Keppel Pacific Oak US Reit H2 distributable income falls

[SINGAPORE] The manager of Keppel Pacific Oak US Reit (Kore) on Tuesday (Feb 3) posted a 3.1 per cent fall in distributable income to US$23.1 million for the second half ended Dec 31, from US$23.8 million in the previous corresponding period.

This brought its income available for distribution for the full year down 9.6 per cent at US$43 million from US$47.6 million. 

The contraction in distributable income for H2 and the full year was due to higher financing costs as a result of the expiration of interest rate swaps in 2025, said the manager. This was partially offset by higher cash net property income (NPI).

The office-focused US real estate investment trust (Reit) began an early resumption of distributions with a distribution per unit (DPU) of US$0.0025. It previously said that it would suspend distributions from H2 FY2023 to H2 FY2025 as part of recapitalisation plans to address capital needs and leverage concerns. 

The distribution will be paid on Mar 30; the a record date is Feb 11. The manager added that it plans to start with a “conservative payout ratio” with the aim of increasing it to a “sustainable level aligned with long-term portfolio performance”.

For the half year, its revenue rose 4.9 per cent to US$75.6 million from US$72.1 million. Its NPI increased 10.3 per cent to US$40 million from US$36.3 million. Excluding the non-cash amortisation of straight-line rent and lease incentives, the cash revenue for H2 FY2025 was 2.2 per cent higher year on year.

This brought its full-year revenue up 2.5 per cent year on year at US$150.2 million from US$146.4 million. Its NPI rose 3 per cent to US$80.7 million from US$78.3 million.

The increase in revenue for H2 FY2025 was primarily due to higher other operating income as a result of the “recognition of restoration fee” received in the second half, as well as higher recoveries income due to the increase in recoverable property expenses, said the manager.

In January, the Reit obtained a US$37.5 million loan facility through its trustee, Perpetual (Asia). Following the execution of the loan facility, it will have “substantially addressed” its refinancing requirements for 2026, the manager had said.

The Reit’s higher NPI for H2 compared with the year-ago period was supported by stable property expenses for H2 FY2025, which fell 0.5 per cent to US$35.6 million from US$35.8 million due to lower costs related to repairs and maintenance and other property-related expenses, partially offset by higher utilities and property taxes.

The manager said Kore’s portfolio committed occupancy as at Dec 31, 2025, stood at 87.2 per cent in comparison to 90 per cent as at Dec 31, 2024.

Its portfolio value based on an independent valuation stood relatively stable on the year at US$1.33 billion as at Dec 31, 2025.

The Reit recorded a US$40.5 million net fair value loss for FY2025, after accounting for capital expenditures and tenant improvements primarily from The Plaza Buildings, Westmoor Center, 105 Edgeview, Maitland Promenade I & II and 1800 West Loop South.

The decline was largely due to higher discount rates and higher vacancy assumed.

As at end-December 2025, its aggregate leverage stood at 44.1 per cent and the weighted average term to maturity of its debt was 1.5 years (2.1 years on a pro forma basis assuming refinancing), the manager said.

It added that the Reit addressed all 2025 and 2026 term loan maturities following the execution of US$152.5 million in loan facilities, comprising a US$115 million facility announced in December 2025 and a US$37.5 million facility announced in January 2026.

The Reit’s portfolio weighted average lease expiry by cash rental income stood at 3.8 years. Its rental reversion for FY2025 was positive 6.8 per cent.

Outlook

On the office leasing market, the manager noted that office attendance continues to rise to new post-pandemic highs, with 97 per cent of Fortune 100 employees now subject to hybrid or full-time office mandates. Leasing activity reached new post-pandemic highs in Q4 2025, with annual leasing increasing 5.2 per cent year on year.

The manager said it will continue to focus on maintaining high occupancy rates, optimising rental rates and future-proofing assets to align with evolving tenant preferences.

Units of Kore fell 2 per cent to close US$0.005 lower at US$0.24 on Monday.