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RHB maintains ' buy' on KORE on the back of US office recovery
RHB Group Research' s Vijay Natarajan has maintained his " buy" rating on Keppel Pacific Oak US REIT (KORE) with a target price of 90 US cents, citing US office recovery." Although there has been a slight delay in [the] timeline, more employees are expected to return to the office in the US in early 2022, boosting leasing demand and acting as a re-rating catalyst," says Natarajan.
Last month, KORE completed the acquisition of Bridge Crossing (BC) in Nashville and 105 Edgeview (105 EV) in Denver for a total consideration of US$105.1 million.
The buildings were acquired at pro forma net property income (NPI) yields of 7.8% and 6.7% respectively, says Natarajan. These are yield-accretive acquisitions at 0.8%, based on a 60:40 equity to debt funding mix.
Natarajan highlights that the assets are in the upcoming US growth markets, largely occupied by tech tenants. Payment processing company Comdata, for example, occupies 93% of net leasable area in BC, while inflight internet and entertainment provider Gogo Business Aviation occupies 66% of 105 EV.
With this acquisition, the tech sector will account for the biggest portion of KORE' s cash rental income at 31.2%. BC and 105 EV also have a long weighted average lease expiry of 6.6 years and 5.7 years respectively, with no leases expiring until 2023 and a built-in annual rental rate escalation of 2.7%.
After its equity fund-raising exercise to acquire the two assets, KORE' s gearing level is still modest at around 37%. Natarajan says KORE has US$100 million to US$200 million of debt headroom for further acquisitions, assuming comfortable gearing levels of 40% to 45%.
" We believe it could acquire one to two assets in the next six to 12 months in key growth cities in the US, like Salt Lake City, Nashville, Charlotte and Phoenix," says Natajaran.
He notes that KORE has begun its preliminary studies involving a new five-storey multi-family building at The Plaza in Washington, intended to be constructed atop the site' s existing parking garage.
RHB Group Research expects a potential capex outlay of about US$100 million for this project, with potentially double digit returns. " More details on the proposed development are expected in the coming quarters, which should be a positive catalyst against a backdrop of current strong demand for mult-ifamily assets in the US," says Natarajan.
While KORE' s portfolio occupancy rate has declined to 90.5% since early 2020, rental growth has been positive at 5% to 15%, underscoring its under-rented portfolio, says Natarajan.
He adds that the REIT was also recently included in the FTSE EPRA Nareit Global Developed Index, which should enhance its trading liquidity and visibility, as well as narrow the valuation gap versus its peers.
Eleven of Singapore' s smaller Reits enter FTSE EPRA Nareit Global Real Estate Index
Eleven of Singapore' s smaller Reits have made it into the FTSE EPRA Nareit Global Real Estate Index series, according to the index series' quarterly review changes announced by FTSE Russell on Sept 1.The entries into the FTSE EPRA Nareit Global Developed Index include AIMS APAC Reit, ARA Logos Logistics Trust, Cromwell European Reit, ESR-Reit, Far East Hospitality Trust, Keppel Pacific Oak US Reit, Lendlease Global Commercial Reit, OUE Commercial Reit, Prime US Reit, SPH Reit and Starhill Global Reit.
FTSE Russell noted that the increased number of additions this quarter was due to the updated thresholds for the Developed Asia series.
In June, the investable market cap threshold was lowered to 0.1 per cent of the securities' respective regional index for additions to the Developed Asia series, compared to 0.3 per cent previously. For deletions from the index series, the threshold was lowered to 0.05 per cent from 0.15 per cent.
The review may be subject to changes until the close of business on Sept 3, and all constituent changes will be applied after the close of business on Sept 17.
The index series, which tracks the performance of listed real estate companies and Reits, is a global benchmark jointly developed by FTSE Russell with the EPRA (European Public Real Estate Association) and the Nareit (National Association of Real Estate Investment Trusts).
Prior to the review, there were 17 Singapore Reits and property trusts in the FTSE EPRA Nareit Developed Index, according to the index' s factsheet as at July 30, 2021.
UOBKH initiates coverage on Keppel Pacific Oak US Reit with ' buy' , US$1.10 target price
UOB Kay Hian (UOBKH) has started coverage on Keppel Pacific Oak US Reit (KORE) with a " buy" recommendation and US$1.10 target price, on the belief that it is benefiting from in-migration and the high-growth magnet cities which the real estate investment trust (Reit) focuses on.
