REIT-TIREMENT - REITs Investing & Personal Finance

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Thursday, February 04, 2021

Keppel Pacific Oak US REIT Review @ 4 February 2021

Basic Profile & Key Statistics

Keppel Pacific Oak US REIT (KORE) is a pure office REIT that owns 13 properties in U.S. KORE is traded in USD.


Performance Review

Gross revenue, NPI and distributable income increased YoY by 7.7%, 6.6% and 13.4% respectively mainly due to contribution from One Twenty Five which was acquired on November 2019. Despite that, DPU increased by 4% YoY due to enlarged unitholders arising from private placement for One Twenty Five acquisition.
Rental reversion is +10.2% for FY2020.

Lease Profile

  • Occupancy is slightly low at 92.3%
  • WALE is moderate at 3.8 years 
  • Highest lease expiry within 5 years is low at 17.1% which falls in 2023
  • All properties are freehold.


Debt Profile

  • Gearing ratio is moderateat 37%
  • Cost of debt is high at 3.22%
  • Fixed rate debt % is slightly high at 84.7%
  • All debts are unsecured debt.
  • WADE is moderate at 2.9 years
  • Highest debt maturity within 5 years is slightly low at 28.6% which falls in 2022
  • Interest coverage ratio is high at 4.7 times


Diversification Profile

  • Top geographical contribution is low at 42.4% (from 2019 Annual Report)
  • Top property contribution is low  at 18.7% (from 2019 Annual Report)
  • Top tenant contribution is low  at 3.4%
  • Top 10 tenants contribution is low at 19.7%

Key Financial Metrics

  • Property yield is high at 6.5%
  • Management fees over distribution is competitive at 11.3% in which unitholders receive US$ 8.85 for every dollar paid
  • Distribution on capital is high at 4.7%
  • Distribution margin is low at 42%

Trends

  • Uptrend - DPU
  • Slight Uptrend - Distribution on Capital
  • Flat - Property Yield, Distribution Margin
  • Slight Downtrend - NAV per Unit
  • Downtrend - Interest Coverage Ratio


Relative Valuation

  • Dividend Yield - Past 4 quarters DPU @ 6.23 cents / average yield @ 8.17% = US$ 0.765
  • Price/NAV - NAV @ US$ 0.819 x average P/NAV @ 0.9= US$ 0.735


Author's Opinion

 Favorable Less Favorable
Well Spread Lease ExpiryHigh Cost of Debt
All Freehold PropertiesLow Distribution Margin
100% Unsecured DebtInterest Coverage Ratio Downtrend
High Interest Coverage Ratio 
Low Top Geographical Contribution 
Low Top Property Contribution 
Low Top Tenant & Top 10 Tenants Contributions 
High Property Yield 
Competitive Management Fees 
High Distribution on Capital 
DPU Uptrend

KORE performance and fundamental remain sound. As per presentation, average rents are 8% below asking rents, which provide rooms for positive rental reversion as upcoming leases expire. There is a 12.9% lease expiry by GRI in this year, hopefully KORE could achieve positive rental reversion.


For more information, you could refer to:

SREITs Dashboard - Detailed information on individual Singapore REIT

SREITs Data - Overview of Singapore REIT

REIT Analysis - List of previous REIT analysis posts

REIT-TIREMENT Patreon - Support this blog as a Patron and get SREITs Dashboard PDF

REIT Investing Community - Facebook Group where members share and discuss REIT topic


*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee the accuracy, completeness, and reliability. It should not be taken as financial advice or a statement of fact. I shall not be held liable for errors, omissions as well as loss or damage as a result of the use of the material in this blog. Under no circumstances does the information presented on this blog represent a buy, sell, or hold recommendation on any security, please always do your own due diligence before any decision is made.

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