Keppel Pacific Oak US Reit Q2 distributable income falls 8.8% to US$11.9 million; distributions remain suspended
The manager notes that if market conditions allow, distributions may recommence earlier than planned
KEPPEL Pacific Oak US Reit (Kore) reported distributable income of US$11.9 million for the second quarter ended Jun 30, down 8.8 per cent from US$13.1 million in Q2 FY2023, said its manager on Wednesday (Jul 31).
The office-focused US real estate investment trust (Reit) did not declare any distributions for the period, as it announced in February that it would be suspending distributions from H2 FY2023 to H2 FY2025. This is to address capital needs and leverage concerns over these two years. Its Q2 FY2023 distribution per unit (DPU) had been US$0.0125.
Revenue for Q2 FY2024 slid 4 per cent to US$37.3 million, from US$38.9 million year on year.
Net property income (NPI) for the period contracted 7.4 per cent on year to US$21 million, from US$22.7 million. Excluding non-cash straight-line rent, lease incentives and amortisation of leasing commissions, the fall would have been 3.6 per cent to US$21.8 million, from US$22.6 million year on year.
On a half-yearly basis, distributable income declined 8.8 per cent to US$23.8 million, from US$26.1 million in H1 FY2023. This was attributed to higher financing costs as a result of rising interest rates, said the manager.
Its DPU for H1 FY2023 was US$0.025.
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Revenue for the six months fell 2 per cent to US$74.4 million, from US$75.9 million.
NPI dropped 4.2 per cent to US$42 million, from US$43.9 million in H1 FY2023. Excluding non-cash straight-line rent, lease incentives and amortisation of leasing commissions, net property income for H1 FY2024 would have been US$43.4 million, down 1.6 per cent from US$44.2 million.
The manager said that its committed occupancy “remained healthy” at 90.7 per cent as at Jun 30, with 6.7 per cent cash rental income (CRI) expiring in the second half of 2024.
Rental reversions for the first half was negative 0.3 per cent, mainly affected by renewals at Seattle business park Bellevue Technology Center, Orlando office campus Maitland Promenade I & II and Denver’s Westmoor Center. For Q2, rental reversions was positive 1.2 per cent.
“A low tenant concentration risk continues to be a key unique value proposition of Kore, with its top 10 tenants accounting for only 28.2 per cent of CRI,” said the manager.
Improving capital management
Kore’s manager announced that subsequent to Jun 30, the Reit had earlier refinanced loan facilities of US$55 million that were originally due in the fourth quarter of this year. It also extended a loan facility of US$115 million that would have been due in the third quarter of 2025.
This amounts to a total of US$170 million, and the refinancing and extension were completed in July.
As at Jun 30, the Reit’s aggregate leverage was 42.7 per cent, while its interest coverage ratio was 2.9 times. All-in average cost of debt was 4.47 per cent, and the weighted average term to maturity of the Reit’s debt was 2.3 years.
The manager noted that if market conditions allow, distributions may recommence at an earlier date than planned.
Units of Kore closed unchanged at US$0.20 on Wednesday.
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