Prime US Reit

[homer123]

DBS Group Research: Prime US REIT

 

[Shion]

UOB Kay Hian initiates Prime US REIT at 'buy' with TP of 78 US cents​

https://www.theedgesingapore.com/ca...an-initiates-prime-us-reit-buy-tp-78-us-cents
UOB Kay Hian analyst Jonathan Koh has initiated coverage on Prime US REIT with a “buy” call and a target price of 78 US cents ($1.03).

At its current share price levels, the REIT’s valuations are “bombed-out”. Units in Prime US REIT corrected by some 40% in the 2H2022 amid the rising interest rates. Units in Prime US REIT closed at 41.5 US cents at the close of Jan 17, which provides a distribution yield of 15.2% and yield spread of 11.7% for the FY2023, notes Koh.

With its P/NAV at 0.56x, Koh adds that the stock is oversold and that its “current weakness presents a good opportunity to accumulate the stock”.

In his report dated Jan 18, Koh sees several positives that may lead to a re-rating in the REIT’s unit price.

Prime US REIT, which has a portfolio of 14 Class A freehold office properties in 13 key office markets in the US, looks set to benefit from the “flight to quality” trend despite the gloom in the US market seen in the second half of 2022.

“Class A offices with amenities are well sought after to attract employees back to work from the office. Demand is skewed towards high-quality Class A office space. According to Cushman & Wakefield, Class A offices outperform in net absorption. Premium in rents commanded by newer Class A office buildings have also doubled during the Covid-19 pandemic,” Koh writes.

In addition, some of the REIT’s key tenants are blue-chip companies with strong credit standing. These include names like Charter Communications, Goldman Sachs, Sodexo, Dexcom, Wells Fargo and Bank of America, which are among the REIT’s top 10 tenants.

“[The] weighted average lease expiry (WALE) for its top 10 tenants is healthy at 4.6 years. Some 73% of tenants are in the established and growth (STEM/TAMI) sectors,” he adds.

STEM stands for science, technology, engineering and math while TAMI stands for technology, advertising, media and information.

In addition to its quality portfolio of offices, Prime US REIT has a sizeable exposure to the 18-hour and Super Sun Belt cities, which attract an influx of companies and people. These high-growth cities have low or no state-level taxes, a highly educated workforce generated by renowned local universities, rich amenities and good infrastructure, says Koh.

Plus, the REIT has room to consistently generate positive rental reversion.

“Prime US REIT has generated positive rental reversion consecutively for the past 10 quarters. On a portfolio basis, in-place passing rents were 6.7% below asking rents in 4QFY2022,” notes Koh.

“Within its portfolio, Park Tower at Sacramento, Sorrento Towers at San Diego, Crosspoint at Philadelphia and Tower 909 at Irving have the potential to provide strong positive rental reversion of 11.2%, 21.3%, 17.7% and 13.0% respectively in 4QFY2022,” he adds.

Driven by higher interest rates, Koh expects the REIT’s cap rate to increase by 50 basis points (bps) to 6.8%. On this, he estimates the REIT to see a US$124.8 million drop in the fair value of its investment properties, which will cause its aggregate leverage to drop by 3.4 percentage points to 42.1%, below the 50% limit.

The REIT’s net asset value (NAV) per unit may also drop by 13% to 75 US cents.

To Koh, Prime US REIT’s exposure to the fluctuation in the US’s interest rates as “prudently hedged”.

“Some 83% of Prime US REIT’s borrowings [are] on fixed rates or [are] hedged to fixed rates. About 66% of its borrowings [are] fixed or hedged till mid-2026. It does not have any refinancing obligations till Jul 2024,” he notes.

As at 4.35pm, units in Prime US REIT are trading 1.5 US cents higher or 3.61% up at 43 cents.

 

[TehSi99]

UOB Kay Hian initiates Prime US REIT at 'buy' with TP of 78 US cents​

https://www.theedgesingapore.com/ca...an-initiates-prime-us-reit-buy-tp-78-us-cents
UOB Kay Hian analyst Jonathan Koh has initiated coverage on Prime US REIT with a “buy” call and a target price of 78 US cents ($1.03).

At its current share price levels, the REIT’s valuations are “bombed-out”. Units in Prime US REIT corrected by some 40% in the 2H2022 amid the rising interest rates. Units in Prime US REIT closed at 41.5 US cents at the close of Jan 17, which provides a distribution yield of 15.2% and yield spread of 11.7% for the FY2023, notes Koh.

