Research from SooChow CSSD Capital Markets (Asia), SCCM Asia Research

SCCM Asia Research

Research from SooChow CSSD Capital Markets (Asia)

Thematic (Sector/Industry)

<h2>Singapore</h2><h3>SREITs results in a glance (see detailed spreadsheet and calendar attached)</h3><table class="table table-striped"><tbody><tr><td style="width: 363.047px;"> </td><td style="width: 362.953px;">MLT</td></tr><tr><td style="width: 363.047px;">Period</td><td style="width: 362.953px;">1Q22</td></tr><tr><td style="width: 363.047px;">Gross Revenue (S$ m)</td><td style="width: 362.953px;">163.7 (+23.7% YoY)</td></tr><tr><td style="width: 363.047px;">NPI (S$ m)</td><td style="width: 362.953px;">144.2 (+21.3% YoY)</td></tr><tr><td style="width: 363.047px;">DPU (S$ c)</td><td style="width: 362.953px;">2.161 (+5.7% YoY)</td></tr><tr><td style="width: 363.047px;">NAV per Unit (S$)</td><td style="width: 362.953px;">1.32</td></tr><tr><td style="width: 363.047px;">P/B (x)</td><td style="width: 362.953px;">1.59</td></tr><tr><td style="width: 363.047px;">Occupancy (%)</td><td style="width: 362.953px;">97.8</td></tr><tr><td style="width: 363.047px;">Reversion (%)</td><td style="width: 362.953px;">2.2</td></tr><tr><td style="width: 363.047px;">Gearing (%)</td><td style="width: 362.953px;">38.2</td></tr><tr><td style="width: 363.047px;">Cost of Debt (%)</td><td style="width: 362.953px;">2.2</td></tr><tr><td style="width: 363.047px;">1 Yr Fwd Yield (%)</td><td style="width: 362.953px;">4.14</td></tr><tr><td style="width: 363.047px;">Debt Hedged (%)</td><td style="width: 362.953px;">75%</td></tr><tr><td style="width: 363.047px;">Target Price</td><td style="width: 362.953px;">NA</td></tr><tr><td style="width: 363.047px;">Rating</td><td style="width: 362.953px;">NA</td></tr></tbody></table>

SingaporeSREITs results in a glance (see detailed spreadsheet and calendar attached) MLTPeriod1Q22Gross Revenue (S$ m)163.7 (+23.7% YoY)NPI (S$ m)144.2 (+21.3% YoY)DPU (S$ c)2.161 (+5.7% YoY)NAV per Unit (S$)1.32P/B (x)1.59Occupancy (%)97.8Reversion (%)2.2Gearing (%)38.2Cost of Debt (%)2.21 Yr Fwd Yield (%)4.14Debt Hedged (%)75%Target PriceNARatingNA

ASEAN Builder's Scoop (21Jul21) - MLT Steady Occ and Reversions Support 1.6x P/B

<h2>Singapore</h2><h3><a href="https://www.smartkarma.com/entities/prime-us-reit" target="_blank" data-smartkarma-citation="entities:28144" rel="noopener">Prime US REIT (PRIME SP)</a> private placement raises US$80m; Over two times subscribed at US$81c per unit</h3>PRIME’s private placement, which raised US$80m was more than two times subscribed. A total of 98.8m new units will be issued at US$81c/new unit, and their listing is expected to commence on 5Jul21. The issue price is fixed at the higher end of the US$79.7-82.2c price range. It represents a ~3.4% discount to the adjusted volume-weighted average price of US$83.85c/unit on 23Jun and ~8% discount to last close US$88c on 24Jun. Institutional investors accounted for over half the demand and final allocations, accompanied by strong private wealth and family office interest. Proceeds of the placement will partially fund PRIME's proposed acquisitions of Sorrento Towers in San Diego, California and One Town Center in Boca Raton, Florida.

SingaporePrime US REIT (PRIME SP) private placement raises US$80m; Over two times subscribed at US$81c per unitPRIME’s private placement, which raised US$80m was more than two times subscribed. A total of 98.8m new units will be issued at US$81c/new unit, and their listing is expected to commence on 5Jul21. The issue price is fixed at the higher end of the US$79.7-82.2c price range. It represents a ~3.4% discount to the adjusted volume-weighted average price of US$83.85c/unit on 23Jun and ~8% discount to last close US$88c on 24Jun. Institutional investors accounted for over half the demand and final allocations, accompanied by strong private wealth and family office interest. Proceeds of the placement will partially fund PRIME's proposed acquisitions of Sorrento Towers in San Diego, California and One Town Center in Boca Raton, Florida.

