Kore Us Reit · SGX:CMOU
Kore Us Reit — Keppel Pacific Oak US REIT — FY2023 Earnings Presentation
51 slides from Kore Us Reit's earnings presentation, Feb 15, 2024
Slide 1: Recapitalisation Plan and Second Half and Full Year 2023 Financial Results
Recapitalisation Plan and Second Half and Full Year 2023 Financial Results 15 February 2024
Slide 2: Important Notice / Content Outline
Important Notice The past performance of Keppel Pacific Oak US REIT is not necessarily indicative of its future performance. Certain statements made in this Content Outline release may not be based on historical information or facts and may be “forward-looking” statements due to a number of risks, u
Slide 3: Recapitalisation Plan
Recapitalisation Plan Great Hills Plaza Austin, Texas
Slide 4: Why Recapitalisation Is Necessary
Why Recapitalisation Is Necessary Leverage has risen to 43.2% post-FY 2023 valuation. Lenders remain concerned about the United States (U.S.) office market. The Monetary Authority of Singapore (MAS) and bank covenants limit KORE to 50% leverage. Banks are reluctant to lend above 45% leverage
Slide 5: Recapitalisation Options and Decision
Recapitalisation Options and Decision Recapitalisation Options: • Several options were evaluated to recapitalise KORE’s balance sheet. Divestments – not possible at this point because of the difficult U.S. real estate market. Equity fund raising (EFR) – Unlikely to raise enough at this point in
Slide 6: Additional Background
Additional Background Capital Requirements For U.S. Office: • U.S. office requires a lot more capital to build out and lease office space, which is very different from the Singapore office market. • Capital needs are funded by landlords, not tenants. Without the necessary capital investments, U.S. l
Slide 7: Recapitalisation Plan Goals
Recapitalisation Plan Goals • Maintain leverage within the MAS limits and bank debt covenants. There is always the risk that asset valuations could change enough to cause KORE to exceed MAS limits or breach the bank debt covenants. KORE plans to invest capital strategically to preserve the capit
Slide 8: US Office S-REITs Differentiators
US Office S-REITs Differentiators • There are various factors that impact the operational performance and differentiate the U.S. office S-REITs. These include: Market Presence – KORE invests in key growth markets, primarily 18-hour and Super Sun Belt Cities. Tenant Concentration – KORE’s top 10
Slide 9: US Office S-REITs Capex and Occupancy Comparison
US Office S-REITs Capex and Occupancy Comparison FY2020 KORE PRIME MUST US office S-REITs occupancy AUM (1) (US$ mil) 1,282.8 1,427.4 2,120.6 -2.2pp Capex (1) (US$ mil) 26.3 9.5 25.6 -10.8pp -11.1pp -3.5pp -6.4pp % Capex Per AUM 2.1 0.7 1.2 FY2021 KORE PRIME MUST AUM (1) (US$ mil) 1,415.4 1,687.7 2,
Slide 10: Commitment Towards Recovery
Commitment Towards Recovery KORE will continue to invest in the portfolio, with the goal of maximising NPI by the end of 2025 and restarting distributions for FY 2026 at the highest appropriate level, balancing the capital needs of the REIT and the desire to distribute income to Unitholders. Commitm
Slide 11: Important: Submission Of Relevant Tax Forms
Important: Submission Of Relevant Tax Forms It is important for Unitholders to continue to comply with the relevant documentation requirements or they will be subject to U.S. withholding tax under the IRC, including under FATCA. • While distributions to Unitholders are expected to be suspended throu
Slide 12: Key Highlights
Key Highlights Bridge Crossing Nashville, Tennessee
Slide 13: FY 2023 Key Highlights
FY 2023 Key Highlights Portfolio Valuation Net Property Income (NPI) Leasing momentum US$1.33 billion 2.2% YoY 704,191 sf Portfolio valuation decreased by leases signed in FY 2023 Despite the disposal of the two Atlanta assets in 6.8% or US$97.1 million year-on-year 2H 2022, NPI increased by 2.2% y-
Slide 14: Financial Performance & Capital Management
Financial Performance & Capital Management 105 Edgeview Denver, Colorado