In a report on Tuesday, analyst Jonathan Koh lauded KORE as a " much more attractive" Reit compared to its US-listed peers investing in suburban offices. This is because KORE provides a distribution yield of 8.6 per cent as opposed to a " paltry" distribution yield of 3.6 per cent by its peers, in his view.
Mr Koh believes the Reit is oriented towards growth cities currently benefiting from the accelerating in-migration trend in the US.
The analyst observed that Florida, Tennessee, Texas and Washington &ndash which have no state-level personal income tax &ndash accounted for 77.7 per cent of pro forma H1 FY2021 cash rental income (CRI), as well as 82.7 per cent of the Reit&rsquo s assets under management (AUM) as of August 2021.
He further likes KORE for its focus on Super Sun Belt and 18-hour cities which he describes as " high-growth magnets that attract influx of companies and people" due to low or no state-level taxes, a highly educated workforce generated by renowned local universities, along with their rich amenities and good infrastructure.
In-place passing rents are about 8 per cent below asking rents due to recurrent growth in rents from Super Sun Belt and 18-hour cities, providing room for continued positive rental reversion, said the analyst.
Mr Koh is also positive on the Reit&rsquo s recent acquisition of two office buildings in 18-hour cities Nashville and Denver, as the deal is estimated to expand KORE' s AUM by 8.2 per cent to US$1.41 billion.
" The exposure to technology tenants (with the acquisition of the two buildings) would increase by 4.8 percentage points to 31.2 per cent of pro forma 1H FY021 CRI," he said, noting that tech hub states in the US contributed to 60.9 per cent of the Reit' s net profit income in H1 FY2021.
" While distribution yield is similar to other offshore office Reits, KORE offers brighter growth prospects due to growth from in-migration at Super Sun Belt and 18-hour cities and technology tenants," said Mr Koh.
UOB Kay Hian initiates ' buy' on KORE with TP of US$1.10
UOB Kay Hian has started " buy" on Keppel Pacific Oak US REIT (KORE) with a target price of US$1.10 ($1.49), implying a 47.7% upside to the 74.5 US cents at market close on Aug 23.KORE has a diversified portfolio comprising office real estate in growth cities in the US. It owns 15 freehold office buildings and business campuses in nine markets namely Seattle - Bellevue/Redmond, Austin, Denver, Nashville, Houston, Dallas, Orlando, Sacramento and Atlanta.
To date, KORE has five properties in three Super Sun Belt cities namely Atlanta, Dallas and Houston, which accounted for 19.0% of assets under management (AUM). The REIT also owns six properties in four 18-hour cities, Seattle, Austin, Denver and Nashville, which accounted for 71.4% of AUM.
These cities, according to analyst Jonathan Koh, are high-growth magnets that attract an influx of companies and people, due to low or no state-level taxes.
To be sure, Americans have been migrating to the South and West regions over the past 50 years, although the rate of in-migration from high-tax to low-tax states have increased due to the Trump-inspired Tax Cut & Jobs Act of 2017, Koh notes in his report dated Aug 24.
The cities, which KORE is focused on, is also oriented towards growth from technology companies. The tech hubs of Seattle - Bellevue/Redmond, Austin and Denver contributed 60.9% of KORE' s net property income (NPI) in 1HFY2021.
In its portfolio, 35.8% of portfolio net lettable area (NLA) is occupied by quality tenants from the high-growth technology sector as well as defensive medical and healthcare sector.
Seattle has benefitted from the continued expansion of Amazon and Facebook while Austin has attracted investments from Tesla and Samsung Electronics. Denver has become a " Wall Street of the West" and a fintech hub.
The REIT has also seen consistent positive rental reversion, which is a plus, in Koh' s books.
" KORE recorded positive rental reversion of 7.6% in 2018, 14.3% in 2019 and 10.2% in 2020. Positive rental reversion was 5.4% in 1HFY2021 driven by higher rents in Seattle - Bellevue/Redmond. In-place passing rents are about 8% below asking rents due to recurrent growth in rents from Super Sun Belt and 18-hour cities, providing room for continued positive rental reversion," he writes.