ASEAN Builder's Scoop (25Jun21) - PRIME Placement >2x Subscribed

<h2>Singapore</h2><h3><a href="https://www.smartkarma.com/entities/prime-us-reit" target="_blank" data-smartkarma-citation="entities:28144" rel="noopener">Prime US REIT (PRIME SP)</a> to acquire two properties in California and Florida; DPU accretive by +2.4% but -1.2% NAV dilutive</h3><ul><li>PRIME, through KBS Realty Advisors, has entered into a purchase agreement with Sorrento Towers North to acquire Sorrento Towers (located at 5355 &amp; 5375 Mira Sorrento Place, San Diego, California) and a purchase agreement with CP OTC to acquire the property One Town Center (located at One Town Center, Boca Raton, Florida). Sorrento Towers is a freehold property comprised of two, seven-story, Class-A office towers and sits above a three-level podium garage with an occupancy rate of 95.6%, NLA of 296,327sqft and WALE By NLA of 6.6 years. One Town Center is a freehold 10-storey Class-A office tower and a five-storey attached parking garage with an occupancy rate of 94.7%, NLA of 191,294sqft and WALE by NLA of 6.2 years</li><li>The aggregate purchase consideration payable for the Acquisitions is US$245.5m, comprising US$146.0m for Sorrento Towers and US$99.5m for One Tower Center. Sorrento Towers would be acquired at valuation, whilst One Town Center will be acquired at a discount of 2.5% of its appraised value, representing an aggregate discount of 1%. The estimated total cost for the acquisitions is US$247.71m, including fees, which will be funded by a combination of loans and a private placement of new units (to raise gross proceeds of at least US$80.0m)</li><li>The Acquisitions will expand the REIT’s footprint in two new target markets, San Diego and Boca Raton. Post-acquisitions, no single market will contribute more than 11.7% of PRIME’s enlarged portfolio Cash Rental Income. In aggregate, the acquisitions have a long WALE of 6.5 years by NLA and 6.6 years by Cash Rental Income, with minimal proportion of leases expiring before 2025</li><li>100% of the leases at Sorrento Towers and One Town Center, based on Cash Rental Income for the month of Mar21, offers visible organic growth having a built-in rental escalation with a weighted average built-in escalation rate of c.3% pa. Moreover, both Sorrento Towers and One Town Center have positive office market dynamics with in-place rents that are currently below market</li><li>At the purchase price, the implied capitalisation rate for Sorrento Towers and One Town Center is approximately 5.3% and 5.8%, respectively. On a pro-forma 1Q21 basis, the WALE of the enlarged portfolio will increase to 4.5 years by NLA and 4.6 years by Cash Rental Income. On a pro-forma FY20 basis, the acquisitions are expected to be +2.4% DPU accretive, but -1.2% NAVPU dilutive. Gearing will increase to 39.1% from 33.8% as at 31Mar21 on a pro-forma basis.</li></ul><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/214/962/original/image003+%282%29.png?1624498042" class="editor-image img-responsive" data-smartkarma-image-id="214962"></figure><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/214/963/original/image004.png?1624498057" class="editor-image img-responsive" data-smartkarma-image-id="214963"></figure></section>

