Prime US REIT has reported a distribution per unit (DPU) of 2.71 US cents (3.6 cents) for the FY2023 ended Dec 31, 2023, 58.6% lower than the DPU of 6.55 US cents in the FY2022.
For the 2HFY2023, the REIT manager has decided to pay a cash distribution of 0.25 US cents, which is equivalent to about 10% of its total distributable income for the half-year.
The distribution of 10% in cash for the 2HFY2023 was so that the REIT could preserve a “substantial portion” of distributable income to meet its capital expenditure (capex) needs. It would also “provide creditors with the assurance that PRIME will reinvest cash flows in the business alongside its lenders” says the REIT manager.
In addition to the cash distribution, the REIT manager has announced a 1-for-10 bonus issue. The issue translates to about 1.03 US cents per unit, or 43% of the distributable income for the 2HFY2023. The bonus issue is fully paid with nil consideration, says the REIT manager. The REIT will be issuing new units to unitholders on the basis of one new unit for every 10 existing units held. This will be done at a date and time to be determined by the manager.
If the DPU for the 2HFY2023 were to be fully paid in cash, unitholders would have received their DPU of 2.4 US cents, bringing FY2023 DPU to 4.86 US cents.
Gross revenue for the FY2023 fell by 2.0% y-o-y to US$159.8 million mainly due to lower rental income on the decline in occupancy. Net property income (NPI) fell by 4.5% y-o-y to US$93.6 million on lower revenue and higher property expenses.
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Income available for distribution fell by 25.0% y-o-y to US$57.8 million.
For the 2HFY2023, gross revenue fell by 1.1% y-o-y to US$80.3 million mainly due to lower straight-line rent and lease incentives, as well as lower recoverable expenses on lower occupancy. NPI fell by 1.5% y-o-y to US$46.4 million on lower revenue offset by lower property expenses.
2HFY2023 distributable income fell by 20.2% y-o-y to US$28.6 million.
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In the FY2023 and 2HFY2023, the REIT reported a net fair value loss of US$161.2 million with portfolio valuations impacted by higher discount rates and capitalisation rates from the challenging market conditions for offices. Elevated interest rates and a tight lending environment also led to the negative impact on valuations.
As at Dec 31, 2023, occupancy stood at 85.4% while weighted average lease expiry (WALE) stood at 4.0 years.
The REIT’s aggregate leverage stood at 48.4% with an interest coverage ratio of 3.1 times as at the same period.
“Going forward, the manager will evaluate Prime US REIT OXMU ’s distribution policy dynamically, factoring in macro, regulatory and REIT-specific developments,” reads the statement on Feb 21.
Units in Prime US REIT closed 0.4 US cents higher or 3.88% up at 10.7 US cents.
