Keppel Pacific Oak US REIT’s Occupancy Hits Rock-bottom
USA – Some market watchers think that the portfolio occupancy of Keppel Pacific Oak US REIT (KORE) has reached a trough during the third quarter of 2021, reported The Edge on Monday evening (1 November, SGT).
“Portfolio occupancy seems to have bottomed out and leasing momentum is gathering pace with more workers seen returning to the office,” said RHB analyst Vijay Natarajan in a research note published on 29 October.
He highlighted that KORE’s portfolio occupancy edged up by 1.3 percentage points to 91.8 percent in Q3 2021 compared to the prior quarter, and this represented the first quarterly growth since the onset of the COVID-19 pandemic.
Natarajan also pointed out the trust’s rental reversions improved during the quarter under review, with a positive rental reversion of 9.3 percent attained year-to-date as at 30 September 2021.
“Management guided that it continues to expect rent reversion to remain in the positive mid-single digits for fiscal year 2022 on the back of strengthening demand and low in-place rents,” he added.
Moreover, Natarajan thinks that Keppel Pacific Oak US REIT has room for more redevelopment and acquisitions, given its current gearing level of 37.7 percent. He reckons that the trust has debt headroom of roughly US$200 million.
“We believe it could acquire 1 to 2 assets in the next six to 12 months in key growth cities like Salt Lake City, Nashville, Charlotte and Phoenix.”
Meanwhile, UOB Kay Hian analyst Jonathan Koh underscored that the trust’s net property income (NPI) increased by 5.6 percent in Q3 2021 on a yearly basis thanks to the acquisition of assets in Denver and Nashville that were concluded in August, in addition to better performance of existing real estate.
He also believes that office rents at magnet cities, such as Austin, Redmond, and Seattle have reached rock-bottom. “According to CoStar’s office report, average growth in rents for growth markets over the past 12 months has turned around from negative 0.2 percent in June 2021 to positive 0.2 percent in Sept 2021.”