SingaporePrime US REIT (PRIME SP) to acquire two properties in California and Florida; DPU accretive by +2.4% but -1.2% NAV dilutivePRIME, through KBS Realty Advisors, has entered into a purchase agreement with Sorrento Towers North to acquire Sorrento Towers (located at 5355 &amp; 5375 Mira Sorrento Place, San Diego, California) and a purchase agreement with CP OTC to acquire the property One Town Center (located at One Town Center, Boca Raton, Florida). Sorrento Towers is a freehold property comprised of two, seven-story, Class-A office towers and sits above a three-level podium garage with an occupancy rate of 95.6%, NLA of 296,327sqft and WALE By NLA of 6.6 years. One Town Center is a freehold 10-storey Class-A office tower and a five-storey attached parking garage with an occupancy rate of 94.7%, NLA of 191,294sqft and WALE by NLA of 6.2 yearsThe aggregate purchase consideration payable for the Acquisitions is US$245.5m, comprising US$146.0m for Sorrento Towers and US$99.5m for One Tower Center. Sorrento Towers would be acquired at valuation, whilst One Town Center will be acquired at a discount of 2.5% of its appraised value, representing an aggregate discount of 1%. The estimated total cost for the acquisitions is US$247.71m, including fees, which will be funded by a combination of loans and a private placement of new units (to raise gross proceeds of at least US$80.0m)The Acquisitions will expand the REIT’s footprint in two new target markets, San Diego and Boca Raton. Post-acquisitions, no single market will contribute more than 11.7% of PRIME’s enlarged portfolio Cash Rental Income. In aggregate, the acquisitions have a long WALE of 6.5 years by NLA and 6.6 years by Cash Rental Income, with minimal proportion of leases expiring before 2025100% of the leases at Sorrento Towers and One Town Center, based on Cash Rental Income for the month of Mar21, offers visible organic growth having a built-in rental escalation with a weighted average built-in escalation rate of c.3% pa. Moreover, both Sorrento Towers and One Town Center have positive office market dynamics with in-place rents that are currently below marketAt the purchase price, the implied capitalisation rate for Sorrento Towers and One Town Center is approximately 5.3% and 5.8%, respectively. On a pro-forma 1Q21 basis, the WALE of the enlarged portfolio will increase to 4.5 years by NLA and 4.6 years by Cash Rental Income. On a pro-forma FY20 basis, the acquisitions are expected to be +2.4% DPU accretive, but -1.2% NAVPU dilutive. Gearing will increase to 39.1% from 33.8% as at 31Mar21 on a pro-forma basis.

ASEAN Builder's Scoop (24Jun21) - PRIME Acquires US Offices

<h2>Singapore</h2><h3><a href="https://www.smartkarma.com/entities/prime-us-reit" target="_blank" data-smartkarma-citation="entities:28144" rel="noopener">Prime US REIT (PRIME SP)</a> in talks with WeWork on proposed lease restructuring</h3><ul><li>Co-working space operator WeWork has approached PRIME with a proposal to restructure its lease at the latter's Class-A office property in California, and discussions are ongoing. The tenant occupies 56,977sqft within Tower I at Emeryville, out of the building's NLA of 222,606sqft. The tenant contributes less than 2.5% of PRIME's cash rental income as at end-Mar. It added that the tenant has been current on its rental obligations till mid-Jun21, and the lease terms are currently under evaluation</li><li>PRIME has called on the tenant to continue to meet its rental obligations, and also called upon the existing security package for the payment of such obligations. PRIME's security in relation to that WeWork lease consists of a combination of protections. If the counterparty honours its obligations, such protections will cover the tenant's monthly lease obligations through as much as end-2022. PRIME does not expect the matter to have any impact on the distribution per unit of PRIME for FY21, in light of the security. Based on the independent valuation sought, this will not materially affect the value of PRIME's portfolio as compared to the portfolio appraisal conducted as at last Dec.</li></ul>

SingaporePrime US REIT (PRIME SP) in talks with WeWork on proposed lease restructuringCo-working space operator WeWork has approached PRIME with a proposal to restructure its lease at the latter's Class-A office property in California, and discussions are ongoing. The tenant occupies 56,977sqft within Tower I at Emeryville, out of the building's NLA of 222,606sqft. The tenant contributes less than 2.5% of PRIME's cash rental income as at end-Mar. It added that the tenant has been current on its rental obligations till mid-Jun21, and the lease terms are currently under evaluationPRIME has called on the tenant to continue to meet its rental obligations, and also called upon the existing security package for the payment of such obligations. PRIME's security in relation to that WeWork lease consists of a combination of protections. If the counterparty honours its obligations, such protections will cover the tenant's monthly lease obligations through as much as end-2022. PRIME does not expect the matter to have any impact on the distribution per unit of PRIME for FY21, in light of the security. Based on the independent valuation sought, this will not materially affect the value of PRIME's portfolio as compared to the portfolio appraisal conducted as at last Dec.

