The manager of Keppel Pacific Oak US REIT CMOU (KORE) has reported a distribution per unit (DPU) of 5.80 US cents (7.61 cents) for the FY2022 ended December 2022, 8.5% y-o-y lower than the DPU of 6.34 US cents for FY2021.
The REIT’s DPU for 2HFY2022 was 2.78 US cents, 12.6% lower than 2HFY2021’s DPU of 3.18 US cents.
The lower DPU was due to the REIT manager opting to receive 100% of its base fee for 1QFY2022 in the form of units and 100% of its base fee in cash from 2QFY2022 onwards. On a like-for-like basis, had the REIT manager opted to receive its base fee in cash from 2QFY2021 to 4QFY2021, the DPUs for FY2022 and 2HFY2022 would have been 2.8% and 1.0% lower y-o-y.
For FY2022, gross revenue increased by 4.8% y-o-y to US$147.9 million largely due to the contributions from 105 Edgeview and Bridge Crossing which were acquired in August 2021.
The higher gross revenue was also attributable to higher recoverable property expenses, as well as higher car park income as more employees returned to offices.
During the period, property expenses also increased by 8.8% y-o-y to US$63.7 million mainly due to the enlarged portfolio, as well as higher y-o-y utilities, repairs and maintenance and other property expenses for the existing portfolio with more employees back in offices.
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In addition, the amortisation of leasing commission, which is a non-cash item and does not affect distribution, increased as a result of the leasing. This was partially offset by the lower expenses from the divestments of Northridge Center and Powers Ferry on July 28 2022 and Dec 22, 2022.
Consequently, net property income (NPI) for the full-year period increased slightly by 1.9% y-o-y to US$84.3 million.
Adjusted NPI, which excludes non-cash straight-line rent, lease incentives and amortisation of leasing commissions, increased by 2.3% y-o-y to US$85.5 million.
KORE recorded a fair value gain in derivatives of US$31.3 million in FY2022 compared to the fair value gain of US$11.8 million in FY2021 due to movement in interest rates for the respective periods.
After taking into consideration the capital expenditure and tenant improvements spent in FY2022, KORE recorded a fair value loss in investment properties of US$39.2 million as compared to a net fair value gain of US$19.2 million in FY2021.
For FY2022, distributable income decreased by 2.9% y-o-y to US$60.6 million.
KORE committed around 651,319 sq ft of office space, which represents some 13.7% of its total net lettable area (NLA) for the full-year period, bringing portfolio committed occupancy to 92.6% as at Dec 31 2022, with 13.5% leases by cash rental income (CRI) expiring in 2023.
As at end-December last year, KORE’s weighted average lease expiry (WALE) for the REIT’s portfolio and top 10 tenants stood at 3.5 years and 4.6 years respectively
KORE’s net asset value (NAV) stood at 0.81 US cents per unit as at Dec 31 2022, down 0.01 cents from the year before. The REIT’s aggregate leverage stood at 38.2%.
Cash and cash equivalents as at end-December 2022 stood at US$63.4 million.
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As at Dec 31 2022, KORE has 13 office properties in the US measuring some US$1.42 billion in value.
Looking ahead, despite concerns over the US office market from inflation and recessionary fears, and the softening of the market’s office fundamentals, KORE says it remains focused on optimising its portfolio performance, leveraging its well-located assets in key growth markets in the US, as well as exposure to the defensive sectors of technology and healthcare.
KORE’s portfolio, which is backed by the resiliency of its key growth markets, is well-positioned to retain tenants. The REIT will continue to place its focus and emphasis towards strategic enhancements and will work towards improving leasing momentum and developing appealing amenities to attract quality tenants.
“Globally, the office sector is evolving, but it is evident that workers have been returning to the office, and the workplace remains essential, though many companies are reducing their office footprints,” says the REIT in its Feb 1 statement.
Unitholders will receive their DPUs on March 30.
Units in KORE closed 1 US cent higher or 1.87% up at 54.5 US cents on Feb 1.