As at 10.21am, units in KORE are trading flat at 74.5US cents or an FY21 P/B of 0.9 times and a DPU yield of 8.6%, according to UOBKH' s estimates.
S-Reits' recent acquisitions further entrench diversity
In the first seven months of 2021, S-Reits have announced asset acquisitions exceeding S$7.5 billion in total purchase consideration.Several acquisitions announced during the period were in assets such as data centres, logistic warehouses, and office buildings.
In addition, the majority of acquisitions that were announced were outside of Singapore, further entrenching Singapore' s position as a global Reit hub - over 80 per cent of S-Reits' portfolios have assets that are internationally diverse.
Recent S-Reit acquisitions that were announced in the month of July totalled S$323 million in purchase consideration and were by Ascendas India Trust, Keppel DC Reit, Keppel Pacific Oak US Reit and Mapletree Logistics Trust.
Three out of four were overseas acquisitions and two out of four were data-centre-related acquisitions.
Keppel Pacific Oak US Reit announced on July 28 that it is deepening its technology footprint in key growth markets in the US with the acquisitions of Nashville and Denver office building assets.
Both office buildings - Bridge Crossing and 105 Edgeview - are 100 per cent leased to tenants mainly in the fast-growing and defensive technology sector.
They include anchor tenants Comdata, which is part of Fleetcor Group, a leading global business payment firm, and Gogo Business Aviation, which is the world' s largest provider of broadband connectivity services for the business aviation market.
The Reit expects the pro-forma assets under management to grow by 8.0 per cent to approximately US$1.4 billion and the pro-forma portfolio committed occupancy to increase from 90.5 per cent to 91.2 per cent.
RHB raises TP for Keppel Pacific Oak US REIT to 90 US cents following ' solid' 1H21 results
RHB Group Research has kept its " buy" call for Keppel Pacific US REIT (KORE) with a higher target price of 90 US cents ($1.22), up from 84 US cents previously, after it announced its 1HFY2021 ended June results on July 26.RHB analyst Vijay Natarajan views the REIT' s 1HFY2021 results as " solid" and in line with his estimates. The REIT reported a distribution per unit (DPU) of 3.16 US cents for the 1H, up 1.9% y-o-y, supported by positive rent reversions and rental escalations plus lower expenses, which offset a lower occupancy and car park income.
" Despite recent outperformance, KORE' s high trading yields are unjustified in our view and we see more room for compression post its index inclusion which would result in an increased visibility among institutional investors and enhanced trading liquidity," Natarajan comments in a July 27 note.
KORE is expected to be included in the FTSE/EPRA Nareit index in the September review.
Given the impending inclusion, Natarajan has cut his cost of equity assumptions by 40 basis points to reflect increased liquidity and visibility, which underpins his higher target price.
Despite a dip in portfolio occupancy in the 1HFY2021 by 1.1 percentage points on a q-o-q basis, Natarajan believes this will improve in 2HFY2021 given an increase in leases signed in the 2Q, higher leasing inquiries, and an anticipated increase in office demand as workers return to offices.
" With the expected return to the office in 4Q of more professionals in the US, we anticipate office leasing momentum to pick up and KORE' s strategically located assets in fast-growing markets to benefit," he says.
Positive rent reversion is also expected to continue in the coming quarters, with management forecasting low-to-mid-single digits for the full year.
Natarajan is also upbeat on the redevelopment of The Plaza in Seattle, which may drive upside for the REIT. " KORE has commenced preliminary studies for a new five-story multi-family building in downtown Bellevue, which is intended to be constructed atop the site' s existing sixlevel parking garage. More details on proposed development is expected in 3Q/4Q which should be a positive catalyst with strong demand for multifamily assets in the US," he says.
He also expects KORE to acquire one or two assets in the 2H worth a total of between US$100-300 million.
As at 3.15pm, units in KORE are down 1.5 cents or 1.88% lower at 78.5 US cents.
And me.
The decision disappoint retail investers like me.
prophetjul ( Date: 29-Jul-2021 09:36) Posted:
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Private placements are only good for the managers. No benefit to the shareholders and dilutes with a lower than market price.
Keppel Pacific Oak US Reit to acquire two US office buildings for US$105.1m
Bridge Crossing is a newly refurbished freehold three-storey office building located in Nashville. PHOTO: KEPPEL CORPORATION
KEPPEL Pacific Oak US Reit (KORE) is proposing to acquire two office assets in the US for a total of US$105.1 million, the Reit manager announced on Wednesday morning.
