KEPPEL Pacific Oak US Reit (Kore) posted a distributable income of US$11.9 million for the third quarter ended Sep 30, down 8.8 per cent from US$13.1 million in the previous corresponding period.
This was mainly due to higher financing cost as a result of rising interest rate, as well as lower net property income (NPI), said the office-focused real estate investment trust’s manager in a business update on Wednesday (Oct 23).
NPI for the quarter amounted to US$20.1 million, down 8.8 per cent from US$22.1 million in the previous year. The decline was mainly due to higher one-off income in Q3 2023 and higher property expenses in Q3 2024, said the manager.
Kore’s buildings and business campuses in the tech hubs of Seattle, Austin and Denver contributed about 67 per cent of NPI, it added.
For the nine months ended Sep 30, distributable income also fell 8.8 per cent to US$35.7 million, from US$39.2 million previously.
As at end-September, Kore’s aggregate leverage stood at 42.6 per cent. The weighted average term to maturity of its debt was 2.3 years, said the manager.
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It noted that in July this year, Kore secured early refinancing or extension options for most of its loans expiring in 2024 and 2025. The Reit also entered into a new US$45 million uncommitted revolving credit facility in October.
The Reit’s portfolio weighted average lease expiry (Wale) by cash rental income was 3.9 years, and Wale by net lettable area was 3.7 years.
Rental reversion for the first nine months of 2024 was negative 1.2 per cent, affected by the renewals at office buildings Bellevue Technology in Washington, Maitland Promenade I and II in Florida, and Westmoor Centre in north-west Denver.
Market outlook
For Q3, rental reversion stood at a negative 3.5 per cent. Built-in average annual rental escalation across its portfolio was 2.6 per cent.
The manager said it leased out 721,392 square feet (sq ft) of space for the first nine months of 2024, equivalent to 15 per cent of the portfolio’s net lettable area.
In its market outlook, the manager is positive on the strong leasing trend in the US and highlighted that more workers are returning to the office.
“Leasing activity maintained strong momentum from Q2, growing 0.4 per cent quarter on quarter to 50.4 million sq ft. Leasing over the past six months reflects 86 per cent of pre-pandemic levels,” it added.
However, it also cautioned that the US office sales market remains limited as financing is “still not readily available”, and well-occupied properties are “not receiving proper credit for tenancy”.
Looking ahead, Kore remains focused on the technology, advertising, media and information (TAMI), medical and healthcare sectors, which provide income resilience.
Some 51 per cent of Kore’s portfolio net lettable area comprises tenants from the TAMI, medical and healthcare sectors.
Units of Kore ended 1.9 per cent or US$0.005 lower at US$0.265 on Tuesday.
