Prime US REIT plans to raise at least US$25 million via a private placement to fund plans to generate organic growth, with the US office market showing signs of recovery. Having held back distribution to unitholders previously, Prime US REIT plans to normalise distribution at 50% of its distributable income from the current half year, from 10% now.
The new units will be priced between 19.35 US cents, and 20 US cents.
At this pricing range, the placement will be priced at a discount of between 7 and 10% off the volume weighted average price of 21.5 US cents on Sept 24.
According to Prime US REIT, the bulk of the funds to be raised, or US$24.2 million, will be used for capex, tenant incentives, costs to secure new tenants, retain existing tenants, and so on.
The REIT observes that its leasing momentum this year has "improved considerably" over 2024, with more than 400,000 square feet of leases signed in the first six months of 2025.
Its occupancy rate has increased to 80.2% as at June 30 from 78.9% as at March 31. Its weighted average lease expiry has lengthened to 4.7 years as at June 30 compared to 4.3 years as at March 31. It is also enjoying an annual rent escalation of 2% to 3% and expects leasing volume to further improve in 2025 which would result in a higher occupancy rate as compared to that of June 30.
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Prime US REIT says this increase in demand validates the quality and strategic positioning of its assets and correspondingly creates a need for capital to activate the signed leases and support its upcoming pipeline of leases.
"To maintain the high quality of the properties and to secure tenants to build on the organic growth of Prime US REIT, Prime US REIT will need to finance capital expenditure, tenant incentives and leasing costs to secure new tenants, retain existing tenants or to satisfy its obligations to existing tenants," says the REIT.
The REIT says that capital applied to the recently signed leases will enable the leases to commence resulting in stable and recurring property income stream for Prime US REIT’s assets.
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In addition, the REIT is in "advanced" lease negotiations amounting to more than 150,000 square feet of space.
"The private placement positions Prime US REIT with capital readiness to immediately fund the activation of the leases upon signing, avoiding delays in capitalising on this demand and accelerating Prime US REIT’s path to higher cash flows and higher distribution payout," the REIT says.
Upon completion of the placement, the unit base will increase by 9.7%.
In its most recent 1HFY2025, Prime US REIT distributed 0.12 US cents per unit, equivalent to 10% of its distributable income for the half year ended June period.
As the US office market was working through its post-pandemic slump, the REIT was prioritising reinvestment into its portfolio by retaining the distributable income.
With the commencement of some of the new leases and "high degree of visibility" on future contractual cash flows, the REIT thinks it is reasonable to begin normalising distribution, and increase its distributable income payout ratio to at least 50% for the current 2HFY2025 onwards.
As such, ahead of the new units to be issued, Prime US REIT will pay an advanced distribution of 50% of the distributable income for July 1 to Oct 5 of around 0.24 US cents.
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"As the rent payment of a majority of the newly signed leases commences throughout 2026, the manager expects further growth in Prime US REIT’s property cash income.
"This allows the manager to confidently implement a progressively higher distribution policy, with future increases in tandem as more leased space transits from rent-free period to cash-generating status," says Prime US REIT.
This placement is handled by DBS Bank and Maybank Securities.
