Prime US Reit H1 DPU falls by 33.3% to US$0.0012 due to higher finance expenses, asset divestment

[SINGAPORE] Prime US Real Estate Investment Trust (Reit) on Tuesday (Aug 12) posted a 33.3 per cent decline in its distribution per unit (DPU) for the first half of the 2025 financial year to US$0.0012, from US$0.0018 in the corresponding year-ago period.

Income available for distribution slid 28.6 per cent to US$16.7 million, from US$23.3 million.

The Reit manager attributed the drop to the divestment of One Town Center, an office tower in Florida, in July 2024 as well as higher finance expenses.

Finance expenses for the first six months increased to US$20.6 million, compared with US$14.8 million a year ago. This was mainly due to a rise in finance cost on the unhedged portion of borrowings and incremental drawdowns on debt facilities for capital expenditures, said the Reit manager.

The Reit recorded a revenue of US$67.3 million for the first six months, an 8.4 per cent decrease from US$73.5 million in H1 FY2024. The Reit manager attributed this to the divestment of the One Town Center asset.

Property operating expenses fell to US$31.5 million for H1, compared with US$32.9 million a year ago due to the divestment. As a result, net property income for the six months was lower at US$35.8 million, sliding 11.6 per cent year on year from US$40.6 million.

The weighted average interest rate, excluding amortisation of debt-related transaction costs, on loans and borrowings for H1 was 5.4 per cent per annum. As at Jun 30, 2025, the Reit’s aggregate leverage and interest coverage ratio were 46.7 per cent and 1.7 times, respectively.

“Cautiously optimistic”

The manager said that the Reit is retaining capital to prepare for approximately 440,000 square feet of new leases, which are equivalent to 10.5 per cent of the Reit’s portfolio occupancy.

It expects the cash flow from rent to commence as early as the third quarter of FY2025, on a staggered basis. The capital deployment is expected to drive meaningful yield expansion as these leases transition from rent-free periods to contributing income, said the manager.

It added that US office-leasing demand is increasing as the return-to-office momentum improves. This has led to increased interest and leasing activities at several of its assets.

“Given Prime’s ample debt headroom and access to committed undrawn facilities, Prime was able to actively pursue major tenant opportunities, as prospective tenants increasingly favour landlords with robust balance sheets and strong liquidity positions,” said the manager.

It noted that Prime had secured 400,000 sq ft of leases in H1 FY2025, up 24 per cent against the second half of FY2024. The leases have annual rent escalations of 2 to 3 per cent, and a positive rental reversion of 3.4 per cent.

The Reit manager said that it is cautiously optimistic for the period ahead.

“As the economic environment progresses, Prime US Reit is expected to maintain strong leasing activity, bolstered by a diverse and resilient tenant base that ensures steadily increasing rental income,” it said in a bourse filing on Tuesday.

The distribution will be paid out on Sep 30.

Units of Prime US Reit closed up 0.6 per cent or US$0.001 at US$0.174 on Tuesday, before the announcement.