The properties are Bridge Crossing in Nashville, Tennessee, and 105 Edgeview in Denver, Colorado. They will be purchased for US$46 million and US$59.1 million, respectively.
Both are 100 per cent leased to tenants in the technology sector as at June 30, 2021.
Occupants include Bridge Crossing' s anchor tenant Comdata, which is a part of the New York-listed Fleetcor Group. Meanwhile, 105 Edgeview' s anchor tenant is broadband connectivity services provider Gogo Business Aviation, whose lease expires in 2029.
In its announcement, KORE' s manager said it believes its proposed acquisitions of these buildings will deepen the Reit' s presence in key growth markets and enhance its portfolio' s income resilience.
The acquisitions are seen as distribution per unit (DPU)-accretive, and the manager believes additions of these assets will strengthen KORE' s distributions and total unitholder returns.
Further, KORE' s manager highlighted Nashville and Denver as prime locations in key sub-markets with limited upcoming supply. The acquisitions augment KORE' s green footprint and enhance the Reit' s weightage in current indices while positioning it for further index inclusions, added the manager.
KORE' s manager intends to finance the acquisitions through a combination of debt financing and proceeds from a private placement of new units in the Reit.
In a separate announcement on Wednesday morning, the manager said it is proposing to place out new units of the Reit to raise gross proceeds of about US$65 million.
The placement' s issue price will be between 72 US cents and 74.3 US cents per new unit, representing a discount of 6.6 per cent to 9.5 per cent to the volume-weighted average price of 79.59 US cents per unit of KORE for trades done on Tuesday.
DBS and UOB have been appointed joint bookrunners and underwriters of the deal.
The manager also said KORE' s trustee, Perpetual (Asia) Limited, has obtained a 5.5-year US$120 million loan facility following a July 27 facility agreement.
Under the terms and conditions of the agreement, the aggregate level of facilities that may be affected by a mandatory prepayment event - or a cross default under other borrowings of KORE and its subsidiaries - is US$684.7 million.
KORE to acquire Nashville and Denver assets for US$105.1 mil, launches private placement to raise US$65 mil
Keppel Pacific Oak US REIT (KORE) is proposing to acquire two office buildings located in Nashville and Denver for a total consideration of some US$105.1 million ($142.9 million), according to a July 28 announcement.KORE' s manager also announced the launch of a private placement to raise US$65 million which will be used to partially fund the acquisition.
The Bridge Crossing building in Nashville, Tennessee is being acquired for US$46 million, while 105 Edgeview in Denver, Colorado is being acquired for $59.1 million. Both buildings are 100% leased as at June 30, including anchor tenants Comdata at Bridge Crossing and Gogo Business Aviation at 105 Edgeview.
According to the manager, Nashville and Denver are two of the six new favourite &lsquo boomtowns' for young talent pool in the US, known also as 18-hour cities. Other 18-hour cities include Seattle and Austin, where KORE has presence in.
" The strategic addition of two quality assets in some of the strongest markets in the US reinforces our approach and drive to pursue long-term value that will support KORE' s growth and strengthen distributions to unitholders," says David Snyder, CEO and CIO of the manager.
The proposed acquisitions are expected to be completed in 3Q2021.
Post-acquisition, the pro-forma DPU for the FY2020 ended December is expected to increase by 0.8% from 6.23 US cents to 6.28 US cents. The pro-forma assets under management will grow by 8% to approximately US$1.4 billion.
Meanwhile the pro-forma portfolio committed occupancy as June 30 will increase from 90.5% to 91.2%. Following the completion of the proposed acquisitions, KORE' s portfolio will consist of 15 freehold office buildings and business campuses across nine key growth markets driven by innovation and technology in the US.
The manager intends to finance the proposed acquisitions through a combination of the private placement proceeds and debt.
The new units in KORE will be issued at a price range between 72 US cents to 74.3 US cents. DBS Bank and United Overseas Bank have been appointed as the joint bookrunners and underwriters.
In addition to the launch of the placement, the manager also announced on July 28 that KORE has obtained a new 5.5-year term loan facility in an aggregate principal amount of US$120 million.
