. Tenants are investing in their space. Tenants are choosing nicer buildings. One of the reasons why our Michelson building does quite well and so does our Phipps building is there's walkable amenities, there's walkable restaurants. Tenants want that in their buildings, to have those amenities that are close by. So I definitely think things for the most part as it relates to work from home is normalizing. Now unemployment was the other part of that. We're still kind of around the average unemployment, maybe it's a little higher. But nothing is sort of skewed too much, I think, from where the unemployment rates are generally. I think when unemployment goes down too low, that actually works against a lot of our tenants because it swings the pendulum to the employees court, right? And so it's kind of interesting, those 2 questions really tie together. So if unemployment was very low, basically, when tenants were hiring new employees, those new employees could mandate that they want to work from home. They could mandate that they don't want to be in the office 5 days a week. And given low employment numbers, an employer might have to agree to that. Now when unemployment goes up some and more to what you would consider a healthier level, it puts a little more power back into the employer, i.e., our tenant, to be able to make the demand, you need to be in the office 4 days a week, 5 days a week, which then brings people back in the office. And when there's less opportunities out there for people to go to, they have to fall within the program. And hopefully, we get back to a more normalized work habits to where things were before COVID.

Okay. Thank you. We've come to the end of our presentation. So if management have any concluding remarks to share with our investors.

We just want to thank everyone for continuing confidence and faith in us as we move forward through our Growth and Value Up Plan.

Thank you very much. We'll see you the next time. Have a good day.

All right. Thanks, everyone.