KEPPEL Pacific Oak US Reit (Kore) reported distributable income of US$11.9 million for the second quarter ended Jun 30, down 8.8 per cent from US$13.1 million in Q2 FY2023, said its manager on Wednesday (Jul 31).
The office-focused US real estate investment trust (Reit) did not declare any distributions for the period, as it announced in February that it would be suspending distributions from H2 FY2023 to H2 FY2025. This is to address capital needs and leverage concerns over these two years. Its Q2 FY2023 distribution per unit (DPU) had been US$0.0125.
Gross revenue for Q2 FY2024 slid 4 per cent to US$37.3 million, from US$38.9 million year on year.
Net property income for the period contracted 7.4 per cent on year to US$21 million, from US$22.7 million. Excluding non-cash straight-line rent, lease incentives and amortisation of leasing commissions, the fall would have been 3.6 per cent to US$21.8 million, from US$22.6 million year on year.
On a half-yearly basis, distributable income declined 8.8 per cent to US$23.8 million, from US$26.1 million in H1 FY2023. This was attributed to higher financing costs as a result of rising interest rates, said the manager.
Its DPU for H1 FY2023 was US$0.025.
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Gross revenue for the six months fell 2 per cent to US$74.4 million, from US$75.9 million.
Net property income dropped 4.2 per cent to US$42 million, from US$43.9 million in H1 FY2023. Excluding non-cash straight-line rent, lease incentives and amortisation of leasing commissions, net property income for H1 FY2024 would have been US$43.4 million, down 1.6 per cent from US$44.2 million.
In the second quarter, the Reit leased 199,494 square feet of office space, equivalent to 4.2 per cent of its portfolio’s net lettable area. This translates to 534,931 sq ft of space leased in H1, equivalent to 11.1 per cent of its portfolio’s net lettable area.
Kore’s manager announced that subsequent to Jun 30, the Reit had early refinanced loan facilities of US$55 million that were originally due in the fourth quarter of this year. It also extended a loan facility of US$115 million that would have been due in the third quarter of 2025.
This amounts to a total of US$170 million, and the refinancing and extension were completed in July.
As at Jun 30, the Reit’s aggregate leverage was 42.7 per cent, while its interest coverage ratio was 2.9 times.
The manager noted that if market conditions allow, distributions may recommence at an earlier date than planned.
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 recaptalisation plan,” said the manager.
Units of Kore closed at US$0.20, up 3.6 per cent or US$0.007, on Tuesday.
