Prime US Reit priced unchanged from initial guidance at US$0.88 per unit

PRIME US Reit was priced unchanged from its initial guidance at US$0.88 per unit, representing a distribution yield of 7.4 per cent in 2019, and 7.6 per cent in 2020.

Its manager on Monday registered the final prospectus with the Monetary Authority of Singapore for the proposed offering and listing of units in the real estate investment trust (Reit) on the main board of the Singapore Exchange. According to the prospectus, the manager is jointly owned by its sponsor KBS Asia Partners (60 per cent); Keppel Capital Two (30 per cent), a wholly owned subsidiary of Keppel Capital Management; Experion Holdings (10 per cent stake), a wholly owned subsidiary of AT Holdings. 

Times Properties, a wholly owned unit of Singapore Press Holdings (SPH) has also entered into a call option agreement to acquire from KAP a 20 per cent stake in the manager after the listing date, subject to approvals. SPH owns The Business Times.

Prime US Reit has an initial portfolio comprising 11 Class A and freehold office properties with a total appraised value of US$1.2 billion. 

The assets are located in nine key office markets across the US: San Francisco Bay Area (Oakland); Salt Lake City; Denver; St Louis; Dallas; San Antonio; Philadelphia; Washington DC (suburban Maryland and Virginia); and Atlanta. 

They have a total net lettable area of 3.4 million sq ft, and a portfolio occupancy rate of 96.7 per cent.

Its sponsor, KBS Asia Partners, is linked to KBS, one of the largest US commercial real estate managers with US$11.6 billion of assets under management as at end-December 2018. 

Prime US Reit's yield growth is driven by 98.3 per cent of contracted leases having built-in escalation clauses on a fixed rate basis, ranging annually at 1-3 per cent. 

The rentals still have room to grow, as the current weighted average rental rates on expiring leases are generally below the market rental rates.

Unitholders can choose to receive their distributions in Singapore dollars or US dollars. 

The offering of 335.2 million units consists of an international placement of 318.4 million units to investors outside the US, and an offering of at least about 16.8 million units to the public in Singapore.

Concurrently, Prime US Reit has secured commitments of US$317 million from nine cornerstone investors including AT Investments; Keppel Capital; Times Properties; and Hiap Hoe Investment, among others.

The cornerstone investors have subscribed for an aggregate of 360.3 million units, representing 39 per cent of the total units in issue immediately after completion of the offering.

KBS Real Estate Investment Trust III, which is selling the initial portfolio to Prime US Reit, has also signed a subscription agreement to subscribe for 228.4 million units, which will result in 24.7 per cent stake in Prime US Reit. 

The offering cum issuance is expected to raise gross proceeds of US$813 million altogether.

The Singapore public offer will open at 9pm on July 8, 2019 and closes at noon on July 15, 2019. Trading of the units is expected to start at 2pm on July 19.

DBS Bank is the sole financial adviser and issue manager for the offering. 

The joint bookrunners and underwriters are DBS, Merrill Lynch (Singapore), China International Capital Corporation, Credit Suisse (Singapore), Maybank Kim Eng Securities and Oversea-Chinese Banking Corporation.