Slide 15: Financial Performance for 2H 2023 & FY 2023
Financial Performance for 2H 2023 & FY 2023 (US$’000) 2H 2023 2H 2022 % Change FY 2023 FY 2022 % Change Gross Revenue 74,846 73,867 1.3 150,757 147,976 1.9 Net Property Income (NPI) 42,230 41,274 2.3 86,100 84,275 2.2 Adjusted NPI (excludes non-cash straight-line rent, lease incentives and amortisat
Slide 16: Balance Sheet
Balance Sheet As at 31 December 2023 US$’000 Total Assets 1,393,676 Investment Properties 1,326,310 Cash and Cash Equivalents 43,777 Other Assets 23,589 Total Liabilities 670,472 Gross Borrowings 601,920 Other Liabilities 68,552 Unitholders’ Funds 723,204 Units in issue and to be issued (‘000) 1,044
Slide 17: Financial Position
Financial Position As at 31 December 2023 Interest Rate Exposure Total Debt • US$601.9 million of external loans Sensitivity to SOFR(3) • No direct exposure to any US Floating regional bank Debt Every + 50bps in SOFR translates 26.2% Due to - 0.076 US cents in DPU p.a. Available Facilities • US$50.0
Slide 18: Portfolio Performance
Portfolio Performance The Westpark Portfolio Seattle – Redmond, Washington
Slide 19: Quality Portfolio Driven By Tech and Innovation
SEATTLE – BELLEVUE/REDMOND, Washington NASHVILLE, Tennessee Quality Portfolio The Plaza Buildings Bellevue Technology Center Occupancy: 90.7% The Westpark Portfolio Bridge Crossing Occupancy: 100% Driven By Occupancy: 91.5% Occupancy: 95.9% ORLANDO, Florida Tech and DENVER, Colorado Innovation Westm
Slide 20: Steady Income with Visible Organic Growth
Steady Income with Visible Organic Growth 704,191 sf New Renewal Expansion Leased spaces for FY 2023, equivalent to New leasing demand and expansions from: 14.7% of portfolio NLA. 165,012 sf, equivalent to 3.4% of portfolio NLA of space was leased in TAMI(2) 41.9% 4Q 2023. Portfolio WALE of 3.7 year
Slide 21: Resilient Portfolio with Diversified Tenant Composition
Resilient Portfolio with Diversified Tenant Composition KORE’s buildings and business campuses in ~51% of KORE’s portfolio NLA comprises the tech hubs of Seattle – Bellevue/Redmond, high-quality tenants from the growing and Austin and Denver contribute ~67% of NPI(1) defensive sectors of TAMI, medic
Slide 22: Low Tenant Concentration Risk
Low Tenant Concentration Risk Top 10 Tenants Sector Asset Location % of CRI % of NLA Ball Aerospace TAMI Westmoor Center Denver 3.7 4.2 Comdata Inc TAMI Bridge Crossing Nashville 3.7 3.9 Gogo Business Aviation TAMI 105 Edgeview Denver 2.9 2.5 Seattle – KORE has over Lear Cooperation TAMI The Plaza B
Slide 23: Property Portfolio Valuation
Portfolio Valuation 31 December FV gain/(loss) on 31 December 2023 Change Property 2022 Capex % Change Investment Property (US$ ‘million) (US$ ‘million) (US$ ‘million) The Plaza Buildings Seattle, Bellevue CBD 340.0 5.3 (37.6) 307.7 (32.3) (9.5) Bellevue Technology Center Seattle, Eastside Bellevue
Slide 24: Last 12 Months Rent Growth
Last 12 Months Rent Growth 0.7% Key Growth Markets Average 0.5% United States Average 0.7% Gateway Cities Average -0.2% US Average Seattle, Bellevue CBD -1.1% Seattle, Eastside Bellevue -1.0% Seattle, Redmond -1.5% Austin, Northwest -0.5% Denver, Northwest Denver, Broomfield 1.3% 1.9% 0.5% Nashville
Slide 25: Projected 12-Month Rent Outlook
Projected 12-Month Rent Outlook Key Growth Markets Average United States Average -4.0% -3.3% -3.3% Gateway Cities Average -4.8% US Average Seattle, Bellevue CBD -7.2% Seattle, Eastside Bellevue -7.1% Seattle, Redmond -7.1% Austin, Northwest -5.4% Denver, Northwest Denver, Broomfield -4.4% -4.6% -4.0
Slide 26: 3-year market rent growth remained stable despite fluctuating forecasted rent growth
3-year market rent growth remained stable despite fluctuating forecasted rent growth 5.0% 4.0% 3.0% 2.0% Forecasted 12-month Market Rent 1.0% Growth for KORE's Key Growth Markets 0.0% -1.0% Actual Average of KORE's Key Growth -2.0% Markets preceding 12-month Market Rent Growth -3.0% -4.0% Dec-21 Mar
Slide 27: First Choice Submarkets Outlook
