KORE US REIT (CMOU) H1 2024 earnings summary

Executive summary

• Recapitalization plan implemented to address elevated leverage and refinancing needs, with distributions suspended since 2H 2023 and expected to remain so through 2H 2025, potentially resuming earlier if market conditions improve.

• Achieved strong leasing momentum in 1H 2024, leasing 534,931 sq ft (11.1% of portfolio NLA), with committed occupancy at 90.7% as of June 30, 2024.

• Portfolio consists of 13 office properties in key US growth markets, valued at approximately US$1.36 billion as of June 30, 2024.

• Focus remains on TAMI, medical, and healthcare tenants, which make up 51% of the portfolio.

Financial highlights

• Gross revenue for 1H 2024 was US$74.4 million, down 2.0% year-over-year; net property income (NPI) was US$42.0 million, down 4.2% year-over-year; adjusted NPI declined 1.6%.

• Income available for distribution fell 8.8% year-over-year to US$23.8 million, mainly due to higher financing costs.

• Net income for the period was US$20.4 million, a 15.4% decrease from 1H 2023.

• No distribution declared for 1H 2024 in line with the recapitalization plan.

• NAV per unit increased to US$0.71 from US$0.69 at end-2023, supported by withholding distributions.

Outlook and guidance

• Distributions are suspended through 2H 2025, with potential for earlier resumption if market conditions improve; focus remains on refinancing loans due in 2024 and 2025 and maintaining leverage within regulatory limits.

• Year-end 2024 occupancy guidance at 86%-88%, with similar expectations for 2025, subject to capital availability and leasing momentum.

• Rental reversion for 1H 2024 was -0.3%, but Q2 2024 saw a positive 1.2% reversion; built-in average annual rental escalation of 2.6% supports organic growth.

• Projected 12-month rent growth in key markets is negative, averaging -0.9%.

• U.S. economic indicators remain positive, with job growth and declining inflation.