KORE US REIT (CMOU) H1 2024 earnings summary

Executive summary

• Recapitalisation plan implemented to address elevated leverage and refinancing needs, with distributions suspended since 2H 2023 and expected to remain so through at least 2H 2025, pending market improvements.

• Strong leasing momentum in 1H 2024, with 534,931 sq ft leased (11.1% of portfolio NLA), raising committed occupancy to 90.7% as of 30 June 2024.

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

• Focus remains on refinancing upcoming maturities, maximizing NPI and occupancy, and supporting portfolio resilience through TAMI, medical, and healthcare tenants.

• No asset sales planned for 2024-2025; early refinancing/extensions of US$170 million in loans completed in July 2024.

Financial highlights

• Gross revenue for 1H 2024 was US$74.4 million, down 2.0% year-over-year; NPI was US$42.0 million, down 4.2%; adjusted NPI fell 1.6%.

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

• Net income for 1H 2024 was US$20.4 million, a 15.4% decrease from 1H 2023.

• No distribution declared for 1H 2024 due to the recapitalisation plan.

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

Outlook and guidance

• Distributions are suspended through at least 2H 2025, with potential for earlier resumption if market conditions improve; focus remains on refinancing and capital management.

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

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

• Cap rates expected to remain stable if U.S. Fed cuts rates as anticipated.

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