Stock.i1: Prime US REIT Post Result Announcement

Prime US REIT Limited has released its FY2021 result on 16 February 2022. In this article, we will be looking at the highlights of their results and the management outlook for the REIT.

About Prime US REIT

Listed on 19 July 2019 on the Main Board of the Singapore Exchange, Prime US REIT is a well-diversified real estate investment trust ("REIT") focused on stabilised income-producing office assets in the United States ("U.S.").

With the objectives to achieve long-term growth in distributions per unit and net asset value per unit while maintaining a robust capital structure, PRIME offers investors unique exposure to a high-quality portfolio of 14 Class A freehold office properties which are strategically located in 13 key U.S. office markets. Prime US REIT's portfolio has a total carrying value of US$1.65 billion as at 31 December 2021.

FY2021 Result Highlights

For FY2021, Prime US REIT’s net property income grew by 6.0% year-on-year to US$100.69 million. The rise was mainly attributable to the acquisitions of Sorrento Towers, San Diego and One Town Center, Boca Raton.

Despite the near 5% higher distributable income to unitholders, total distribution per unit for FY2021 shrank by 2.3% year-on-year to 6.78 US cents. The decline can be seen from the issuance of new units by Prime US REIT for the above acquisitions.

Capital Management

With a gross borrowing of US$633.6 million in Prime US REIT’s balance sheet, this translates into an aggregate leverage of 37.9%, which is well in line with MAS’s regulation of a 50% leverage limit. Meanwhile, interest coverage ratio continues to be in a healthy region of 5.4 times, which showcases Prime US REIT’s ability to meet its interest payment obligations.

On the other hand, Prime US REIT’s effective interest rate dipped by 0.2 percentage points to 2.7% and has a weighted average maturity of 3 years to its debt profile.

Top 10 Tenants

Based on the pie chart, no more than 20% of Prime US REIT’s cash rental income are derived from one sector. This sector diversification helped to add resiliency to the REIT’s cash rental income. The top 3 sectors are as follows:

• Finance (18.2%)
• Communications and Information (13.7%)
• Medical, Biotech and Healthcare (12.8%)

Meanwhile, none of its top 10 tenants contributes more than 10% of the overall portfolio’s cash rental income too. The top 3 tenants are as follows:

• Charter Communications (8.2%)
• Goldman Sachs Group Inc. (5.0%)
• Sodexo Operations LLC (4.9%)

Management Outlook

Ms. Barbara Cambon, Chief Executive Officer and Chief Investment Officer of the Manager of Prime US REIT, said, “Our strategy to capture leasing and growth opportunities in key non-gateway markets as the economy regains momentum continues support our strong performance. As job growth and recent leasing activity indicate a nascent recovery and tenants’ confidence in the return to office, we continue to identify market and asset attributes that employers seek, to best support their long-term workspace needs.

We have a strong balance sheet and access to capital which underpin our growth strategies as we scale our portfolio further into strategic markets and sectors, and as we address evolving tenant needs through asset enhancement initiatives. We continue to pursue operational excellence by taking a prudent and proactive approach to asset and capital management, to maximise Unitholder returns through the economic cycle.”

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