Keppel Pacific Oak US Reit posts 10.7% drop in Q3 distributable income to US$13.1 million
Samuel Oh
KEPPEL Pacific Oak US Reit (Kore) said its third-quarter distributable income was down 10.7 per cent to US$13.1 million, from US$14.6 million in the corresponding period a year ago.
This was mainly due to higher financing costs as a result of rising interest rates, said the Reit’s manager in its key business and operational updates for Q3 2023 on Wednesday (Oct 18).
For the nine months period ended Sep 30, distributable income logged a larger decline of 15.2 per cent to US$39.2 million, from US$46.2 million in the corresponding period in 2022.
Net property income rose 3.7 per cent to US$22.1 million, and gross revenue increased 3.3 per cent to US$38.4 million for Q3 2023.
As at end-September, Kore’s aggregate leverage stood at 39.1 per cent with no long-term refinancing requirements until the Q4 2024; the weighted average term to maturity of its debt was 2.9 years, said the manager.
The Reit’s portfolio weighted average lease expiry by cash rental income was 3.6 years, while committed occupancy was at 91.4 per cent as at end-September.
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Rental reversion for the first nine months of 2023 declined by 0.6 per cent, affected by the renewal or expansion of one of its tenants at its office building at Maitland Promenade I & II in Orlando, Florida. But rental reversion for Q3 was positive at 3.8 per cent, said the manager. Built-in average annual rental escalation across its portfolio was at 2.5 per cent.
The manager said that it leased out 539,179 square feet (sq ft) of space for 9M 2023, equivalent to 11.3 per cent of the portfolio’s net lettable area.
Kore’s buildings and business campuses in the tech hubs of Seattle, Austin and Denver contributed 67 per cent of the portfolio’s net property income, including non-cash items, it added. It also said the Reit’s strategic presence in key growth markets and focus on technology, advertising, media and information (TAMI), medical and healthcare sectors provides income resilience.
About 50 per cent of the Reit’s portfolio by net lettable area are companies from these sectors. The majority of Kore’s top 10 tenants are from TAMI companies, contributing 24.8 per cent of cash rental income, the manager said.
It added that most companies are moving away from hiring remote-based positions, and are adopting hybrid work with a minimum of three days in office per week emerging as a common standard. The manager further noted that office leasing volume has seen an uptick of 11.6 per cent growth, to 41.9 million sq ft nationwide during the second quarter.
Units of Kore closed at US$0.205, up 2.5 per cent or US$0.005, before the announcement.
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