With its P/NAV at 0.56x, Koh adds that the stock is oversold and that its “current weakness presents a good opportunity to accumulate the stock”.

In his report dated Jan 18, Koh sees several positives that may lead to a re-rating in the REIT’s unit price.

Prime US REIT, which has a portfolio of 14 Class A freehold office properties in 13 key office markets in the US, looks set to benefit from the “flight to quality” trend despite the gloom in the US market seen in the second half of 2022.

“Class A offices with amenities are well sought after to attract employees back to work from the office. Demand is skewed towards high-quality Class A office space. According to Cushman & Wakefield, Class A offices outperform in net absorption. Premium in rents commanded by newer Class A office buildings have also doubled during the Covid-19 pandemic,” Koh writes.

In addition, some of the REIT’s key tenants are blue-chip companies with strong credit standing. These include names like Charter Communications, Goldman Sachs, Sodexo, Dexcom, Wells Fargo and Bank of America, which are among the REIT’s top 10 tenants.

“[The] weighted average lease expiry (WALE) for its top 10 tenants is healthy at 4.6 years. Some 73% of tenants are in the established and growth (STEM/TAMI) sectors,” he adds.

STEM stands for science, technology, engineering and math while TAMI stands for technology, advertising, media and information.

In addition to its quality portfolio of offices, Prime US REIT has a sizeable exposure to the 18-hour and Super Sun Belt cities, which attract an influx of companies and people. These high-growth cities have low or no state-level taxes, a highly educated workforce generated by renowned local universities, rich amenities and good infrastructure, says Koh.

Plus, the REIT has room to consistently generate positive rental reversion.

“Prime US REIT has generated positive rental reversion consecutively for the past 10 quarters. On a portfolio basis, in-place passing rents were 6.7% below asking rents in 4QFY2022,” notes Koh.

“Within its portfolio, Park Tower at Sacramento, Sorrento Towers at San Diego, Crosspoint at Philadelphia and Tower 909 at Irving have the potential to provide strong positive rental reversion of 11.2%, 21.3%, 17.7% and 13.0% respectively in 4QFY2022,” he adds.

Driven by higher interest rates, Koh expects the REIT’s cap rate to increase by 50 basis points (bps) to 6.8%. On this, he estimates the REIT to see a US$124.8 million drop in the fair value of its investment properties, which will cause its aggregate leverage to drop by 3.4 percentage points to 42.1%, below the 50% limit.

The REIT’s net asset value (NAV) per unit may also drop by 13% to 75 US cents.

To Koh, Prime US REIT’s exposure to the fluctuation in the US’s interest rates as “prudently hedged”.

“Some 83% of Prime US REIT’s borrowings [are] on fixed rates or [are] hedged to fixed rates. About 66% of its borrowings [are] fixed or hedged till mid-2026. It does not have any refinancing obligations till Jul 2024,” he notes.

As at 4.35pm, units in Prime US REIT are trading 1.5 US cents higher or 3.61% up at 43 cents.

As always, thamks for sharing.
US Reits are tricky now. But Prime has been hammered down badly and could be an opportunity.

 

[lzydata]

Annualised DPU yield 23.6%

NAV 75 USD cents, so trading at about 25% book value

https://links.sgx.com/FileOpen/1H2023 - Presentation Slides.ashx?App=Announcement&FileID=768172

 

[homer123]

Although cheap but scare to buy

 

[Shion]

Prime US REIT reports lower DPU of 0.29 US cents for FY2024 to preserve distributable income for capex needs​

https://www.theedgesingapore.com/ca...us-cents-fy2024-preserve-distributable-income

Prime US REIT has reported a distribution per unit (DPU) of 0.29 US cents (0.39 cents) for the FY2024 ended Dec 31, 2024, 88.2% y-o-y lower than the DPU of 2.46 US cents declared in FY2023.

Accordingly, the REIT’s 2HFY2024 DPU came in 51.6% y-o-y lower at 0.11 US cents.

This DPU is based on the number of units entitled to distribution for 2HFY2024 and FY2024 of 1,308,259,171.

The number of units entitled to distribution has taken into account bonus issue of new units on the basis of 1 bonus unit to be credited as fully paid for every 10 existing units on March 28, 2024. The amounts for 2HFY2023 and FY2023 have been represented to take into account the effect of the bonus issue.

