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Prime US REIT 7.2% Yield Looks Attractive

Key Highlights:

  • Prime US REIT (SGX: OXMU)'s 3Q19 DPU grew 5.3%

  • The annualised yield and price to book ratio are 7.2% and 1.1 respectively

1. Dividends

Net property income was up 2.8% to $17.9m. This was mainly due to the higher rental income and recoveries income. 98.3% of the tenancy agreement has a built-in rental escalation. Thus, we would see consistent upside on the DPU.

The annualised yield is 7.2%.

2. Portfolio

Portfolio occupancy remains high at 97%. The portfolio leverage is currently at the healthy side of 33.9%. The interest cost is at 3.34%, with 89.5% of the loans are on fixed rates.

It is currently trading at a price to book ratio of 1.1.

3. Growth Catalyst

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

  1. The currently owns 11 freehold Class A office properties across nine primary markets in the US. 35.7% of the tenants are from the favourable science & technology and infocomms & media sectors.

  2. US unemployment rate is hitting the historical low since 1969. In 3Q19, out of the 470,000 new jobs, 140,000 were came from the key sectors that occupy offices. This would increase the demand for Class A offices.

  3. With robust demand and the strong technology sector, Prime US REIT could be the beneficiaries on the recovery of the office segment.

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