Prime poised to be third US-focused REIT to list on SGX Mainboard in 2019

101 South Henley, Missouri, St. Louis, USA, one of the properties featured in the IPO portfolio (Source: KBS)

Prime US Reit (Prime), a US-focused REIT, is set to be the third such entity to be listed on the Singapore Stock Exchange’s Mainboard after the offerings by ARA Hospitality Trust, and Eagle Hospitality Trust in the first half of 2019.

ARA US Hospitality Trust raised $498 million in gross proceeds on the SGX while Eagle Hospitality Trust had proposed to raise $565.8 million but less than half of the 580.60 million units offered were fully subscribed.

In SGX’ third such listing, Prime US REIT filed its preliminary prospectus on Friday with a proposed offering of 335.20 million units priced at $0.88 apiece. The timing of the offering has not been finalised.

Based on the offering size, Prime is expected to raise $294.98 million in gross proceeds from the initial public offering (IPO).

KBS REIT Properties III, an indirect wholly-owned subsidiary of KBS REIT III, has entered into an agreement with Prime to subscribe 228.41 million units.

The initial portfolio of Prime consists of 11 office properties located across the US, with an appraised value of $1.22 billion and an aggregate net lettable area (NLA) of 3.4 million square feet (sq ft). Prime will be investing in office properties located in the US.

All the 11 properties in the IPO portfolio are Class A office buildings that come with 100 per cent freehold land tenures. As of January 01, 2019, the existing occupancy of the IPO portfolio stands at 96.7 per cent and committed occupancy of 97.3 per cent.

Most of the cash rental income came from key cities including Atlanta, Georgia, Washington D.C., and Salt Lake City, Utah. It also has assets in San Francisco Bay area, Philadelphia, San Antonio, Dallas, St. Louis, and Denver.

Its top three tenants include Charter Communications Inc, Goldman Sachs Inc., and Sodexo Operations. The other tenants include Wells Fargo Bank, Holland and Hart.

The IPO portfolio has a long weighted average lease expiration (WALE) of 5.5 years. Lease terms are generally signed for five to 10 years with anchor tenants having agreements for longer than 10 years.

The forecasted distribution per unit (DPU) yield is expected to increase from 7.4 per cent for the financial year ending December 31, 2019 (FY 2019) to 7.6 per cent in FY 2020.

The cornerstone investors will, collectively, subscribe to 360.25 million units. The investors include AT Investments Limited, Keppel Capital Investment Holdings Pte Ltd, Times Properties Private Limited, Linda Bren 2017 Trust, The Schreiber Trust, and Hiap Hoe Investment Pte Ltd, among others.

The manager for the Prime offering is KBS US Prime Property Management Pte Ltd, a joint company of KBS Asia Partners Pte Ltd (KAP), Keppel Capital Two Pte Ltd (KC Two), and Experion Holdings Pte Ltd (Experion).

DBS Bank Ltd (DBS) is the sole financial adviser and issue manager for the offering while Merrill Lynch (Singapore) Pte Ltd (MLS) and DBS are the joint global co-ordinators.