Keppel Pacific Oak US Reit posts 1.6% rise in H2 DPU to US$0.0318

OFFICE-FOCUSED Keppel Pacific Oak US Reit (KORE) on Wednesday (Jan 26) posted a higher H2 distribution per unit (DPU) of 3.18 US cents, compared with 3.13 US cents a year ago, after contributions from acquired properties as well as positive rental reversions and annual rental escalations across the portfolio.

The DPU includes the advanced distribution of 0.64 US cent for the July 1 to Aug 5, 2021 period, which was paid out on Sep 28, 2021.

Distributable income for the 6 months ended Dec 31, 2021 rose 10 per cent to US$32.5 million. The increase was partly driven by the acquisitions of Bridge Crossing in Nashville, Tennessee, and 105 Edgeview in Denver, Colorado, which were completed last August.

Net property income rose 2.4 per cent to US$42.1 million, while gross revenue climbed 5.5 per cent to US$72.9 million.

Bridge Crossing and 105 Edgeview contributed about 4 months' results to H2 earnings. This was partially offset by lower non-cash straight-line rent and lease incentives from the existing portfolio.

Excluding non-cash income adjustments, cash rental income in the second half for the existing portfolio was similar to that for H2 2020, said KORE.

A total of 250,454 square feet (sq ft) of office space was committed in Q4, bringing full-year leasing to over 730,619 sq ft - equivalent to about 14.3 per cent of the total portfolio by net lettable area.

Portfolio committed occupancy at year-end was 91.9 per cent. Rental reversion remained positive at 6 per cent throughout 2021, driven mainly by strong rents in the technology hubs of Seattle - Bellevue/Redmond and Austin.

Average rental collections last year came in at about 99 per cent. As at end-2021, 35.6 per cent of KORE's tenants operated in the sectors of technology, advertising, media and information, identified by the manager as key growth areas.

The weighted average lease expiry by cash rental income for KORE's portfolio and top 10 tenants was 3.6 years and 5 years, respectively. "Tenant concentration risk remains low with the top 10 tenants accounting for only 22.6 per cent of cash rental income," said the manager.

KORE's all-in average cost of debt was 2.8 per cent at year-end. Its aggregate leverage ratio was 37.2 per cent, while interest coverage ratio was 5.1 times.

The weighted average term to maturity (WATM) of debt was 2.8 years. As at Dec 31, 83.4 per cent of the Reit's non-current loans have been hedged.

KORE secured new loan facilities of US$80 million on Jan 19. In February, the loan facilities and existing revolving credit facilities will be used to refinance a loan due in November 2022. The WATM of KORE's debt would have been 3.2 years if the early refinancing had happened on Dec 31.

The manager said it will continue to focus particularly on the defensive sectors of tech and healthcare in the US, and plans to seek "high-quality assets and deliver accretive acquisitions in Super Sun Belts (Atlanta, Dallas and Houston) and 18-Hour Cities (Austin, Denver and Seattle)".

"These highly sought-after states have been encountering increasing demand in the past quarter as more people are starting to move out of densely populated cities," it added.

Distributions for the period Aug 6 to Dec 31, 2021 will be made on Mar 31, 2022.

Units of KORE closed flat at US$0.775 on Wednesday.