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Sunday, November 21, 2021

Prime US REIT Review @ 21 November 2021

Basic Profile & Key Statistics

Prime US REIT (PRIME) is an office REIT with 14 properties in U.S.

Performance Highlight

Performance has improved due to contribution from the newly acquired One Tower Center and Sorrento Towers.

Rental reversion is high for this quarter at 19.2%.

Acquisition of Sorrento Towers and One Town Center was completed on 23 July and 21 July respectively.

 Related Parties Shareholding

  • REIT sponsor's shareholding is low at 0.832%
  • REIT manager's shareholding is low at 0.218%
  • Directors of REIT manager's shareholding is high at 1.059%

Lease Profile

  • Occupancy is slightly low at 91.4%
  • WALE is long at 4.5 years
  • Highest lease expiry within 5 years is low at 18.3% which falls in 2024
  • All properties are freehold

Debt Profile

  • Gearing ratio is moderate at 38.4%
  • Cost of debt is slightly high at 2.6%
  • Fixed rate debt % is high at 85%
  • All debts are secured debts
  • WADM is long at 3.2 years
  • Highest debt maturity within 5 years is high at 49% which falls in 2023, identical to 2024
  • Interest coverage ratio is high at 5.5 times

Diversification Profile

  • Top geographical contribution is low at 21.2% 
  • Top property contribution is low at 12.7%
  • Top 5 properties contribution is low at 53.1% 
  • Top tenant contribution is low at 8.7% 
  • Top 10 tenants contribution is slightly high at 40.3%

Key Financial Metrics

  • Property yield is high at 6.6% 
  • Management fees over distribution is low at 11% in which unitholders receive S$ 9.09 for every dollar paid 
  • Distribution on capital is high at 5.1%
  • Distribution margin is moderate at 49.7%

Trends

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

Relative Valuation

  • P/NAV - Average for 1y and 3y
  • Dividend Yield - Average for 1y and 3y

Author's Opinion

 Favorable Less Favorable
High Directors of REIT Manager's Shareholding Low REIT Sponsor's Shareholding
Long WALELow REIT Manager's Shareholding
Well Spread Lease ExpiryConcentrated Debt Maturity
100% Freehold Properties0% Unsecured Debt
High Fixed Rate Debt % Property Yield Downtrend
Long WADM 
High Interest Coverage Ratio 
Low Top Geographical Contribution 
Low Top Property & Top 5 Properties Contributions 
Low Top Tenant Contribution 
High Property Yield 
Competitive Management Fees 
High Distribution on Capital
Performance has improved as compared to the previous quarter due to the acquisition of Sorrento Towers and One Town Center. For the lease with a subsidiary of WeWork (around 2.2% of cash rental income), Prime has reached an agreement to terminate its lease in which the cash security would cover the lease until early 4Q 2022. Therefore, it should not affect the DPU in the near term. With the acquisition couple with positive rental reversion, PRIME performance is expected to improve in the upcoming quarters.

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*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee 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 and 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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