The manager of the REIT says that it has made the decision to announce a DPU for the 2HFY2024 of 0.11 US cents, about 10% of distributable income in order to balance its objectives to preserve a substantial portion of distributable income to meet capex needs and reinvest cash flow into the business.

The REIT reported a lower distribution to unitholders for the FY2024 of US$3.80 million, 88.2% y-o-y lower.

The REIT recorded a lower net property income of US$75.96 million for the FY2024, lower 18.8% y-o-y.

Its gross revenue came in 11.8% y-o-y lower for the reporting period at US$140.96 million.

As at Dec 31, 2024, occupancy stood at 80% while weighted average lease expiry (WALE) stood at 4.4 years, up from the 4 years in the same period a year ago.

Following the completion of refinancing and divestment exercises in 2024, PRIME’s aggregate leverage stood at 46.7%. This represents approximately US$92.5 million debt headroom to MAS 50% leverage threshold.

As at Dec 31, 2024, 67% of borrowings are hedged or fixed to mid-2026 and beyond. PRIME has a fully extended weighted average debt maturity of 2.8 years.

Units in Prime US REIT closed 0.1 US cents lower or 0.58% down at 17 US cents on Feb 19.

 

[tokcocksingsong]

gone were the days of 40% dividend yield...

quickly drop back to $0.12 leh

 

[Shion]

Prime US Reit H1 DPU falls by 33.3% to US$0.0012 on the back of higher finance expenses, asset divestment​

Reit records 11.6% year-on-year decrease in net property income to US$35.8 million for period

https://www.businesstimes.com.sg/co...back-higher-finance-expenses-asset-divestment

[SINGAPORE] Prime US Real Estate Investment Trust : OXMU +0.58% (Reit) on Tuesday (Aug 12) posted a 33.3 per cent decline in its distribution per unit (DPU) for the first half of the 2025 financial year to US$0.0012, from US$0.0018 in the corresponding year-ago period.

Income available for distribution slid 28.6 per cent to US$16.7 million, from US$23.3 million.

The Reit manager attributed the drop to the divestment of One Town Center, an office tower in Florida, in July 2024 as well as higher finance expenses.

Finance expenses for the first six months increased to US$20.6 million, compared with US$14.8 million a year ago. This was mainly due to a rise in finance cost on the unhedged portion of borrowings and incremental drawdowns on debt facilities for capital expenditures, said the Reit manager.

The Reit recorded a revenue of US$67.3 million for the first six months, an 8.4 per cent decrease from US$73.5 million in H1 FY2024. The Reit manager attributed this to the divestment of the One Town Center asset.

Property operating expenses fell to US$31.5 million for H1, compared with US$32.9 million a year ago due to the divestment. As a result, net property income for the six months was lower at US$35.8 million, sliding 11.6 per cent year on year from US$40.6 million.

The weighted average interest rate, excluding amortisation of debt-related transaction costs, on loans and borrowings for H1 was 5.4 per cent per annum. As at Jun 30, 2025, the Reit’s aggregate leverage and interest coverage ratio were 46.7 per cent and 1.7 times, respectively.

“Cautiously optimistic”​

The manager said that the Reit is retaining capital to prepare for approximately 440,000 square feet (sq ft) of new leases, which are equivalent to 10.5 per cent of the Reit’s portfolio occupancy.

It expects the cash flow from rent to commence as early as the third quarter of FY2025, on a staggered basis. The capital deployment is expected to drive meaningful yield expansion as these leases transition from rent-free periods to contributing income, said the manager.

It added that US office-leasing demand is increasing as the return-to-office momentum improves. This has led to increased interest and leasing activities at several of its assets.

“Given Prime’s ample debt headroom and access to committed undrawn facilities, Prime was able to actively pursue major tenant opportunities, as prospective tenants increasingly favour landlords with robust balance sheets and strong liquidity positions,” said the manager.

It noted that Prime had secured 400,000 sq ft of leases in H1 FY2025, up 24 per cent against the second half of FY2024. The leases have annual rent escalations of 2 to 3 per cent, and a positive rental reversion of 3.4 per cent.

The Reit manager said that it is cautiously optimistic for the period ahead.

“As the economic environment progresses, Prime US Reit is expected to maintain strong leasing activity, bolstered by a diverse and resilient tenant base that ensures steadily increasing rental income,” it said in a bourse filing on Tuesday.

The distribution will be paid out on Sep 30.

Units of Prime US Reit closed up 0.6 per cent or US$0.001 at US$0.174 on Tuesday, before the announcement.