Manulife US Reit bags two-year lease renewal with US Treasury

The government department makes up 5.3% of the Reit’s total gross rental income

Manulife US Real Estate Investment Trust (MUST) secured a 24-month lease renewal with its fifth-largest tenant, the US Treasury, for some 120,000 sq ft of office space in Washington, DC.

The government department has been a major anchor tenant in the building since 2011 and, as at Sep 30, contributes 5.3 per cent of Must’s total gross rental income, said the Reit in a release on Wednesday (Nov 19).

The property at 1750 Pennsylvania Avenue is a 13-storey Class A office building situated a block from the White House and within proximity to the International Monetary Fund, the World Bank and the Federal Reserve.

The new lease – which began in August – is for a 24-month term with 12 months firm, after which the tenant has a termination option, said Must. The renewal extends the property’s weighted average lease expiry from 1.4 years to 2.3 years, and no tenant improvement allowances were granted for the extension.

The US Treasury lease has been on a month-to-month basis since August, which is when the original lease expired, said the Reit, adding that the execution of the lease renewal was delayed due to the US federal government shutdown.

The US Treasury will retain its existing rent, which is in line with other US Government Services Administration leases recently signed in the Washington, DC submarket, noted the Reit.

The government department earlier informed MUST of its decision to relocate, but added that it was considering a short-term extension of its existing lease at Penn, said John Casasante, chief executive and chief investment officer of the Reit’s manager.

“The finalisation of this two-year lease renewal provides us with greater cashflow certainty amid ongoing challenges in the Washington, DC office market,” he noted.

That being said, Casasante expects the federal government’s requirement for employees to return to office to revitalise the city’s economy and boost office demand over time.

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“Our focus remains on sourcing and executing strategic and accretive leases where we hold a competitive advantage and can create a scenario that benefits both the landlord and tenant, rather than competing purely on rent and tenant concessions,” he continued.

The Reit is working on several of these leasing opportunities and is optimistic of finalising them before the year ends, concluded Casasante.

MUST is the first pure-play US office Reit listed in Asia. As at Sep 30, the Singapore-listed Reit’s portfolio comprises seven freehold office properties in Arizona, California, Georgia, New Jersey, Virginia and Washington DC, with an aggregate net lettable area of 3.5 million sq ft.

Its units ended Wednesday up US$0.001 or 1.4 per cent at US$0.073 before the announcement.

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