Prime US Reit

[winston]

not vested

Feb 12, 2020

Prime US REIT ($1.02, trading halt) a real estate investment trust with a high-quality office
portfolio in the United States announced its financial results for 19 July 2019 to 31 December 2019.

Gross revenue and net property income (“NPI”) for FY2019 outperformed by 2.2% and 2.9% to
US$60.7 million and US$40.2 million respectively.

The outperformance of IPO forecasts was driven by higher rental income and recoveries income.

PRIME’s FY2019 distribution per unit (“DPU”) of US 3.15 cents per Unit comprised tax-exempt income of US 2.00 cents per Unit and capital of US 1.15 cents per Unit.

PRIME distributes 100% of distributable income for FY2019 and for FY2020.

The books closure date for the DPU is Thursday, 20 February 2020 and payment is expected to be made on Monday, 30 March 2020.

PRIME has continued to maintain a prudent capital management strategy with a conservative debt maturity profile and gearing level.

100% of PRIME’s term debt interest is on a fixed rate basis and the outstanding amount of US$437.6 million has a weighted average tenor of 5.2 years, providing investors with DPU certainty.

Leveraging on the strength of KBS, PRIME was able to access a weighted average interest cost of 3.3% as at 31 Dec 2019.

PRIME continues to adopt a proactive portfolio lease management strategy to drive growth. Occupancy rate has continued to remain high at 95.8% for FY2019, with approximately 98.0% of leases having rental escalations.

The weighted average lease expiry is 5.1 years, with not more than 17.2% of the leases by net lettable area (“NLA”) expiring in any one year.

PRIME’s property portfolio was revalued as of 31 December 2019 and recorded a net fair value gain of US$18.8 million, reflecting the improving fundamentals of U.S. office market.

U.S. businesses continued to add jobs at a healthy pace in the fourth quarter of 2019. Job gains boosted demand for office space, keeping absorption levels consistent with levels over the past three years despite uncertainty surrounding tariffs and trade issues.

Employment in the key office-using sectors of financial services, professional services and
information increased by 150,000 jobs during the fourth quarter according to Cushman &
Wakefield, which drives healthy positive absorption.

The Federal Reserve cut its benchmark rate three times in 2019 and lied commercial real estate valuations in the second half of 2019 according to CoStar.

In total, CoStar recorded net absorption of about 53 million square feet for the year with the fourth quarter posting the strongest absorption in 2019.

With a similar amount of new supply delivered, the vacancy rate remained stable at year-end, matching the expansion-low of 9.7%.

According to Cushman & Wakefield, technology was once again the top leasing sector. Financial services firms increased their share of major leases to 16.7% in the fourth quarter compared to 13.2% in the third.

Overall, technology companies accounted for 26.4% of major leasing— roughly double the 14.3% of major leases by the financial services sector.

While demand and supply vary quarterly, the vacancy trend is likely to remain stable. The technology sector dominated leasing in 2019 and is expected to remain so in 2020.

PRIME’s diversified portfolio is supported by its favourable tenant exposure in the STEM/TAMI sectors, and CoStar expects the technology sector to continue its outperformance in 2019 through 2020.

The Manager maintains a proactive and prudent approach in its leasing and asset management activities to maximise returns to Unitholders. With the coronavirus outbreak continuing to unfold in China and globally, we continue to monitor the situation closely on its impact on the global economy.

Barring any unforeseen circumstances, we remain cautiously optimistic about the U.S. office market.

Source: Lim & Tan

[winston]

not vested

RHB initiates coverage of Prime US Reit with 'buy'

RHB gives a target price of US$1, citing "resilient and attractive" yield, and expectations of stable rental income

by RAPHAEL LIM

Prime's sustainable yield of 9 per cent is among the highest in the real estate investment trust (Reit) sector.

Prime's portfolio comprises 12 freehold office buildings across 10 key markets across the US. The analyst noted that the assets are well-diversified, with no asset accounting for more than 15 per cent of total portfolio value.

Most of Prime's assets are new or recently refurbished, with good amenities, and located across low density urban environments, which have a highly educated workforce.

While some tenants may choose to downsize in future, RHB expects strong demand from technology, healthcare and government-related tenants to partially offset the impact.

The brokerage also noted that Prime's portfolio average rent is still 7 per cent below market. It expects flat to slightly positive rent reversion for Prime's portfolio for the 2021 financial year.

The overall weighted average lease expiry also "remains healthy" at 4.6 years.

Its gearing, at 32.7 per cent, is one of the lowest among S-Reits, and presents it with a debt headroom of US$324 million for acquisitions, assuming gearing is raised to 45 per cent.

Source: Business Times

https://www.businesstimes.com.sg/compan ... t-with-buy

[winston]

not vested

Initiate coverage with BUY and USD1.00 TP, 30% upside and c.9% yield

Prime US REIT derives rental income from a portfolio of 12 freehold office assets in the US.

Despite the US’ severe COVID-19 situation, we expect the company to see stable rental income, due to its strong asset and tenant quality, and limited near-term lease expiry.

Its sustainable yield of 9% is among the highest in the REIT sector, and is unjustified, in our view,
compared to the 5.4% S-REIT peer average.

