Prime US REIT Review @ 19 February 2021

Basic Profile & Key Statistics

Prime US REIT (PRIME) is a pure office REIT with 12 properties in U.S.

Performance Review

NPI and distributable income beat by 7.8% and 16.1% respectively as compared to IPO prospectus forecast mainly due to contributions from Park Tower, which was acquired in February 2020. Despite that, DPU beat only 2.1% due to an enlarged unitholders base. If compare against annualized 2H 2019, then NPI and distributable income increased YoY by 6.8% and 12.1% respectively while DPU slightly decreased by 1.9% YoY. 

4Q rental reversion is +8.3% while FY2020 rental reversion is +7.2%.

Lease Profile

• Occupancy is slightly low at 92.4%
• WALE is long at 4.4 years
• Highest lease expiry within 5 years is low at 19.6% which falls in 2025
• All properties are freehold

Debt Profile

• Gearing ratio is low at 33.5%
• Cost of debt is moderate at 2.7%
• Fixed rate debt % is high at 89.8%
• All debts are secured debts
• WADE is long at 4.1 years 
• Highest debt maturity within 5 years is slightly high at 33% which falls in 2023
• Interest coverage ratio is high at 5.8 times

Diversification Profile

• Top geographical contribution is low at 18.7% 
• Top property contribution is low at 13.7% 
• Top tenant contribution is low at 8.9%
• Top 10 tenants contribution is slightly high at 41.8%

Key Financial Metrics

• Property yield is high at 6.9%
• Management fees over distribution is competitive at 11.1% in which unitholders receive S$ 9.01 for every dollar paid
• Distribution on capital is high at 5.3%
• Distribution margin is moderate at 50.2%

Trends

• Uptrend - Interest Coverage Ratio
• Slight Uptrend - Distribution Margin
• Flat - DPU, NAV per Unit, Distribution on Capital
• Downtrend - Property Yield

Relative Valuation

• Dividend Yield - Past 4 quarters DPU @ 6.94 cents / average yield @ 8.37% = US$ 0.83
• Price/NAV - NAV @ US$ 0.858 x average P/NAV @ 0.97 = US$ 0.83

Author's Opinion

Favorable	Less Favorable
Long WALE	0% Unsecured Debt
Well Spread Lease Expiry	Property Yield Downtrend
All Freehold Properties
Low Gearing Ratio
High Interest Coverage Ratio
Long WADE
Low Top Geographical Contribution
Low Top Property Contribution
Low Top Tenant Contribution
High Property Yield
Competitive Management Fees
High Distribution on Capital
Interest Coverage Ratio Uptrend

PRIME fundamentals remain strong. Despite dropping occupancy, it is still higher than U.S Class A office average occupancy @ 86.8% for the same area. From the presentation, since the start of 2021, 48,603 sq ft of space leased at a positive rental reversion of 6.9%. Hopefully, occupancy could be improved to boost PRIME performance.

For more information, you could refer to:

SREITs Dashboard - Detailed information on individual Singapore REIT

SREITs Data - Overview of Singapore REIT

REIT Analysis - List of previous REIT analysis posts

REIT-TIREMENT Patreon - Support this blog as a Patron and get SREITs Dashboard PDF

REIT Investing Community - Facebook Group where members share and discuss REIT topic

*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee the accuracy, completeness, and reliability. It should not be taken as financial advice or a statement of fact. I shall not be held liable for errors, omissions as well as loss or damage as a result of the use of the material in this blog. Under no circumstances does the information presented on this blog represent a buy, sell, or hold recommendation on any security, please always do your own due diligence before any decision is made.