Keppel Pacific Oak US REIT Review @ 7 August 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 2Q, gross revenue, NPI and distributable income improved yoy due to contribution from Bridge Crossing and 105 Edgeview which were acquired in August 2021. However, the income available for distribution and DPU are lower yoy as the manager has chosen to receive the 100% of the base fee in cash for 2Q.

Rental Reversion

Rental reversion is at 1.6% for 1H 2022.

Divestment

On 28 Jul, the Northridge Center I & II divestment in Atlanta, Georgia was completed at a price of US$22.1 million, which is 16.9% above valuation and around 10% above the purchased price. As for Powers Ferry, the divestment is expected to be completed in 3Q.

Sensitivity to Interest Rate

For every 0.5% increase in interest rate, DPU impact would be 0.062 cents per annum, around 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:  ± 10% from median
• Highest lease expiry within 5 years: Below median for more than 20%; Falls in 2025
• Weighted Average Land Lease Expiry: All properties are freehold

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: ± 10% from median
• Highest debt maturity within 5 years: ± 10% from median; 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: ± 10% from median

Trends

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

Relative Valuation

• P/NAV: Below -1SD for 1y, 3y & 5y
• Dividend Yield: Above +1SD for 1y; Above average for 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	High Cost of Debt
Well Spread Lease Expiry	Interest Coverage Ratio Downtrend
100% Freehold Properties
100% Unsecured Debt
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
DPU Uptrend

The performance has improved albeit with a drop in DPU due to the manager taking 100% of base fees in cash for 2Q. Let's see whether this practice would be a norm moving forward.

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.