The manager of Keppel Pacific Oak US REIT (KORE) has reported a distribution per unit (DPU) of 1.25 US cents (1.66 cents) for the 2QFY2023 ended June 30, 12.6% lower than the DPU of 1.43 cents in the corresponding year before.
KORE’s DPU for the 1HFY2023 fell by 17.2% y-o-y to 2.50 US cents.
Income available for distribution also fell by 17.2% y-o-y to US$26.1 million due to higher financing costs. The divestments of Northridge Center I & II and Powers Ferry in the 2HFY2022 and the REIT manager opting to receive its base fees in cash instead of units during the 1QFY2023 also led to the lower distributable income.
For the 1HFY2023, the manager has elected to receive 100% of its base fee of US$2.9 million in cash.
On a like-for-like basis, the adjusted distributable income would’ve been down by 12.6% y-o-y to US$26.1 million, assuming the manager received its 1QFY2022 base fee in cash.
Similarly, KORE’s DPU for the six-month period would’ve been down by 12.6% y-o-y on an adjusted basis.
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Gross revenue for the 1HFY2023 rose by 2.4% y-o-y to US$75.9 million mainly from higher rental income, higher recoverable property expenses and higher car park income from returning employees. This was offset by the loss in contributions from the divestments of Northridge Center and Powers Ferry.
Net property income (NPI) increased by 2.0% y-o-y to US$43.9 million.
Adjusted NPI excluding non-cash straight-line rent, lease incentives and amortisation of leasing commissions rose by 1.4% y-o-y to US$44.2 million.
As at June 30, KORE’s portfolio occupancy stood at 90.8%. Its weighted average lease expiry (WALE) stood at 3.5 years by net lettable area (NLA) and 3.6 years by cash rental income (CRI).
As at the same period, the REIT’s aggregate leverage stood at 38.4% with an interest coverage ratio (ICR) of 3.4 times. According to the REIT manager, it has the capacity to borrow US$350 million before reaching its regulatory limits and debt covenants. Alternatively, its portfolio valuation would have to fall by some 24% to reach the leverage limit of 50%. All of the REIT’s borrowings are US dollar-denominated and 100% unsecured.
Cash and cash equivalents as at June 30 stood at US$38.3 million.
According to the REIT manager, about 50% of its tenants are operating in the technology, advertising, media and information (or TAMI) sectors, which are deemed to be growth and defensive sectors.
“Looking ahead, the manager will maintain its focus on optimising KORE’s portfolio, leveraging the strengths of its well-located assets in key growth markets across the US. The manager believes that KORE’s strategy of investing in the right locations will continue to drive the resiliency of its performance, enabling it to be well-positioned to capture the right tenant base,” reads KORE’s statement on July 26.
Units in KORE closed flat at 30 US cents on July 26.
