The manager of Prime US REIT has reported distribution per unit (DPU) of 3.3 US cents (4.5 cents) in 1HFY21 ended June. This is down 5.4% from the 3.5 US cents disbursed in the previous year and follows higher property expenses.
Taking into account the private placement launched on June 24, Prime US REIT announced a cumulative DPU distribution of US 3.42 cents for the period from January 1 to July 5.
Gross revenue for the first six months of the year was up by 1.2% to US$72.1 million, largely due to full half-year contributions from Park Tower, which was acquired in February 2020.
However, the REIT’s net property income fell by 2.3% to US$46.3 million, due to higher property expenses such as an increase in property taxes for its facility at 101 South Hanley.
The REIT – which has a portfolio of 12 office properties in the US – saw its income distributable to unitholders edge down by 1.3% to US$35.4 million in 1HFY21.
With this, its gearing was 34.4% as at end June, while interest coverage was 5.8 times.
Prime US REIT’s portfolio carried a total value of US$1.41 billion in end June.
Its occupancy was 91.7% in 1HFY1, with a weighted average lease expiry (WALE) of 4.1 years and low near-term lease expires.
The manager of the REIT noted that rent collections were strong at 99.6% in 2Q2021, with minimal deferrals. Meanwhile, it executed some 52,349 sq ft of mainly long-term leases with positive rental revision of 10.5%.
New leases signed include leading financial services and government tenants such as Deloitte, Commission on State Mandates, EDJ Leasing and FCI Lender Services.
The REIT notes that portfolio in place rents are 6.4% below market, thereby providing an added buffer and rental reversion potential.
Going forward, the REIT’s manager is focused on renewing leases and executing new ones to address the remaining expiries for this year. For this, it says it has “ample debt headroom” of US$458.5 million and US$200 million of undrawn facilities.
As at June 30, Prime US REIT had cash and cash equivalents of US443.9 million, up from US433.8 million in the previous year.
“We are pleased to report another stable and resilient performance. PRIME’s well-diversified portfolio and prudent capital structure continue to deliver on our growth objectives and enhance Unitholders’ value,” says Barbara Cambon, CEO and CIO of the manager of Prime.
The manager of the REIT views the rising vaccination rates and increased consumer activity in the US positively. However, they also note that national asking rents were up 0.9% q-o-q, despite rising vacancy.
Still, they are optimistic that the return to office will be a point of emphasis of many companies considering that several employers have indicated dates at which their staff will be returning.
In line with this, the REIT is looking to acquire two high quality assets – One Town Centre and Sorrento Towers – which are expected to contribute positively to the portfolio’s performance in 2H2021.
“We believe non-gateway markets will continue to provide superior risk-adjusted returns, and the extension of our presence into key growth markets and sectors presents significant future growth opportunities for us,” added Cambon.
To their end, the REIT has its sights on being included in the FTSE EPRA NAREIT index. This will “further institutionalise our unitholder register and improve trading liquidity,” Cambon explains.
Shares in Prime US REIT closed plat at 84 US cents on Aug 3, prior to its results announcement.
Cover image: Prime US REIT