First Choice Submarkets Outlook Property Submarket Last 12M Last 12M Under Last 12M Projected Submarket Vacancy Rate Vacancy Rate Deliveries Absorption Construction Rental Growth Rental Growth Property (%) (%) (sf’000) (sf’000) (sf’000) (%) (%) Seattle, Bellevue CBD 8.5 9.7 2100 1400 2,625(1)* (1.1)
Slide 28: Market Outlook
Market Outlook Bellevue Technology Center Amenity Building Patio Seattle – Bellevue, Washington
Slide 29: U.S. Economic Updates
U.S. Economic Updates (2) % % • U.S. real GDP increased by 3.3% (2) Unemployment Rate Labour Force Participation Rate quarter-on-quarter in 4Q 2023(1), with low 20 65 unemployment rate of 3.7%(2). 64 15 63 62.5% • Annual inflation rate was 3.2% in December 10 62 2023(3), slightly up from a five-mont
Slide 30: Investment Headquarters Increasingly Moving South
Investment Headquarters Increasingly Moving South New York City and California in the past 3 years lost firms that managed close to US$1 trillion in assets(1) • California confronted with close to US$32 billion deficit for 2023-24, on pace to have a budget deficit of US$68 billion in Investment head
Slide 31: Trends For Business Relocations
Trends For Business Relocations Headquarter Relocations(1) Top 5 markets that Top 5 markets that Number of Relocations by Reason(2) gained headquarters lost headquarters Business Climate/ Lower Taxes 110 *Austin: 66 San Francisco/ San Jose: 79 Consolidate Operations/ Portfolio Optimization 73 *Dalla
Slide 32: The Rise of The Sun Belt
The Rise of The Sun Belt 2023 U-Haul U.S. Growth Cities(1) Rank City State #1 Palm Bay-Melbourne Florida* • Florida destinations dominated U.S. growth cities list in 2023. #2 Ocala Florida* • Most metros that people are moving #3 Charleston-North Charleston South Carolina into have similarities: #4
Slide 33: Remote Workers Given An Ultimatum
Remote Workers Given An Ultimatum Does leadership feel that having employees together in the office is important to achieving corporate success? (1) • Most organisations have set a policy on 60% attendance and expect employees to 50% 50% 80% work in office 2-4 days a week(2). • More companies shifti
Slide 34: First choice US office S-REIT focused on fast-growing TAMI, medical and healthcare sectors
Strategic presence in some of the fastest growing states in the U.S. First choice US office S-REIT Exposure to the fast-growing TAMI, medical and healthcare sectors provides income resilience. focused on the fast-growing TAMI, medical and Highly diversified portfolio with low tenant concentration ri
Slide 35: Thank You
Thank You For more information, please visit www.koreusreit.com Connect with us on: Lobby space at 1800 West Loop Houston, Texas
Slide 36: Additional Information
Additional Information The Plaza Buildings Seattle – Bellevue, Washington
Slide 37: KORE's Presence in Key Growth Markets
KORE’s Presence in • Low or no taxes • Better cost of living Key Growth Markets • • Employment opportunities Attractive lifestyle and culture SEATTLE Seattle Seattle, Washington The Plaza Buildings Bellevue Technology Center #17 The Westpark Portfolio Austin, Texas Westech 360 #4
Slide 38: 2023 Sustainability Highlights
2023 Sustainability Highlights Execute sound fiscal and asset management strategy to drive growth and long-term value for Unitholders ENVIRONMENTAL STEWARDSHIP RESPONSIBLE BUSINESS Further progress in 2023 to adopt Dedicated Board ESG Committee Taskforce on Climate-related Financial Disclosures
Slide 39: Continued Exodus From America's Gateway Cities
Continued Exodus From America’s Gateway Cities 2021-2022 POPULATION CHANGE AMONG THE TOP 10 • Most of the gateway cities continue to face a tough future. LARGEST METRO AREAS AND WASHINGTON, DC(1) New York continues to lead the country in population Phoenix loss and outmigration(1) with more than 4
Slide 40: Business Migrations To The South
Business Migrations To The South Net migration of businesses across the United States, 2021(1)** • Suburban properties continue * Florida +399 to attract the most capital. North Carolina +148 In 1Q 2023, US$8.1 billion * Texas +103 was placed in suburban * Tennessee +92 assets, compared to New Jer
