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Monday, February 28, 2022

Prime US REIT Review @ 28 February 2022

Basic Profile & Key Statistics

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

Performance Highlight

For 2H, gross revenue, NPI and distributable income increased YoY due to contribution from One Town Center and Sorrento Tower which were acquired in July 2021. DPU has increased YoY due to this albeit slightly due to enlarged unitholder base.

Rental Reversion
Rental reversion for 4Q 2021 is t 7.8%.

 Related Parties Shareholding

  • REIT sponsor's shareholding is low at 1.082%
  • REIT manager's shareholding is low at 0.252%
  • Directors of REIT manager's shareholding is high at 1.055%

Lease Profile

  • Occupancy is slightly low at 90.3%
  • WALE is moderate at 4.2 years
  • Highest lease expiry within 5 years is low at 18.9% which falls in 2025
  • All properties are freehold

Debt Profile

  • Gearing ratio is moderate at 37.9%
  • Cost of debt is slightly high at 2.5%
  • Fixed rate debt % is high at 87%
  • All debts are secured debts
  • WADM is long at 4.1 years
  • Highest debt maturity within 5 years is high at 50% which falls in 2024
  • Interest coverage ratio is high at 5.4 times

Diversification Profile

  • Top geographical contribution is low at 22.4% 
  • Top property contribution is low at 11.9%
  • Top 5 properties contribution is low at 50.9% 
  • Top tenant contribution is low at 8.5% 
  • Top 10 tenants contribution is moderate at 39.6%

Key Financial Metrics

  • Property yield is high at 6.6% 
  • Management fees over distribution is low at 10.2% in which unitholders receive S$ 9.80 for every dollar paid 
  • Distribution on capital is high at 5%
  • Distribution margin is moderate at 48.2%

Trends

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

Relative Valuation

  • P/NAV - Below -1SD for 1y; Below average for 3y
  • Dividend Yield - Above +2SD for 1y; Above average for 3y

Author's Opinion

 Favorable Less Favorable
High Directors of REIT Manager's ShareholdingLow REIT Sponsor's Shareholding
Well Spread Lease ExpiryLow REIT Manager's Shareholding
100% Freehold PropertiesConcentrated Debt Maturity
High Fixed Rate Debt %0% Unsecured Debt
Long WADMProperty Yield Downtrend
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 1H due to the acquisition of One Town Center and Sorrento Tower. Despite a good rental reversion throughout the year, the occupancy has been declining from 97% at 3Q 2019 to current low of 90.3%, without sign of reversal. 


You could also refer below for more information:

SREITs Dashboard - Detailed information on individual Singapore REIT

SREITs Data - Overview and Detail of Singapore REIT

REIT Analysis - List of previous REIT analysis posts


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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.

2 comments:

  1. Hi Vince - can you re-look at the sponsor ownership? KBS owns 24.8%. I share the below from market screener.
    BTW - this is great work that you are doing and sharing...helps me on my own research.


    Name Equities %
    KBS Realty Advisors LLC 289,561,899 24.8%
    Tiku Family 85,226,000 7.30%
    Singapore Press Holdings Limited 68,181,000 5.84%
    Keppel Corporation Limited 62,500,000 5.35%
    Steppe Investments Pte Ltd. 62,182,000 5.32%
    TMB Asset Management Co., Ltd. 17,406,514 1.49%
    The Vanguard Group, Inc. 16,971,277 1.45%
    BlackRock Fund Advisors 7,647,764 0.65%
    Norges Bank Investment Management 6,769,499 0.58%
    Charles J. Schreiber 5,681,500 0.49%

    ReplyDelete
    Replies
    1. Hi Suresh,

      Thanks for your compliment. I just check again, KBS Asia Partners Pte. Ltd. (KAP) is the sponsor of Prime US REIT. From 2020 annual report, it mentioned KAP directly holds 9,695,134 units in Prime US REIT and KAP holds a 40% direct interest in the Manager, which mean KAP has deemed interest of PRIME US REIT through manager. I would update my post to include the deemed interest. I am not sure how KBS realty advisors is link to KAP. Let's say KAP is a subsidiary of KBS realty advisors, then KBS realty advisors shareholding should not be taken as sponsor interest. Unless it is vice versa.

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