Prime US Reit reaches agreement with WeWork to terminate lease agreement

PRIME US Reit OXMU : OXMU 0%has reached an agreement with tenant WeWork to terminate its lease in Tower 1 at Emeryville, a Class A office property in California.

In a bourse filing on Friday (Nov 19), the real estate investment trust (Reit) manager said that in accordance with the terms of the agreement, the Reit's security package has been converted into a termination fee that has been received.

When added to the cash security already on hand, the fee would cover the tenant's lease payments to the Reit through to early Q4 2022.

This comes after the manager announced on Sep 13 that the Reit was in discussions with the resolution of WeWork's lease obligations. Prior to that, the media in San Francisco reported that WeWork will be closing its co-working operations in the building.

WeWork previously approached the Reit with a proposal to restructure its lease in June. At that time, Prime US Reit had 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.

The manager noted that the Reit 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.

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In addition, based on the independent valuation advice sought by the manager, the lease termination will not materially affect the value of the Reit's portfolio as compared to the portfolio appraisal conducted as at Dec 2020.

As at Sep 30, WeWork occupied 56,977 square foot (sq ft) of space within the Reit's 4.38 million sq ft portfolio, and contributed approximately 2.2 per cent of the Reit's cash rental income.

According to the manager, the Reit has taken possession of the said space, allowing it to be marketed to potential new tenants with immediate effect.

Units of Prime US Reit closed flat at US$0.84 on Nov 19.

Read more: 

• WeWork to close operations at Prime US Reit property; in talks over lease obligation

• Prime US Reit in talks with WeWork on proposed lease restructuring

• Prime US Reit H1 DPU down 5.4% on higher expenses