Keppel Pacific Oak US Reit posts Q2 DPU of 1.56 US cents

KEPPEL Pacific Oak US Reit (KORE) on Wednesday posted a second-quarter distribution per unit (DPU) of 1.56 US cents, 4 per cent higher than a year ago, helped by factors such as positive rental reversion from lease renewals and income from new leases. 

For the half year ended June 30, DPU was 3.10 US cents, a 3.3 per cent increase year on year. KORE declares its distributions semi-annually, and unitholders can expect to receive their distributions on Sept 24. 

This comes as second-quarter distributable income rose 18.5 per cent on the year to US$14.7 million. Gross revenue was US$35.2 million, up 20.1 per cent year on year. 

Net property income increased 16.3 per cent on the year to US$20.9 million.  

KORE attributed the better showing to higher rental income, mainly from new leases across the portfolio, and positive rental reversion from lease renewals signed in H2 2019. Contributions from One Twenty Five in Dallas - which KORE acquired last November - and built-in rental escalation in the portfolio also helped. 

KORE said that it committed approximately 196,000 sq ft of office space in H1, equivalent to about 4.2 per cent of its total portfolio by net lettable area, despite a slowdown in property tours across the US due to the coronavirus pandemic. Most of the leasing activity occurred in Seattle, Atlanta and Houston.

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It brought the KORE portfolio's committed occupancy to 94.3 per cent as at June 30, with only 2.8 per cent of leases by cash rental income (CRI) expiring in the remainder of the year.

KORE also achieved rental reversion of 14.7 per cent in H1, driven mainly by the tech hubs of Seattle and Austin. 

Still, the Reit's manager said it remains "cautiously optimistic of leasing performance in its key growth markets". It added that it will continue its prudent approach to capital management and efforts to capture rental escalations and positive rental reversions as leases expire.

KORE currently has no long-term debt refinancing requirements until November 2022, having obtained a loan facility for the early refinancing of borrowings that were due in November 2021 and restructured interest rate swaps related to these borrowings. 

Meanwhile, tenants in the retail sector, including those in medical retail, accounted for less than 2 per cent of KORE's CRI as at June 30. 

The Reit's manager said it has received rental-relief requests from about 15 per cent of KORE's tenancies across different industries to date. But of this, only 5.7 per cent have been granted, equivalent to approximately 2.8 per cent in economic impact. 

Tenants have neither pre-termination rights, nor are they entitled to rental rebates, KORE noted. 

Units in the Reit closed down 0.74 per cent at US$0.675 on Wednesday before the announcement.