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3 Things You Need To Know About Prime US REIT

Key Highlights:

  • Prime US REIT (SGX: OXMU)'s 4Q19 DPU was 9% above its IPO forecast

  • The annualised yield and price to book ratio are 6.9% and 1.15 respectively

1. Dividends

Net property income was 3% higher than projections. This was mainly due to higher rental income and recoveries. Interestingly, 98% of its leases have rental escalations, which help to support its DPU growth in the mid-term.

The annualised yield is 6.9%.

2. Portfolio

Portfolio occupancy remains high at 95.8%. The portfolio leverage is currently at the healthy side of 33.7%. The interest cost is at 3.3% and 100% of the loans are on a fixed rate.

It is currently trading at a price to book ratio of 1.15.

3. Growth Catalyst

Moving forward, Prime US REIT will enjoy few growth catalysts:

  1. Strong employment provides healthy demand for US Grade A office space.

  2. Technology remained as the top leasing sector, which is favourable to Prime US REIT, given its exposure to tenants in the fintech, engineering and science.

  3. The trust is also acquiring Park Tower, in California for US$165.5m with a net property yield of 6.9%. The asset is backed by very stable government-related tenancies and the leases are embedded with an average of 2.9% rental escalations. This will the first acquisition post-IPO. The trust will raise the proceeds of US$120m through private placement.

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