Keppel Pacific Oak US REIT posts 1.8% increase in FY2021 DPU to 6.34 US cents
Keppel Pacific Oak US REIT (KORE) has delivered a DPU of 6.34 US cents for the FY2021 ended December 2021 period, representing a 1.8% increase from 6.23 US cents in FY2020.
Income available for distribution increased by 6.5% y-o-y to US$62.4 million ($83.9 million) from US$58.6 million a year ago.
This came on the back of a 1.2% growth in revenue to US$141.3 million from US$139.6 million, largely due to contributions from 105 Edgeview and Bridge Crossing.
However, as property expenses increased in higher than revenue – 3.5% y-o-y increase to US$58.6 million – net property income (NPI) saw a slight 0.4% y-o-y decline to US$82.7 million. If the REIT ere to exclude non-cash straight-line rent, lease incentives and amortisation of leasing commissions, NPI would have seen a 3.6% y-o-y increase to US$83.6 million.
As at end-December 2021, cash and cash equivalents stood at US$51.0 million.
During the year, KORE expanded and solidified its presence in the fast-growing 18-Hour cities of Nashville and Denver with the acquisitions of Bridge Crossing and 105 Edgeview respectively. The acquisitions were completed in August 2021, and were partially funded by way of a private placement.
Meanwhile, KORE continued to see positive leasing momentum, committing a total of approximately 250,454 sq ft of office space in 4QFY2021. This brought full-year leasing to over 730,619 sf, equivalent to about 14.3% of its total portfolio by net lettable area (NLA).
KORE ended the year with a healthy portfolio committed occupancy of 91.9%. Rental reversion continued to remain positive at 6.0% for the whole of 2021, driven mainly by strong rents in the technology hubs of Seattle – Bellevue/Redmond and Austin. At the same time, average rental collections for FY2021 remained high at approximately 99%.
The weighted average lease expiry (WALE) by cash rental income (CRI) for KORE’s portfolio and top 10 tenants was 3.6 years and 5.0 years respectively as at end December 2021. Tenant concentration risk remains low with the top 10 tenants accounting for only 22.6% of CRI.
Looking ahead, notwithstanding new Covid-19 variants and tighter restrictions, the REIT believes that conglomerates, especially tech giants have and are expected to continue committing to office spaces despite potential delays in their return to office mandates, reinforcing the necessity of offices and its need for social interaction and workplace collaboration, both of which are essential for employee development.
KORE will continue to focus on key growth markets in the US, particularly on the defensive sectors of tech and healthcare, to seek out high-quality assets and deliver accretive acquisitions in Super Sun Belts and 18- Hour Cities. These highly sought-after states have been encountering increasing demand in the past quarter as more people are starting to move out of densely populated cities.
At the same time, the REIT’s manager remains focused on improving operating metrics and move forward with a tactical approach towards capital management to ensure KORE is able to capture more positive rental reversions and higher rental escalations.
Units in KORE closed at 78 US cents on Jan 26.