Post-acquisition, KORE' s pro-forma aggregate leverage as at June 30 is expected to be 37.4%.
Units in KORE closed 1.5 cents or 1.91% higher at 80 US cents on July 28.
Keppel Pacific Oak US Reit raises H1 DPU by 1.9% to 3.16 US cents
OFFICE-FOCUSED Keppel Pacific Oak US Reit (KORE) on Monday announced a half-yearly distribution per unit (DPU) of 3.16 US cents, up from 3.10 US cents the year before.
This came from positive rental reversions and built-in rent increases, which lifted second-quarter distributable income to US$15.0 million for the three months to June 30 this is 2.1 per cent higher than a year ago.
Still, net property income fell 3.3 per cent to US$20.2 million, as gross revenue slid 3.9 per cent to US$33.8 million on a drop in car park income and recoverable expenses.
For the half-year, distributable income came in at US$29.9 million, higher by 2.8 per cent on the year prior. Net property income fell 3.1 per cent to US$40.6 million, and gross revenue was down by 3.0 per cent to US$68.4 million.
The real estate investment trust had an aggregate leverage of 37.1 per cent, while the weighted average term to maturity of its debt was 2.5 years.
Portfolio weighted average lease expiry by cash rental income was 3.5 years, while committed occupancy stood at 90.5 per cent as at end-June.
Citing factors such as low taxes and above-average job growth, the manager said it is " proactively seeking expansion opportunities to expand and solidify its presence" in markets such as Atlanta, Dallas, Houston, Austin, Denver and Seattle.
KORE already focuses on tech-related office space, with the Seattle, Austin and Denver regions contributing more than half its net property income.
Books close on Aug 5 and unitholders will be paid on Sept 28.
Keppel Pacific Oak US Reit raises H1 DPU by 1.9% to 3.16 US cents
Office-focused Keppel Pacific Oak US Reit (KORE) on Monday announced a half-yearly distribution per unit (DPU) of 3.16 US cents, up from 3.10 US cents the year before.This came from positive rental reversions and built-in rent increases, which lifted second-quarter distributable income to US$15.0 million for the three months to June 30 this is 2.1 per cent higher than a year ago.
Still, net property income fell 3.3 per cent to US$20.2 million, as gross revenue slid 3.9 per cent to US$33.8 million on a drop in car park income and recoverable expenses.
For the half-year, distributable income came in at US$29.9 million, higher by 2.8 per cent on the year prior. Net property income fell 3.1 per cent to US$40.6 million, and gross revenue was down by 3.0 per cent to US$68.4 million.
The real estate investment trust had an aggregate leverage of 37.1 per cent, while the weighted average term to maturity of its debt was 2.5 years.
Portfolio weighted average lease expiry by cash rental income was 3.5 years, while committed occupancy stood at 90.5 per cent as at end-June.
Citing factors such as low taxes and above-average job growth, the manager said it is " proactively seeking expansion opportunities to expand and solidify its presence" in markets such as Atlanta, Dallas, Houston, Austin, Denver and Seattle.
KORE already focuses on tech-related office space, with the Seattle, Austin and Denver regions contributing more than half its net property income.
Books close on Aug 5 and unitholders will be paid on Sept 28.
Units last traded at US$0.785, up by half a US cent or 0.64 per cent, before the results.
Finally, up 8cts from my average price. Buying from 30cts + to 80cts. It has been a long journey for me.
Look forward to more price/DPU uptrend.
Look forward to more price/DPU uptrend.
UOB Kay Hian sees KORE as beneficiary of heightened in-migration to magnet cities in unrated report
UOB Kay Hian analyst Jonathan Koh is positive on Keppel Pacific Oak US REIT (KORE) as he sees the REIT being a beneficiary of the in-migration and growth at the magnet cities of Texas and Washington.
KORE owns 13 freehold office buildings and business campuses in eight markets in the US, namely Seattle &ndash Bellevue/Redmond, Austin, Denver, Houston, Dallas, Orlando, Sacramento and Atlanta.
In his unrated report on July 8, Koh notes that the in-migration from high-tax to low-tax states have increased due to the Trump-inspired tax cut and jobs act in 2017.
To note, there are no state-level personal income taxes imposed in Texas and Washington.
