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Prime US Reit Q4 DPU of 1.77 US cents, 9% above IPO forecast

PRIME US Reit on Wednesday posted a distribution per unit (DPU) of 1.77 US cents for its fourth quarter ended Dec 31, 9 per cent higher than its initial public offering forecast of 1.62 US cents.

Gross revenue was US$33.5 million for the quarter, up 2 per cent from a forecast of US$32.9 million. This was due to higher rental income and recoveries income, the real estate investment trust's (Reit) manager said in a regulatory filing.

Net property income (NPI) grew 3 per cent on the year to US$22.3 million for the quarter, from a forecast of US$21.6 million.

Income available for distribution was US$16.4 million, up 8.8 per cent from a forecast of US$15 million.

The distribution will be paid out on March 30, after books closure on Feb 20.

Meanwhile, for the full year ended Dec 31, DPU was 7.5 per cent higher at 3.15 US cents, versus a forecast of 2.93 US cents, and income available for distribution grew 7.3 per cent to US$29.2 million from a forecast of US$27.2 million.

Gross revenue was 2.2 per cent higher at US$60.7 million, from a forecast of US$59.4 million, while NPI rose 2.9 per cent to US$40.2 million, from a forecast of US$39 million.

Barbara Cambon, chief executive officer and chief investment officer of Prime US Reit's manager, said improving fundamentals of the US economy supports the sustainable growth of its portfolio.

"We aim to expand our premium portfolio of high-quality Class A office assets, maintain a balanced business model and leverage our expertise to enhance unitholder value in the long-term," she said.

In a separate announcement on Wednesday morning, the manager announced that Prime US Reit has entered into a purchase agreement with GV/HI Park Tower Owner to acquire a property located in the downtown area of Sacramento, California for US$165.5 million.

The building - called Park Tower, is a freehold 24-storey Class A office tower and five-storey mixed-use retail or parking garage with a net lettable area of 489,171 square feet.

The purchase price of US$165.5 million represents a 2.6 per cent discount to the property's independent valuation of US$170 million as at Jan 16. 

The estimated total cost of the proposed acquisition is about US$170.1 million, comprising the US$165.5 million purchase price, a US$1.7 million acquisition fee to be paid to the manager in cash, and estimated professional fees and other transaction fees and expenses of around US$3 million. The latter includes financing and equity fundraising related expenses, due diligence cost, land transfer taxes and costs to be incurred in relation to the valuation.

The proposed acquisition will allow Prime US Reit to expand its footprint to Sacramento, following which no single market will contribute more than 13 per cent of the Reit's cash rental income, the manager added.

It will be financed by a combination of loans and the issuance of new units in the Reit via a proposed private placement.

In another filing, the manager said it is looking to raise at least around US$100 million in gross proceeds from the proposed private placement, where new units will be priced between US$0.928 and US$0.957 apiece. The final issue price will be determined after a book-building process.

The issue price range represents a discount of between 6 per cent and 8 per cent to the volume-weighted average price of US$1.0179 per unit for trades done on Feb 11.

Around US$95.4 million of the gross proceeds will be used to partially fund the Park Tower acquisition, while around US$4.6 million will be used to pay estimated fees and expenses, including land transfer taxes, professional fees and expenses, related to the proposed acquisition and private placement. Any remaining gross proceeds will be used for general corporate and/or working capital purposes.

The new units, which are expected to be listed on Feb 21, will be offered to institutional and other investors.

DBS Bank and Credit Suisse (Singapore) are the joint lead managers and underwriters for the proposed private placement.

In connection with this, Prime US Reit's manager intends to declare a cumulative distribution of the distributable income which consists of a distribution from July 19, 2019 (Prime US Reit's listing date) to Dec 31, 2019, and a distribution for the period from Jan 1 to Feb 20, 2020.

DPU under the cumulative distribution is estimated to be 4.11 US cents, with the actual amount to be announced after the finalisation of the Reit's management accounts for the relevant period.

Units of mainboard-listed Prime US Reit closed flat at US$1.02 on Tuesday, before the results were released. The manager called for a trading halt on Wednesday morning.

Prime US Reit's manager KBS US Prime Property Management, is an associate company of Singapore Press Holdings - which publishes The Business Times.