Prime US REIT - UOB Kay Hian 2023-01-17: Rising From The Abyss

• Initiate coverage on Prime US REIT with BUY and target price of US$0.78.
• Prime US REIT's Class A offices will benefit from a flight to quality despite the gloom in the US office market in 2H22. It is able to continue generating positive rental reversion as in-place passing rent was 6.7% below asking rent in 4Q22.
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• Prime US REIT's share price corrected 40% in 2H22. Valuation has bombed out with 2023 distribution yield at 15.2% and P/NAV at 0.56x.

Prime US REIT's class A offices benefit from flight to quality and attract blue chip tenants.

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• Prime US REIT focuses on Class A office buildings, which are the best in class. Class A offices with amenities are well sought after to attract employees back to work from the office. Demand is skewed towards high-quality Class A office space. According to Cushman & Wakefield, Class A offices outperform in net absorption. Premium in rents commanded by newer Class A office buildings have also doubled during the COVID-19 pandemic.
• Prime US REIT's key tenants are blue chip companies with strong credit standing. Charter Communications, Goldman Sachs, Sodexo, Dexcom, Wells Fargo and Bank of America are among its top-10 tenants. WALE for its top-10 tenants is healthy at 4.6 years. Some 73% of tenants are in the established and growth (STEM/TAMI) sectors.

18-hour and Super Sun Belt cities attract in-migration.

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Jonathan KOH CFA UOB Kay Hian Research | https://research.uobkayhian.com/ 2023-01-17 SGinvestors.io

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