Keppel Pacific Oak US Reit to acquire two US office buildings for US$105.1m

KEPPEL Pacific Oak US Reit (KORE) is proposing to acquire two office assets in the US for a total of US$105.1 million, the Reit manager announced on Wednesday morning.

The properties are Bridge Crossing in Nashville, Tennessee, and 105 Edgeview in Denver, Colorado. They will be purchased for US$46 million and US$59.1 million, respectively.

Both are 100 per cent leased to tenants in the technology sector as at June 30, 2021.

Occupants include Bridge Crossing's anchor tenant Comdata, which is a part of the New York-listed Fleetcor Group. Meanwhile, 105 Edgeview's anchor tenant is broadband connectivity services provider Gogo Business Aviation, whose lease expires in 2029.

In its announcement, KORE's manager said it believes its proposed acquisitions of these buildings will deepen the Reit's presence in key growth markets and enhance its portfolio's income resilience.

The acquisitions are seen as distribution per unit (DPU)-accretive, and the manager believes additions of these assets will strengthen KORE's distributions and total unitholder returns.

Further, KORE's manager highlighted Nashville and Denver as prime locations in key sub-markets with limited upcoming supply. The acquisitions augment KORE's green footprint and enhance the Reit's weightage in current indices while positioning it for further index inclusions, added the manager.

KORE's manager intends to finance the acquisitions through a combination of debt financing and proceeds from a private placement of about 88.7 million new units.

The placement exercise, which is set to raise gross proceeds of about US$65 million, was subscribed more than twice over "with strong demand from new and existing unitholders comprising institutional investors and accredited investors", the manager said in an update on Wednesday night.

The issue price of 73.3 US cents for each unit represents a discount of 7.9 per cent to the volume-weighted average price of 79.59 US cents for trades done on Tuesday, and trading of the new units is expected to start on Aug 6.

DBS and UOB were appointed joint bookrunners and underwriters of the deal.

The manager also said KORE's trustee, Perpetual (Asia) Limited, has obtained a 5.5-year US$120 million loan facility following a July 27 facility agreement.

Under the terms and conditions of the agreement, the aggregate level of facilities that may be affected by a mandatory prepayment event - or a cross default under other borrowings of KORE and its subsidiaries - is US$684.7 million.

Units of KORE ended 1.5 US cents or 1.9 per cent higher at 80 cents on Tuesday, before the Reit manager called for a trading halt that was lifted late on Wednesday.

READ MORE: Keppel Pacific Oak US Reit raises H1 DPU by 1.9% to 3.16 US cents