Keppel Pacific Oak US REIT’s gross revenue, NPI fall in 1HFY2024 while distributions remain suspended

Jovi Ho
3-min read

Distributions to unitholders are slated to be suspended until Dec 31, 2025.

Keppel Pacific Oak US REIT (KORE) has posted gross revenue and net property income (NPI) of US$74.4 million ($99.83 million) and US$42.0 million respectively for 1HFY2024 ended June 30. These figures are 2.0% and 4.2% lower y-o-y compared to the US office REIT’s 1HFY2023 results.

Distributable income fell 8.8% y-o-y to US$23.8 million during the period, but the manager has halted distributions since the release of its FY2023 results in February.

Distributions to unitholders are slated to be suspended until Dec 31, 2025. “This allows KORE to address its capital needs and leverage concerns over the next two years. If market conditions allow, distributions may re-commence at an earlier date than planned,” says the manager in a July 31 announcement.

For 2QFY2024, KORE posted gross revenue of US$37.3 million, 4.0% lower y-o-y; and NPI of 
US$21.0 million, 7.4% lower y-o-y. Distributable income fell 8.8% y-o-y to US$11.9 million during the quarter.

As at June 30, KORE’s aggregate leverage and interest coverage ratio was 42.7% and 2.9 times, respectively. The all-in average cost of debt was 4.47%. The weighted average term to maturity of KORE’s debt was 2.3 years.

All of KORE’s borrowings are US dollar-denominated and 100% unsecured. 69.0% of KORE’s loans has been hedged with floating-to-fixed interest rate swaps, reducing near-term exposure to rising interest rates.

KORE had early refinanced loan facilities of US$55.0 million that were originally due in 4QFY2024 and extended a loan facility of US$115.0 million that was originally due in 3QFY2025, amounting to a total of US$170.0 million.

The refinancing and loan extension was completed on July 19 and 29 respectively. On a pro-forma basis, assuming the refinancing and loan extension occurred on Jan 1, the all-in average cost of debt would increase slightly to 4.56% and the weighted average term to maturity would extend to 2.6 years.

Leasing

In 2QFY2024, KORE leased 199,494 sq ft of office space, equivalent to 4.2% of portfolio net lettable area (NLA). This translated into 534,931 sq ft of space leased in 1HFY2024, equivalent to 11.1% of portfolio NLA.

KORE’s portfolio committed occupancy remained at 90.7% as at June 30, with 6.7% of leases by cash rental income (CRI) expiring in 2HFY2024.

Expansions and renewals comprised 12.7% and 63.5% respectively of all leases signed for the 1HFY2024. Rental reversion for 1HFY2024 was negative 0.3%, mainly affected by renewals at Bellevue Technology Center, Maitland Promenade I & II and Westmoor Center. Rental reversion for 2QFY2024 was positive 1.2%.

With the recapitalisation plan in place, the manager says it will continue to invest in its properties, balancing the capital needs of the REIT and the desire to distribute income to unitholders. “Concurrently, the manager remains focused on improving leasing and capital management, so as to maintain healthy occupancy levels and refinance loans prior to their maturity, which will allow KORE to achieve its objectives under its recapitalisation plan.”

Units in KORE closed 0.7 US cents higher, or 3.63% up, at 20 US cents on July 30.

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