However, taking into account "elevated macroeconomic uncertainties", he has lowered his valuation multiple from 0.4x FY2025 P/BV to 0.3x, leading to a reduced target price of 18 US cents, down from 23 US cents.
The REIT has no debt refinancing is due until 3QFY2026 and around 66% of its debt is hedged.
The REIT expects two big lease signings of more than 100,000 sq ft each by 3QFY2025, which should bring portfolio occupancy rate to mid-80%, from 78.9% as of 1QFY2025.
The first is at Park Tower, where a government tenant is consolidating its operations at the building, which would take the asset’s occupancy rate to mid-80%.
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Next, at Waterfront At Washingtonian, the REIT is in advanced stages of signing a long lease with an energy sector tenant.
"The leases, if signed, will contribute positively from FY2026 onwards and are likely to result in a significant asset valuation uplift, considering the cash flow visibility," says Natarajan.
In its 1QFY2025, the REIT's distributable income declined 24% y-o-y on the back of higher interest costs and occupancy declines.
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For the full year, the REIT expects to incur capex of US$45-50 million, driven mainly by tenant incentive packages for large leases, but this is expected to decline from FY2026.
As such, coupled with rent commencements kicking in, Prime US REIT's distributable income will ramp up in FY2026, says Natarajan.
He expects the REIT's payout ratio to be maintained at 10%, 50% and 60% over FY2025 to FY2027.
The REIT now offers a FY2026 yield of 11% based on a 50% payout ratio.
