Gross revenue for the half-year inched up by 0.2% y-o-y to US$74.6 million as cash rental income fell by 3.8% y-o-y mainly due to higher free rent from the timing differences in leases completed for the respective periods. The figure excludes the non-cash amortisation of straight-line rent and lease incentives. The lower cash rental income was offset by the recoveries income, which rose due to the increase in recoverable property expenses in the 1HFY2025. Other operating income also increased from higher carpark income.
Property expenses increased by 4.8% y-o-y to US$33.9 million mainly due to higher y-o-y utilities, repairs and maintenance, property management fees and other property expenses. These were partly offset by lower property taxes.
As a result, net property income (NPI) fell by 3.2% y-o-y to US$40.7 million. Excluding the non-cash adjustments, which is the increase in amortisation of leasing commission as a result of the leasings completed, adjusted NPI fell by 4.6% y-o-y mostly due to lower cash rental income from higher free rents from timing differences in leases completed.
In addition, amortisation of leasing commission, which is a non-cash item and does not affect distribution, increased as a result of the leasings completed. These were partially offset by the reduction in property taxes.
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Finance and other trust expenses rose by 3.4% y-o-y to US$16.1 million, while net income for the period fell by 42.5% y-o-y to US$11.7 million.
As at June 30, KORE’s portfolio committed occupancy fell to 88.2%, down from 89.1% as at end-March this year and 90% as at end-December last year. As at end-June last year, KORE’s portfolio occupancy stood at 90.7%.
Portfolio weighted average lease expiry (WALE) as at end-June stood at 3.7 years by cash rental income (CRI) and 3.5 years by net lettable area (NLA). As at June last year, portfolio WALE stood at 3.8 years by CRI and 3.6 years by NLA.
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During the 1HFY2025, KORE reported a positive rental reversion of 0.5%. Reversions for 2QFY2025 stood at a positive 3.3%. About 155,034 sq ft of office space, equivalent to 3.2% of KORE’s portfolio NLA was leased in the second quarter. In 1HFY2024, KORE reported a negative reversion of 0.3% due to renewals at Bellevue Technology Center, Maitland Promenade I&II and Westmoor Center at the time.
As at June 30, KORE’s aggregate leverage stood at 43.7%, up from the 42.7% reported as at June 30, 2024. The REIT’s interest coverage ratio was 2.5 times as at June 30, 0.4 times lower y-o-y.
According to the REIT, every 50 basis point change in the Secured Overnight Financing Rate (SOFR) will affect around US$0.89 million in distributable income. Excluding uncommitted revolving credit facilities, 75.3% of the REIT’s loans have been hedged through floating-to-fixed interest rate swaps. About 20% of the hedge expires in 3Q2025.
As at June 30, cash and cash equivalents stood at US$46.3 million.
Looking ahead, the REIT says it sees resilience in office-using industries with the impact from large-scale federal lease terminations elevating downsizing having faded in 2Q2025.
“The slowdown in leasing activities in the first half of the year shows signs of being a temporary disruption that will return to a path of recovery in the second half,” reads the release dated July 29. “In addition, executed rents on leases being signed continue to trend upwards. Base rents and effective rents have increased across all deal types over the past year, and concessions rates have stabilised after a significant run-up in the past decade”.
“In the transactions market, groups that had deprioritised the office sector are beginning to consider acquisitions. Institutional groups comprised more than 25% of acquisitions in 2Q, the highest share of the buyer pool since mid-2022,” it adds.
Units in KORE closed 0.5 US cents higher or 2.22% up at 23 US cents on July 28.
