Keppel Pacific Oak US REIT Review @ 7 February 2022

Basic Profile & Key Statistics

Keppel Pacific Oak US REIT (KORE) is an office REIT that owns 15 properties in U.S.    

Performance Highlight

Gross revenue, NPI, distributable income and DPU have improved YoY due to contributions from

105 Edgeview and Bridge Crossing which were acquired on 20 August 2021.

Rental Reversion

Rental reversion for 2021 is at +6%. 

Related Parties Shareholding

• REIT sponsor's shareholding is low at 6.926%
• REIT manager's shareholding is low at 0.757%
• Directors of REIT manager's shareholding is high at 0.798%

Lease Profile

• Occupancy is slightly low at 91.9%
• WALE is short at 3.6 years
• Highest lease expiry within 5 years is low at 17% which falls in 2023
• All properties are freehold

Debt Profile

• Gearing ratio is moderate at 37.2%
• Cost of debt is high at 2.8%
• Fixed rate debt % is high at 83.4%
• All debts are unsecured debt
• WADM is short at 2.5 years
• Highest debt maturity within 5 years is low at 22.2% which falls in 2024
• Interest coverage ratio is high at 5.1 times

Diversification Profile

• Top geographical contribution is low at 38.5% 
• Top property contribution is low at 16.9%
• Top 5 properties contribution is moderate at 61.9%
• Top tenant contribution is low at 3.2% 
• Top 10 tenants contribution is low at 21.4%

Key Financial Metrics

• Property yield is high at 6.1% 
• Management fees over distribution is low at 10.2% in which unitholders receive S$ 9.80 for every dollar paid 
• Distribution on capital is high at 4.7%
• Distribution margin is slightly low at 44.2%

Trends

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

Relative Valuation

• P/NAV - Below average for 1y; Average for 3y & 5y
• Dividend Yield - Above average for 1y; Average for 3y & 5y

Author's Opinion

Favorable	Less Favorable
Directors of REIT Manager's Shareholding	Low REIT Sponsor's Shareholding
Well Spread Lease Expiry	Low REIT Manager's Shareholding
All Freehold Properties	Short WALE
High Fixed Rate Debt %	High Cost of Debt
100% Unsecured Debt	Short WADM
Well Spread Debt Maturity	Interest Coverage Ratio Downtrend
High Interest Coverage Ratio
Low Top Geographical Contribution
Low Top Property Contribution
Low Top Tenant & Top 10 Tenants Contributions
High Property Yield
Competitive Management Fees
High Distribution on Capital
DPU Uptrend

KORE performance has improved after the acquisition of 105 Edgeview and Bridge Crossing. The upcoming 1H 2022 performance should be better due to the full half yearly contribution of these 2 properties. Besides, there is still room for organic growth as the in-place rents are 4.9% lower than asking rents.

You could also refer below for more information:

SREITs Dashboard - Detailed information on individual Singapore REIT

SREITs Data - Overview and Detail of Singapore REIT

REIT Analysis - List of previous REIT analysis posts

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*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee 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 and 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.