✓ A Measured Strategic Move to Unlock Value 

✓ Aggregate Leverage to Decrease from 48.4% to 45.8%2 

✓ Reinvest in Asset Rejuvenation and Optimise Leasing Efforts 

PRIME US Reit&rsquo s : OXMU +0.89% distributable income fell 19.5 per cent to US$11.9 million in the first quarter of its fiscal year ended Mar 31, 2024, from US$14.9 million for the same period a year ago.

 

The manager of the real estate investment trust (Reit) said in a business update via a bourse filing on Wednesday (May 8) that the decline was because of lower revenue arising from lower occupancy, as well as higher finance expenses attributed to higher interest rates.

 

Net property income also fell to US$20.8 million, an 11.7 per cent decrease from US$23.6 million a year ago. Gross revenue also dropped 7.6 per cent to US$37.1 million from US$40.2 million over the same period.

 

Despite the decline, the Reit, which manages office spaces in the United States, said that there is positive leasing momentum, with seven of its 14 assets being leased at a rate of over 90 per cent. Overall, its portfolio has a leased occupancy of 84.7 per cent and a weighted average lease expiry of 4.2 years.

 

Over 171,300 square feet of space was leased in Q1 2024 &ndash more than double in the same period a year ago, although it was lower compared with the previous quarter.

 

Rental reversion stood at 1.8 per cent. This was predominantly due to a 31,000-square-foot space being renewed for 11 years at rents below preceding, but above prevailing, market rates in its Reston Square asset, an office building in the state of Virginia.

 

The manager said that the US commercial real estate&rsquo s fundamentals continue to navigate cyclical headwinds as an elevated rate environment further weighs on companies&rsquo finance costs, debt servicing ability, and asset valuation.

 

Overall, the US office market is still in a negative net absorption environment, with occupancy rate close to 80 per cent, said the Reit.

 

While demand for space continues on a steady path of recovery with tenant space requirements increasing, the current active tenant volume is still 30 per cent below pre-Covid levels.

 

Leasing activities over the last four quarters have also been at only 75 per cent of pre-pandemic levels.