Keppel Pacific Oak US REIT Review @ 7 November 2022

Basic Profile & Key Statistics

• Main Sector(s): Office
• Country(s) with Assets: United States
• No. of Properties (exclude development/associate/fund): 14

Key Indicators

Performance Highlight

For 3Q, gross revenue has improved yoy, however, NPI and income available for distribution have declined yoy. The drop in income available for distribution is due to the manager has elected to receive the 100% of the base fee in cash. Adjusted income available for distribution increased yoy, this is a like-for-like comparison should the manager has taken 100% of the fees in cash in 3Q 2021.

Rental Reversion

Rental reversion is at 5.3% for 3Q 2022 and at 2.9% for 9M 2022. 

Divestment

On 28 Jul, the Northridge Center I & II divestment in Atlanta, Georgia was completed. As for the divestment of Powers Ferry, no update at this moment.

Sensitivity to Interest Rate

For every 0.5% increase in interest rate, DPU impact would be 0.067 cents per annum, around 1.1%.

  

Related Parties Shareholding

• REIT sponsor's shareholding: Below median for more than 20%
• REIT manager's shareholding: Above median for more than 20%
• Directors of REIT manager's shareholding: Above median for more than 20%

Lease Profile

• Occupancy: ± 5% from median
• WALE:  Below median for more than 10%
• Highest lease expiry within 5 years: Below median for more than 20%; Falls in 2025
• Weighted Average Land Lease Expiry: 100% Freehold Properties

Debt Profile

• Gearing ratio: ± 10% from median
• Cost of debt: Above median for more than 10%
• Fixed rate debt %: ± 10% from median
• Unsecured debt %: 100%
• WADM: Above median for more than 20%
• Highest debt maturity within 5 years: Below median for more than 10%; Falls in 2025
• Interest coverage ratio: Above median for more than 10%

Diversification Profile

• Top geographical contribution: Below median for more than 20%
• Top property contribution: Below median for more than 20%
• Top 5 properties' contribution: ± 10% from median
• Top tenant contribution: Below median for more than 20%
• Top 10 tenants' contribution: Below median for more than 20%

Key Financial Metrics

• Property yield: Above median for more than 10%
• Management fees over distribution: Below median for more than 20%; $ 9.71 distribution for every dollar paid 
• Distribution on capital: Above median for more than 20%
• Distribution margin: Below median for more than 10%

Trends

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

Relative Valuation

• Current 52 Weeks Range: 14.1%
• P/NAV: Below -2SD for 1y, 3y & 5y
• Dividend Yield: Above +2SD for 1y, 3y & 5y

Author's Opinion

Favorable	Less Favorable
High REIT Manager's Shareholding	Low REIT Sponsor's Shareholding
High Directors of REIT Manager's Shareholding	Short WALE
Well Spread Lease Expiry	High Cost of Debt
100% Freehold Properties	Low Distribution Margin
100% Unsecured Debt	Interest Coverage Ratio Downtrend
Long WADM
Well Spread Debt Maturity
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

The performance is similar to the previous quarter with a slight decline in distributable income, possibly due to an increase in interest expenses. KORE has refinanced loans due in Nov 2023 and Jan 2024 in which the earlier loan due would be on 4Q 2024. Coupled with the 76.8% fixed rate, the impact of interest rate hikes should be low.

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.