Prime US Reit in talks with WeWork on proposed lease restructuring

CO-WORKING space operator WeWork has approached Prime US Reit with a proposal to restructure its lease at the latter's Class A office property in California, and discussions are ongoing.

The tenant, a wholly-owned subsidiary of WeWork, occupies 56,977 square feet (sq ft) within Tower I at Emeryville, out of the building's net lettable area of 222,606 sq ft.

WeWork's website states that its shared office space takes up three floors of the 12-storey tower, and includes hot desking spaces, dedicated desks, and private offices.

The tenant contributes less than 2.5 per cent of Prime US Reit's cash rental income as at end-March, the real estate investment trust's (Reit) manager said in a bourse filing on Thursday evening.

It added that the tenant has been current on its rental obligations till mid-June 2021, and the lease terms are "currently under evaluation".

OXMU : OXMU 0%  has called on the tenant to continue to meet its rental obligations, and also called upon the existing security package for the payment of such obligations.

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Prime US Reit's security in relation to that WeWork lease consists of a combination of protections. If the counterparty honours its obligations, such protections will cover the tenant's monthly lease obligations through as much as end-2022, the manager noted.

The manager also said it does not expect the matter to have any impact on the distribution per unit of Prime US Reit for the current financial year, in light of the security.

Also, based on the independent valuation advice sought by the manager, this will not materially affect the value of the Reit's portfolio as compared to the portfolio appraisal conducted as at last December.

The manager will release further announcements as necessary if there are material developments on this matter.

It added that "notwithstanding the above, rental collections across the portfolio have remained resilient in 2021 and continue to trend in line with collection rates achieved in 2020".

Separately, Prime US Reit has upsized its US$470 million credit facility to US$600 million, and adjusted the covenants with the existing bank lending group.

This additional liquidity will be "readily available" for capital needs within the portfolio and for future property acquisitions, thus enabling Prime US Reit to "compete more effectively in the US property acquisition markets", said the manager's deputy chief executive and chief financial officer, Harmeet Bedi.

Units of Prime US Reit rose 0.6 per cent or 0.5 US cent to finish at 86.5 US cents on Thursday, before the filing.