Slide 41: Blue States Losing Taxpayers and Income
Blue States Losing Taxpayers and Income Net Gain in State Adjusted Gross Income Net Loss in State Adjusted Gross Income Due to Domestic Migration(1) Due to Domestic Migration(1) $ billion $ billion 50 0 40 -10 30 -20 20 10 -30 0 -40 2018-19 2019-20 2020-21 2018-19 2019-20 2020-21 North Carolina Ariz
Slide 42: New York City Record High Levels of Felony Crimes in 2022
New York City Record High Levels of Felony Crimes in 2022 • More than 170,000 felony crimes were reported in 2022 – Rise in felony crimes in New York City the most since 2006, when such statistics became publicly (2021 to 2022)(1) available(1) . +32% 172,852 felonies reported in 2022. +27% +25% +2
Slide 43: Spike In Firms Leaving Chicago Traced Back To 2020
Spike In Firms Leaving Chicago Traced Back To 2020 • Number of people leaving Chicago continues to grow(1). List of companies that moved out of Chicago(2) Over the last five years, more people left than moved in (net loss of at least 249,000 people). Only New York and San Francisco saw bigger po
Slide 44: Deteriorating Situation in Downtown San Francisco
Deteriorating Situation in Downtown San Francisco Union Square Area Store Closures • San Francisco shaken by organised crime. Since 2020(3) • Residents are calling on authorities to address the increasingly Date announced Store dangerous situation. May 2023 Nordstrom • The city has become associated
Slide 45: California's Business Exits
California’s Business Exits California lost a total of 352 headquarters in the period January 1, 2018 through December 31, 2021 • Los Angeles and San Francisco counties have experienced the highest number of relocations, several to growth markets where KORE is present. California Headquarters Losses
Slide 46: Relocations Out of California
Relocations Out of California Top 10 states for California relocations (1) Overbearing Rank State Known Relocations regulations 1 Texas 132 Exorbitant 2 Tennessee 31 taxes 3 Nevada 25 4 Florida 24 High costs 5 Arizona 21 6 Colorado 20 7 North Carolina 13 • High cost of buildings are driving large co
Slide 47: Low State Personal Income Taxes
Low State Personal Income Taxes Individuals are moving to states with zero or low personal income taxes, accelerating population growth State Individual Tax Rates (as at January 1, 2023)(1) 5.33% Key Growth Markets Average 2.95% United States Average 5.33% Gateway Cities Average 9.52% US Average Col
Slide 48: Low State Corporate Income Taxes
Low State Corporate Income Taxes Companies are moving to states with zero or low corporate taxes, accelerating population growth State Corporate Income Tax Rates (as at January 1, 2023)(1) 5.99% Key Growth Markets Average 4.21% United States Average 5.99% Gateway Cities Average 8.69% US Average Colo
Slide 49: 2023 Rankings for Overall State Taxes
2023 Rankings for Overall State Taxes Lower overall tax rates in KORE’s key growth markets vs gateway cities Overall State Rankings(1) Best Key Growth 22 46 Markets *Florida 4 where KORE is present *Texas 13 Gateway *Tennessee 14 Markets Colorado 21 Washington 28 Average of Key Growth Massachusetts
Slide 50: Trust Structure
Sponsors(2) Trust Structure Keppel KPA Unitholders Keppel Capital International Keppel No withholding (1)tax in relation to Trustee Management Management Agreement Section 1446(f) Services Fees Keppel Pacific Oak US REIT Trustee Management Trustee Management (Manager) Tax-efficient structure for
Slide 51: Strong Sponsors: Keppel and KORE Pacific Advisors
Strong Sponsors: Keppel and KORE Pacific Advisors (2) • A global asset manager and operator with strong • Established commercial real estate investment expertise in sustainability-related solutions spanning manager in the US the areas of infrastructure, real estate and connectivity • Operates in mor
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