ASEAN Builder's Scoop (18Jun21) - PRIME/WeWork Lease Restructuring

<h2>Singapore</h2><h3>SREITs results in a glance (see detailed spreadsheet and calendar attached)</h3><table class="table table-striped"><tbody><tr><td style="width: 141.25pt;"> </td><td style="width: 141.2pt;">PRIME (US$)</td><td style="width: 141.2pt;">KORE (US$)</td><td style="width: 141.2pt;">MUST (US$)</td></tr><tr><td style="width: 141.25pt;">Period</td><td style="width: 141.2pt;">1Q21</td><td style="width: 141.2pt;">1Q21</td><td style="width: 141.2pt;">1Q21</td></tr><tr><td style="width: 141.25pt;">Gross Revenue (S$ m)</td><td style="width: 141.2pt;">35.9 (+2.5% YoY)</td><td style="width: 141.2pt;">34.6 (-2.1% YoY)</td><td style="width: 141.2pt;">NA</td></tr><tr><td style="width: 141.25pt;">NPI (S$ m)</td><td style="width: 141.2pt;">23.0 (-2.0% YoY)</td><td style="width: 141.2pt;">20.4 (-2.8% YoY)</td><td style="width: 141.2pt;">NA</td></tr><tr><td style="width: 141.25pt;">DPU (S$ c)</td><td style="width: 141.2pt;">Not Disclosed</td><td style="width: 141.2pt;">Not Disclosed</td><td style="width: 141.2pt;">NA</td></tr><tr><td style="width: 141.25pt;">NAV per Unit (S$)</td><td style="width: 141.2pt;">Not Disclosed</td><td style="width: 141.2pt;">Not Disclosed</td><td style="width: 141.2pt;">0.730</td></tr><tr><td style="width: 141.25pt;">P/B (x)</td><td style="width: 141.2pt;">0.99(Based on 4Q20 NAV)</td><td style="width: 141.2pt;">0.90 (Based on 4Q20 NAV)</td><td style="width: 141.2pt;">1.030 (Based on 4Q20 NAV)</td></tr><tr><td style="width: 141.25pt;">Occupancy (%)</td><td style="width: 141.2pt;">91.7</td><td style="width: 141.2pt;">91.6</td><td style="width: 141.2pt;">92.0</td></tr><tr><td style="width: 141.25pt;">Reversion (%)</td><td style="width: 141.2pt;">8.5</td><td style="width: 141.2pt;">5.7</td><td style="width: 141.2pt;">2.1</td></tr><tr><td style="width: 141.25pt;">Gearing (%)</td><td style="width: 141.2pt;">33.6</td><td style="width: 141.2pt;">37.5</td><td style="width: 141.2pt;">41.3</td></tr><tr><td style="width: 141.25pt;">Cost of Debt (%)</td><td style="width: 141.2pt;">2.8</td><td style="width: 141.2pt;">2.82</td><td style="width: 141.2pt;">3.18</td></tr><tr><td style="width: 141.25pt;">1 Yr Fwd Yield (%)</td><td style="width: 141.2pt;">8.24</td><td style="width: 141.2pt;">8.3</td><td style="width: 141.2pt;">8.00</td></tr><tr><td style="width: 141.25pt;">Debt Hedged (%)</td><td style="width: 141.2pt;">90.0</td><td style="width: 141.2pt;">84.7</td><td style="width: 141.2pt;">NA</td></tr><tr><td style="width: 141.25pt;">Target Price</td><td style="width: 141.2pt;">NA</td><td style="width: 141.2pt;">NA</td><td style="width: 141.2pt;">NA</td></tr><tr><td style="width: 141.25pt;">Rating</td><td style="width: 141.2pt;">NA</td><td style="width: 141.2pt;">NA</td><td style="width: 141.2pt;">NA</td></tr></tbody></table><h3><a href="https://www.smartkarma.com/entities/prime-us-reit" target="_blank" data-smartkarma-citation="entities:28144" rel="noopener">Prime US REIT (PRIME SP)</a> 1Q21 Business Update – Robust operations metrics; Trading at an attractive 8+% USD yield  </h3><ul><li>1Q21 revenue and NPI came in +2.5% YoY and -2.0% YoY, respectively, to US$35.9m (25.2% BB est) and US$23.5m (26.7% BB est). 1Q21 DI came in -1.2% YoY at US$17.6m, which benefitted from lower interest cost. 1Q21 DPU was undisclosed</li><li>Leasing momentum remained robust with a positive rental reversion of +8.5% in 1Q21 (vs +8.7% in 4Q20 and +8.9% in 3Q20). Focusing on long-term leases – 57,647sqft of long-term leases were executed in 1Q21 at a rental reversion of +9.5%. Below-market portfolio in place rents (by 6.5%) also provide a buffer for rental reversion potential</li><li>Overall portfolio committed occupancy fell to 91.7% in 1Q21 (vs. 92.4% in 4Q20 and 92.6% in 3Q20). PRIME has ~100% of cash rental income with built-in rental escalations averaging over +2% pa. Portfolio occupancy still well above Class-A office average of 84.3%. Rent collections remained robust at 99% with minimal rent concessions. Portfolio WALE stood at 4.3%</li><li>Portfolio gearing stands at 33.8% (vs. 33.5% in 4Q20 and 32.7% in 3Q20) with average cost of debt of 2.8% pa. (vs. 2.7% in 4Q20 and 2.7% in 3Q20) and 90.0% of debt hedged</li><li>PRIME currently trades at 8.24% FY21E yield and 0.99x P/B.</li></ul>

