The manager of Prime US REIT OXMU has reported a distribution per unit (DPU) of 2.46 US cents (3.30 cents) for the 1HFY2023 ended June 30, 30.1% lower than the DPU of 3.52 US cents in the same period the year before.
Income available for distribution fell by 29.3% y-o-y to US$29.2 million on the back of lower gross revenue and lower net property income (NPI).
The lower DPU and distributable income were also due to the manager’s decision to receive 100% of its base fee in cash, compared to the same period the year before. In FY2022, the manager opted to receive 20.0% of its base fee in cash with the balance of 80% in the form of units. Distributable income would’ve been down by 23.1% y-o-y from $38.0 million while DPU would’ve fallen by 23.8% y-o-y from 3.23 US cents if the manager had opted to receive its base fee wholly in cash the year before.
In the 1HFY2023, gross revenue fell by 2.9% y-o-y to US$79.5 million due to lower rental income on the back of lower occupancies at some of the REIT’s properties. The lower rental income was mitigated by higher parking income.
NPI fell by 7.2% y-o-y to US$47.2 million due to the higher property operating expenses and offset by the higher gross revenue.
During the 2QFY2023, over 66,800 sq ft of leases were executed at a positive rental reversion of 9.5%. Of the total leases, 34% of them were new leases. New tenants came from companies spanning a diverse range of sectors including law firms, financial services, technology and general trade.
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As at June 30, the REIT’s leased occupancy stood at 85.6% with a weighted average lease expiry (WALE) of 3.9 years.
Net asset value (NAV) per unit stood at 75 US cents while total assets stood at US$1.60 billion as at June 30. According to the REIT manager, there were no material changes to the portfolio’s valuation for the period.
The REIT’s aggregate leverage stood at 42.8% with an interest coverage of 3.4x as at the same period.
Cash and cash equivalents as at June 30 stood at US$15.5 million.
“Our approach to drive organic growth through our active leasing strategies and diversified portfolio in non-gateway growth markets has provided resiliency amidst bifurcated markets. We are encouraged by the improving physical occupancy across our assets, which continue to increase quarter on quarter, currently at 58% across the portfolio. We are currently engaged in more leasing discussions with prospective tenants and for larger leases compared to six and twelve months ago,” says Harmeet Singh Bedi, CEO of the manager.
“In anticipation of a flight to quality post Covid, the manager initiated on behalf of Prime several capital, operating and environmental, social and governance (ESG) initiatives to enhance the attractiveness of Prime’s office buildings to existing and prospective tenants,” he adds. “We are in regular conversations with property managers, leasing teams and tenants to understand tenants’ needs and are constantly reviewing and adjusting our asset enhancements and activities at our assets based on tenant dialogue and feedback.”
Finally, Singh expects the REIT’s leasing efforts to “benefit from an environment where tenants are looking for strong, creditworthy, and reliable landlords who can firmly support them in bringing their tenants back to office” thanks to its “high-quality” and “well-located assets” with “available liquidity”.
“Strong capital management is a key focus, and we are managing our balance sheet prudently given the current environment. We remain well-capitalised, and this has been reflected in our strong relationships with our financiers who in July 2023 granted us an extension of our credit facilities,” he says.
Unitholders will receive their DPUs on Sept 28.
Units in Prime US REIT closed 0.3 US cents lower or 1.57% down at 18.8 US cents on Aug 8.
