KORE to post a 34.3% distribution yield following the end of its 2-year distribution halt

KORE’s aggregate leverage as of December 2023 is 43.2%.

Keppel Pacific Oak US REIT (KORE) is expected to provide a distribution yield of 34.3% for 2026, at the end of its two-year self-imposed halt of all distributions, according to UOB Kay Hian.

KORE had earlier announced the suspension of distkributions for 2H23, 2024, and 2025 to recapitalise its balance sheet. 

This move reportedly left investors puzzled as KORE’s aggregate leverage of 43.2% as of 23 December 2023 sits within the Monetary of Singapore’s (MAS) regulatory limit of 50%. 

To maintain leverage and interest coverage within MAS’ and banks’ limits, KORE has been evaluating options including divesting more properties and considering equity fundraising.

KORE estimates capex at $79.8 (US$60m) and $66.5m (US$50m) for 2024 and 2025 respectively to retain and attract new tenants. 

UOB Kay Hian said that if KORE depends on bank loans to fund its capex, it could eventually end up violating regulatory limits or its debt covenants.

KORE's total aggregate leverage is at 43.2%, which is very close to the banks' lending threshold of 45%.

If the leverage exceeds the 45% limit, it may jeopardize the refinancing of its $99m (US$75m) bank loan due in 4Q2024.