SingaporeSREITs results in a glance (see detailed spreadsheet and calendar attached) PRIME (US$)KORE (US$)MUST (US$)Period1Q211Q211Q21Gross Revenue (S$ m)35.9 (+2.5% YoY)34.6 (-2.1% YoY)NANPI (S$ m)23.0 (-2.0% YoY)20.4 (-2.8% YoY)NADPU (S$ c)Not DisclosedNot DisclosedNANAV per Unit (S$)Not DisclosedNot Disclosed0.730P/B (x)0.99(Based on 4Q20 NAV)0.90 (Based on 4Q20 NAV)1.030 (Based on 4Q20 NAV)Occupancy (%)91.791.692.0Reversion (%)8.55.72.1Gearing (%)33.637.541.3Cost of Debt (%)2.82.823.181 Yr Fwd Yield (%)8.248.38.00Debt Hedged (%)90.084.7NATarget PriceNANANARatingNANANAPrime US REIT (PRIME SP) 1Q21 Business Update – Robust operations metrics; Trading at an attractive 8+% USD yield  1Q21 revenue and NPI came in +2.5% YoY and -2.0% YoY, respectively, to US$35.9m (25.2% BB est) and US$23.5m (26.7% BB est). 1Q21 DI came in -1.2% YoY at US$17.6m, which benefitted from lower interest cost. 1Q21 DPU was undisclosedLeasing momentum remained robust with a positive rental reversion of +8.5% in 1Q21 (vs +8.7% in 4Q20 and +8.9% in 3Q20). Focusing on long-term leases – 57,647sqft of long-term leases were executed in 1Q21 at a rental reversion of +9.5%. Below-market portfolio in place rents (by 6.5%) also provide a buffer for rental reversion potentialOverall portfolio committed occupancy fell to 91.7% in 1Q21 (vs. 92.4% in 4Q20 and 92.6% in 3Q20). PRIME has ~100% of cash rental income with built-in rental escalations averaging over +2% pa. Portfolio occupancy still well above Class-A office average of 84.3%. Rent collections remained robust at 99% with minimal rent concessions. Portfolio WALE stood at 4.3%Portfolio gearing stands at 33.8% (vs. 33.5% in 4Q20 and 32.7% in 3Q20) with average cost of debt of 2.8% pa. (vs. 2.7% in 4Q20 and 2.7% in 3Q20) and 90.0% of debt hedgedPRIME currently trades at 8.24% FY21E yield and 0.99x P/B.

ASEAN Builder's Scoop (19May21) - PRIME robust operations metrics

Singapore

Prime US REIT is a Singapore-based real estate investment trust that invests in stabilized income-producing Class A freehold office properties in key markets across the United States. It aims to provide unitholders with regular and stable distributions and long-term growth in distribution per unit and net asset value per unit. The REIT was listed on the Main Board of the Singapore Exchange on July 19, 2019, and is headquartered in Singapore.

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Prime US REIT (PRIME SP)

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ASEAN Builder's Scoop (25Jun21) - PRIME Placement >2x Subscribed

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ASEAN Builder's Scoop (24Jun21) - PRIME Acquires US Offices

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ASEAN Builder's Scoop (18Jun21) - PRIME/WeWork Lease Restructuring

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ASEAN Builder's Scoop (19May21) - PRIME robust operations metrics

PRIME robust operations metrics; CIT plans for GBP500m SREIT IPO; FIRT completes restructuring; Retail landlords roll out tenants support; China...

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