Monday 12 August 2024

PRIME US REIT: Financing Completed, Safe for 02 Years

PRIME US REIT has made an announcement it has completed refinancing of its July 2024 debt due. The new debt facility will run until July 2026, with the option (which likely will be exercised) until July 2027

Effects of Loan Renewal

With the conclusion of its debt and sale of Florida property, the REIT's leverage ratio will fall and the amount of loan it has to service is reduced.

In my view, the REIT is now of a much safer profile, even safer than Keppel Pacific Oak's

Dividend?

In terms of distributable income, I believe the REIT will have US$38 million for the full year and can sustain a 2 US cents dividends, even with 10% retained. However, given the need to conserve cash, dividend should be lower than 2 US cents. An indication is during the AGM where the CFO said if the REIT pays 90% of its taxable income, it will get tax benefits from USA.

The loss in the sale of the Florida property might be recognised to ensure taxable income for 2024 is low.

I think dividend will still be higher than what unitholders received in 2H2023. The REIT could be re-rated to 20 US cents in the upcoming months.

The debt renewal removes the event of doing a force sale during the trough of a commercial real estate oversupply. 

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