Owing to the heightened levels of in-migration, the state of Texas, Washington and Florida, which accounted for 78.8% of KORE' s net property income (NPI) in the 1QFY2021 and 84.8% of KORE' s assets under management (AUM) as at December 2020.
In the Super Sun Belt and 18-hour cities, which are high-growth magnets that attract an influx of companies and people, KORE owns five properties in the three Super Sun Belt cities of Atlanta, Dallas and Houston. These five properties accounted for 20.6% of AUM as at December 2020.
In the 18-hour cities of Seattle, Austin and Denver, KORE' s six properties account for 69.1% of AUM.
Furthermore, KORE' s position is boosted by the growth from technology companies in the cities of Seattle &ndash Bellevue/Richmond, Austin and Denver, which are seeing tenants such as Amazon, Facebook, Tesla and Samsung.
Koh, too, notes that there is room for continued positive rental reversion in the REIT.
From 2018 to 2020, KORE has recorded positive rental reversion of 7.6%, 14.3% and 10.2% respectively.
It reported positive rental reversion of 5.7% in the 1QFY2021 due to higher rents in Seattle &ndash Bellevue/Richmond.
" In-place passing rents are about 8% below asking rents due to recurrent growth in rents from Super Sun Belt and 18-hour cities," he writes.
KORE currently provides a distribution yield of 7.4% and yield spreads of 5.9% for the FY2021. It is trading at a P/NAV of 1.02 times.
Units in KORE closed 1 US cent higher or 1.3% up at 80.5 US cents on July 9.
Quite exceptional to see price move up by 1.5 cts today. Can anyone tell what is driving today price movement, whilst the rest of the shares are in a sea of red? DPU increase from 6.01 cts in Fy2020 to 6.23 cts in Fy2021 based on the presentation material I extracted from SGX (Kore presentation to Philip Securities).
Finally, the market price is now higher than average price per unit. I bought the shares from ipo and has been buying more to average down. It is now my largest reit holding and earning $$$. My purchase price ranged from 30cents + to 80 cts +. Looking back, it is quite a scary journey for me.
Impressive. Not only able to renew,sign on more but also at higher rents.
https://www.reitsweek.com/2021/04/keppel-pacific-oak-us-reit-achieves-5-7-rent-uplift-on-tech-sector-expansion.html
https://www.reitsweek.com/2021/04/keppel-pacific-oak-us-reit-achieves-5-7-rent-uplift-on-tech-sector-expansion.html
KORE reports 3.6% higher distributable income of US$14.9 mil in 1Q2021
Keppel Pacific Oak US REIT (KORE) has posted distributable income of US$14.9 million for the 1QFY2021 ended March, some 3.6% higher than the US$14.4 million posted in the 1QFY2020.
The higher figure was mainly attributable to the new and expansion leases from the tech hubs of Bellevue and Redmond in Seattle, as well as Denver, says the REIT.
Gross revenue stood 2.1% lower y-o-y at US$34.6 million, while net property income (NPI) fell 2.8% y-o-y to US$20.4 million.
Adjusted NPI excluding non-cash straight-line rent, lease incentives and amortisation of leasing commissions, on the other hand, increased 2.7% y-o-y to US$20.5 million.
As at March 31, the REIT has a low gearing of 37.5% with no long-term refinancing requirements till November 2022.
It has cash and undrawn facilities of US$93.5 million as at March 31.
The REIT also reported a portfolio committed occupancy of 91.6% as at March 31 with a weighted average lease expiry (WALE) of 3.7 years by cash rental income (CRI).
Some 128,000 sq ft of space were leased during the quarter, equivalent to 2.7% of the portfolio&rsquo s net lettable area (NLA).
Of the leases signed in 1QFY2021, 24% were new, while 61.3% were renewal contracts. Another 14.7% were expansions.
The REIT, in its 1Q business update, revealed that leasing activities were driven mainly by demand from professional services, finance and insurance, as well as tech.
Over 37% of KORE&rsquo s portfolio by NLA comprises high quality tenants from the growing and defensive sectors of technology and medical/healthcare.
I guess there are broad market concerns on how the future of office will impact these US office REITs. Next to watch is Prime US REIT - ultimately, they are all reporting on FY20 historical data which was also heavily supported by the US government with the CARES Act and PPP programme. Question is whether these US REITs can sustain their performances in FY21?