Source: RHB

https://research.rhbtradesmart.com/view ... 4933ff580c

[winston]

vested

Nov 6, 2020

Prime US REIT - Delivering Ahead Again

Leasing Gains Traction Despite Slow Market

Prime US REIT (SGX:OXMU) continued to deliver ahead of its IPO projection in 3Q20, on the back of stable occupancy, and strong leasing momentum at +8.9% rental reversion against softening market demand.

Prime US REIT's DPU visibility into FY21 remains high, supported by a 4.6-year WALE, strong tenancies, and +2.0% pa growth from its well-placed assets, currently under-rented by 6.7%.

We maintain our forecasts and DDM-based Target Price (COE: 7.4%, LTG: 2.0%).

Prime US REIT's valuations are compelling at 8+% FY20 DPU yield with improving operational performance and potential acquisitions, as re-rating catalysts. BUY.


Stable Occupancy, Rent Collection at 99%

Prime US REIT's 3Q20 revenue, NPI and distributable income exceeded IPO projections by +9.1%, +9.8% and +15.4% respectively, while 9M20 estimates were ahead by +6.8%, +8.3%, and +15.2%.

Rental collections remained high in 3Q20 at 99%, with minimal lease deferrals at 0.5% of cash rental income (CRI).

Portfolio occupancy was stable at 92.9% (vs 93.0% in 2Q20) while there was a dip with non-renewals at Tower 909 (from 94.7% to 90.3%).

Prime US REIT's properties are well-placed, with demand from financial and technology sector tenancies expected to support backfilling in the coming quarters.


Reversion Stronger at +8.9%

Leasing momentum has picked up with ~83.2k sf added in 3Q20, up 56.8% q-o-q, bringing 9M20 to ~165.8k sf or 4.3% of NLA. A +8.9% rental reversion was achieved on long-term leases (vs +8.5% in 2Q20) with over 60% of leases attributed to renewals or expansion by its existing tenants in established and technology industries.

Prime US REIT's DPU visibility is high, with 99.8% of leases by CRI backed by embedded rental escalations averaging +2.0% pa, and supported by a 4.6-year WALE (5.4 years for its top ten tenants) with 10.7% of its leases (by CRI) expiring by 2021.


Strong Balance Sheet, Stacks Well Against Peers

Prime US REIT's balance sheet remains strong with leverage at 32.7%, and suggests USD324m in debt headroom (at 45% limit).

Prime US REIT continues to place well against its US office S-REIT peers on operational metrics and capital management, with low near-term leasing and refinancing risks.

Source: Maybank Kim Eng Research

[winston]

not vested

Our Views

Maintain BUY but lower TP to US$1.00. We maintain our BUY rating on Prime US REIT (Prime) but lower our TP to US$1.00 from US$1.05 previously as we take a slightly prudent outook on the US economy.

Trading at c.8% yield and 0.9x P/NAV, we believe valuations remain attractive as we ride on the positive sentiment of the re-opening of US.

In addition, FY20F rental income will be partly supported by maiden contributions in FY20F from newly acquired Park Tower.

Where we differ: Committed to 100% payout; credit metrics favourable to capture acquisition opportunities. During the IPO, Prime is committed to 100% payout in FY20F and we believe this remains on track as rental collections remain healthy. In addition, Prime has healthy credit metrics of low gearing (34%) with no refinancing needs until 2024, is well-positioned to capture any acquisition opportunities.

Near-perfection rental collections during lockdown; at-risk tenants continue to pay rents. Despite there were concerns on rent collections especially its at-risk tenants (such as co-working and O&G tenants) when lockdown first started in the US, Prime continued to display the quality of its portfolio and management capabilities with successfully collected 99% of its rents in Apr and May during the lockdown period, including at-risk tenants. In addition, June collection is on track. However, we take a more prudent stance on the US economy and lower our FY20F-FY21F distributable income by 6%.

Risks
Non-renewal of leases. Prime’s financials, operations and capital growth may be adversely affected by bankruptcy, insolvency or downturn in the businesses of its tenants, which may lead to non-renewal of their leases.

Valuation
We maintain our BUY rating with a lower DCF-based TP of US$1.00. This is based on a higher beta of 0.95x.

Source: DBS

https://www.dbs.com.sg/treasures/aics/s ... IME_SP.xml

[behappyalways]

Prime US REIT acquires offices in San Diego and Florida for US$246 mil, launches US$80 mil private placement
https://www.theedgesingapore.com/news/r ... il-private


Prime US REIT issues 98.8 mil new shares under private placement, raising US$80 mil
https://www.theedgesingapore.com/news/r ... g-us80-mil

[behappyalways]

Prime US REIT reports distributable income of US$14.7 mil for 3QFY2023, down 23.4% y-o-y
https://www.theedgesingapore.com/capita ... -234-y-o-y

[behappyalways]

Prime US REIT reports 2HFY2023 cash DPU of 0.25 US cents and 1-for-10 bonus issue
https://www.theedgesingapore.com/capita ... onus-issue

[behappyalways]

Prime US REIT to divest asset at below valuation as it focuses on reducing leverage
https://www.theedgesingapore.com/news/r ... g-leverage

[behappyalways]

Prime US REIT announces sale of asset and refinancing of US$550 million
https://www.theedgesingapore.com/capita ... 50-million