The Positive
+ Extension of debt maturities. Prime is in the process of extending its 4-year term loan and RCF under its main credit facility (c.34% of total loans) by one year to July 2024 for an extension fee of 10bps. Expected completion is June 2023. This gives Prime some respite amid the credit crunch situation in the US.
The Negatives
– Portfolio occupancy dipped to 88.6% from 89.1% in 4Q22. The biggest contributors to the decline were Tower 1 at Emeryville (-7ppts QoQ to 69.1%) and Sorento Towers (-2.8ppts QoQ to 94.4%).
– Slowdown in leasing volumes. Prime signed 64.4k sq ft of leases in 1Q23 (-62% YoY and -55% QoQ). However, leasing activity picked up in April 23 with c.38k sq ft of leases executed. Portfolio rental reversions for the quarter were -2.6%, impacted by two renewals with minimal upfront tenant improvements Capex, but with high positive net effective rent reversions. Excluding the two abovementioned renewals, 1Q23 rental reversions would have been +3.2%.
– Gearing increased 1.6ppts QoQ to 43.7%, due to the increase in borrowings to fund 2H22 distribution at the end of March 2023. 79% of debt is either on a fixed rate or hedged (82% in 4Q22), with 62% of debt hedged or fixed through to 2026 or beyond. After the extension of debt, Prime has no refinancing obligations till July 2024. Prime’s effective interest cost for the quarter increased 30bps QoQ to 3.7%, and its interest coverage ratio is at 3.8x.
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Darren has over three years of experience on the buy-side as a fund manager. During his time as fund manager, he has managed multiple funds and mandates including dividend income, growth, customised, Singapore focused and regionally focused funds. He graduated from the University of London with a First-Class Honours degree in Banking and Finance.