Prime US REIT Review @ 30 August 2023

Basic Profile & Key Statistics

• Main Sector(s): Office
• Country(s) with Assets: United States
• No. of Properties (exclude associate/fund): 14

Key Indicators

Performance Highlight

Gross revenue and NPI declined YoY mainly due to lower income arising from occupancy decline as well as high property expenses. However distributable income declined more significantly due to higher interest expenses, the manager has elected to receive 100% of its base fee in cash (vs 20% cash in 1H2022) and the absence of free rent reimbursements arising from the acquisition of One Town Center and Sorrento Towers.

Rental Reversion

Rental reversion for 2Q is at 9.5%.

Related Parties Shareholding

• REIT Sponsor's Shareholding: Below median by 20% or more
• REIT Manager's Shareholding: ± 10% from median
• Directors of REIT Manager's Shareholding: Above median by 20% or more

Lease Profile

• Committed Occupancy: Below median by 10% or more
• WALE: ± 10% from median
• Highest Lease Expiry within 5 Years: Below median by 10% or more; Falls in 2025
• Weighted Average Land Lease Expiry: 100% freehold properties

Debt Profile

• Gearing Ratio: Above median by 10% or more
• Cost of Debt: ± 10% from median
• Fixed Rate Debt %: ± 10% from median
• Unsecured Debt %: 0%
• WADM: Below median by 20% or more
• Highest Debt Maturity within 5 Years: Above median by 20% or more; Falls in 2024
• Interest Coverage Ratio: ± 10% from median

Diversification Profile

• Top Geographical Contribution: Below median by 20% or more
• Top Property Contribution: Below median by 20% or more
• Top 5 Properties' Contribution: Below median by 10% or more
• Top Tenant Contribution: Below median by 10% or more
• Top 10 Tenants' Contribution: Above median by 10% or more

Key Financial Metrics

• Property Yield: Above median by 10% or more
• Management Fees over Operating Distributable Income: Below median by 20% or more; $9.01 distribution for every dollar paid 
• Operating Distributable Income on Capital: Above median by 20% or more
• Operating Distributable Income Margin: ± 10% from median
• Operating Distribution Proportion: Above median by 5% or more

DPU Breakdown

• Distributable Income Breakdown:
• 95.5% from Operation
• 4.5% from Management Fees Paid in Units

Trends

• Downtrend: DPU from Operation, NAV per Unit, Committed Occupancy, Interest Coverage Ratio, Property Yield, Operating Distributable Income on Capital, Operating Distributable Income Margin

Relative Valuation

• Dividend Yield: Above +2SD for 1y, 3y & 5y
• P/NAV: Below -1SD for 1y; Below -2SD for 3y & 5y

Author's Opinion

Favorable	Less Favorable
High Directors of REIT Manager's Shareholding	Low REIT Sponsor's Shareholding
Well Spread Lease Expiry	Low Committed Occupancy
100% Freehold Properties	High Gearing Ratio
Low Top Geographical Contribution	0% Unsecured Debt
Low Top Property & Top 5 Properties' Contributions	Short WADM
Low Top Tenant Contribution	Concentrated Debt Maturity
High Property Yield	High Top 10 Tenants' Contribution
Competitive Management Fees	DPU from Operation Downtrend
High Operating Distributable Income on Capital	NAV per Unit Downtrend
High Operating Distribution Proportion	Committed Occupancy Downtrend
	Interest Coverage Ratio Downtrend
	Property Yield Downtrend
	Operating Distributable Income on Capital Downtrend
	Operating Distributable Income Margin Downtrend

Compared to the last quarter, there was a slight decrease in gross revenue, NPI and distributable income declined slightly. Occupancy rates also continued to decline. For debt, there is no need for refinancing this year, but a significant portion, specifically 65.6%, is due to mature in July next year. It's worth noting that out of this 65.6%, 48.1% is already hedged until June 2026. With a relatively high proportion of fixed-rate debt at 80%, any potential increase in financing costs is expected to be minimal.

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SREITs Dashboard - Detailed information on individual Singapore REIT

SREITs Data - Overview and details of Singapore REIT

REIT Review - List of previous REIT review posts

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*Disclaimer: The information presented on this blog is for educational and informational purposes only. The materials, including research and opinions, are based solely on my own findings and should not be considered as professional financial advice or a definitive statement of fact. I cannot guarantee the accuracy, completeness, or reliability of the information provided. I shall not be held liable for any errors, omissions, or losses that may occur as a result of using the information presented on this blog. It should be noted that the information presented on this blog does not constitute a buy, sell, or hold recommendation for any security. It is crucial to conduct your own thorough research and due diligence before making any investment decisions.