Manulife US REIT will be investing in the Properties in the United States through special purpose vehicles (“SPVs”) that are wholly-owned subsidiaries of the Parent U.S. REIT and organised so as to qualify as U.S. REITs.
U.S. REITs are generally permitted to deduct dividends paid to their shareholders from their U.S. federal (and in most instances, state) taxable income. It is intended that each Property will be acquired and held in a separate U.S. REIT. This structure may facilitate financing on more attractive terms than might be available if the Properties were held by a single U.S. REIT.
Additionally, if Manulife US REIT desires to dispose of any one of the Properties, the exit can be structured as a sale of the shares of the U.S. REIT which owns the Property rather than a sale of the underlying real property, with the goal of simplifying legal transfer and eliminating any otherwise applicable U.S. branch profits tax on the transaction.
In addition, the Property-holding U.S. REITs may form one or more TRSs. TRSs are subsidiaries of U.S. REITs that are generally permitted to undertake activities that the U.S. REIT rules might prohibit a U.S. REIT from performing directly. Such TRSs will enable the Property-holding U.S. REITs to provide non-customary services to their tenants without jeopardising their U.S. REIT statuses.
The following diagram illustrates the relationship, among others, between Manulife US REIT, the Manager, the Trustee, the U.S. Asset Manager and the Unitholders as at the Listing Date: