Keppel Pacific Oak US REIT - RHB Invest 2023-07-27: Rising Against The Tide

• Keppel Pacific Oak US REIT (KORE, SGX:CMOU)’s 1H23 results are broadly in line with expectations. Its operational performance still holds up well against the broad market challenges faced by the US commercial sector, thereby emphasising the REIT’s differentiated portfolio merits.
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Adjusted DPU for 1H23 declined 12.6% y-o-y

• Keppel Pacific Oak US REIT's adjusted DPU for 1H23 declined 12.6% y-o-y mainly from higher interest costs, while overall DPU fell by 17.2% y-o-y on the effect of management fees being fully paid in cash (1Q22: 100% in units). See Keppel Pacific Oak US REIT's dividend date.
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• Also, its loan covenants are tied to official gearing limits, i.e. gearing threshold of 50% and interest cover of 2.5x. As such, valuations need to fall by 24% to breach this limit.
• In terms of debt profile, 78% of its debt is hedged using interest rate swaps with maturities mostly tied closer to loan expiries.

Portfolio occupancy dipped by 1.1ppt q-o-q to 90.8%

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Vijay Natarajan RHB Securities Research | https://www.rhbgroup.com/ 2023-07-27 SGinvestors.io

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