Prime US REIT - DBS Research 2023-05-11: Riding The Storm

Prime US REIT - Riding The Storm

Prime US REIT (SGX:OXMU) | SGinvestors.ioPrime US REIT (SGX:OXMU)
  • Prime US REIT (SGX:OXMU)'s 1Q23 estimated headline DPU -30% y-o-y to US$0.0125, below our estimates, largely due to the raising of management fees paid in cash from 20% to 100%. On a like-for-like basis, estimated DPU -24% y-o-y on higher interest cost, absence of one-off termination fee income received in 1Q22 and higher expenses.
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  • Prime US REIT's gearing increased by 1.6ppts to 43.7% from 42.1% in 4Q22. Effective interest rates increased 30bps q-o-q to 3.7% vs 3.4% in 4Q22. All-in average cost of debt increased 50bps q-o-q to 3.8% vs 3.3% in 4Q22. Hedging ratio fell marginally to 79% from 82% in 4Q22 (62% is hedged / fixed from 2025 to 2026).
  • Notice to extend maturities has been served for its 4-year term loan and RCF facilities to extend maturities to July 2024.

Key Highlights & Observations

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  • A slow start on 1Q23 leasing activities. Prime US REIT signed 64.4k sqft of leases in 1Q23 (-55% q-o-q). However, Apr-23 saw more activities where 38k sqft of leases were executed.
  • Rental reversions -2.6% due to focus on positive net effective rents. After 4Q22 recorded strong positive reversions of ~20%, 1Q23 saw reversions narrow to -2.6% mainly due to 2 renewals with minimal upfront tenant improvements (Tis) but has high positive net effective rent reversions. Excluding the two renewals, 1Q23 reversions would have been +3.2%.
  • Passing rents was 6.8% (vs 6.3% in 4Q22) below that of market rents. Most of Prime US REIT assets are under-rented except Reston Square, One Washingtonian Center and 222 Main.
  • Management continues to focus on leasing with a focus on maintaining positive net effective rent reversions and capital management by monitoring bank debt markets and rate environment.

Maintain BUY on Prime US REIT but lower target price to US$0.33.

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Above is the excerpt from report by DBS Group Research.
Clients of DBS may access the full report in PDF @

Rachel TAN DBS Group Research | Derek TAN DBS Research | 2023-05-11

Read also DBS's most recent report:
2024-02-23 Prime US REIT - Different, Yet The Same.

Previous report by DBS:
2024-02-16 Prime US REIT - Potential Domino Effect; Downgrade To FULLY VALUED.

Price targets by 3 other brokers at Prime US REIT Target Prices.

Listing of research reports at Prime US REIT Analyst Reports.

Relevant links:
Prime US REIT Share Price History,
Prime US REIT Announcements,
Prime US REIT Dividends & Corporate Actions,
Prime US REIT News Articles


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