Prime US REIT - Phillip Securities 2023-11-09: Challenges Remain, But Manageable

• Prime US REIT (SGX:OXMU)'s 3Q23 distributable income of US$14.7mil (-23.4% y-o-y) was in line with our expectations and formed 25% of our FY23e forecast.
• The y-o-y decline was due to Prime increasing management fees paid in cash from 20% to 100%, higher interest expense, lower portfolio occupancy, and absence of lease termination income (US$1.3mil recorded in 3Q22). Excluding the change in management fees paid in cash, distributable income is down 16.6% y-o-y.
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• Maintain BUY, DDM-based target price for Prime US REIT lowered from US$0.39 to US$0.37. FY24e DPU forecast for Prime US REIT is lowered by 7% on lower occupancy and higher finance costs assumptions.

The Positive

Leasing activities picked up in 3Q23.

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• Management indicated strong leasing momentum at some of its properties, with notable leasing discussions underway at VCS I and Park Tower, albeit with relatively longer lead times.
• One of its top 10 tenants, Matheson Tri-Gas, has indicated interest to expand its space at Tower 909, and discussions are ongoing.

The Negatives

Portfolio occupancy dipped from 85.6% to 85% q-o-q.

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Darren Chan Phillip Securities Research | https://www.stocksbnb.com/ 2023-11-09 SGinvestors.io

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