Keppel Pacific Oak US REIT (KORE) reported a distribution per unit (DPU) of 6.23 US cents in FY2020, up 3.7% y-o-y. DPU for 2H2020 was 3.13 US cents, up 4% y-o-y. At this distribution level, DPU translates into an historic FY2020 yield of 8.7% and an annualised yield of 8.8%. KORE declares its distributions semi-annually, and unitholders can expect to receive their 2H 2020 distributions on March 31.
DPU growth was driven by growth in distributable income of 13.4% y-o-y in 2H2020 of US$29.5 million. For FY2020, DI rose 15.4% y-o-y to US$58.6 million. The manager attributed DI growth to an acquisition made in 2019, which boosted 2020’s income, growth in rental reversions and built-in rental escalations.
SEE: ‘Buy’ Keppel Pacific Oak US REIT due to strong 3Q numbers and rental reversions: RHB
Rental reversion for FY2020 was 10.2%, driven mainly by rent growths from leasing activities in Seattle – Bellevue/Redmond, Sacramento and Austin, KORE’s manager says. Average rental collection for FY2020 was approximately 99% by cash rental income (CRI). During the year, the manager granted rent relief requests equivalent to approximately 0.8% of FY 2020’s net property income. Rent relief requests trended lower in 2H2020 with almost half of the tenants who had their rents deferred starting their repayment schedules.
In its January 2021 Office National Report, CoStar reported 12-month average rent growth of -0.9% and average vacancy rate of 11.4%. Although work-from-home policies remain in place for some of the larger tech firms, these companies contributed to some of the largest leases signed in the sector 2H2020. Seattle – Bellevue/Redmond, which constitutes 44.5% of KORE’s portfolio NPI, has 71.8% of its under construction inventory pre-leased, and this should allay fears of impending vacancy.
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KORE’s committed occupancy rate was 92.3% as at Dec 31, 2020, lower than the 94.3% as at end-June 2020.
Although KORE’s unit price of 71 US cents is down 10% y-o-y, it is up 77% from the trough in March 2020.
