Looking for a trusted Stock Remisier? Augustine works closely with a small group of clients - providing regular market updates, Bazi & astrology wealth insights, and clear guidance to invest with confidence.
Keppel Pacific Oak Reit (KORE) benefits from the dispersion of tech jobs to rising star cities, such as Atlanta, Dallas, Denver and Orlando, which account for 34.4% of its AUM.
Management guided positive rent reversion at mid-single-digit in 2022 driven by Seattle and Sacramento. The redevelopment of multi-family units atop the car park at The Plaza Buildings will be finalised over the next two quarters.
KORE provides attractive distribution yield of 9.0% for 2022. Maintain BUY. Target price: US$1.07.
Keppel Pacific Oak Reit benefits from in-migration of companies and population to rising star cities
Tech jobs have migrated to rising star cities outside the Silicon Valley. These regional tech hubs are growing at a faster pace. Major tech companies Hewlett Packard, Oracle, Palantir and Tesla have moved their headquarters from California to Texas.
Keppel Pacific Oak US REIT (KORE) has presence in four rising star cities Atlanta, Dallas, Denver and Orlando, which accounted for 34.4% of its AUM.
Decentralisation and dispersion of tech jobs
According to a study by Brookings Institute, technology employment at nine rising star cities, Atlanta, Dallas, Denver, Miami, Orlando, San Diego, Kansas City, St Louis and Salt Lake City, grew at CAGR of 5% between 2015 to 2019.
These rising star cities have increased their share of postings for tech jobs from 14.5% in 2016 to 16.0% in 2021. During the same period, share of traditional hubs, such as Boston, Bay Area, New York and Los Angeles, contracted from 40% to 31%.
Rising star cities have increased vibrancy and gained share in the number of technology start-ups at the expense of San Francisco and San Jose.
Organic growth from positive rent reversion and rental escalation
Management guided positive rent reversion at mid-single-digit in 2022, driven by Seattle (Bellevue/Redmond) and Sacramento. In-place passing rents are 8.9% below asking rents on a portfolio-wide basis, which underpins organic growth from sustained positive rent reversion.
In addition, KORE also benefits from built-in average annual rental escalation of 2.4%.
Keppel Pacific Oak Reit locking in higher rents at Bellevue CBD and Redmond
According to CBRE, leasing on the Eastside continues to be dominated by tech companies, which accounted for 40% of new and renewed leases in 1Q22. Vacancy at Bellevue CBD sub-market is low at 4.5%.
86% of the 3.8m sf of office space under construction is pre-committed to tenants, such as Amazon (e-commerce) and Bungie (video game). Vacancy at Redmond sub-market is tight at 3.2% as there is no new construction.
KORE is expected to achieve positive rent reversion for The Plaza Buildings at Bellevue CBD and The Westpark Portfolio at Redmond, which have 6.3% and 13.2% of NLA up for renewal in 2022.
Sacramento helps to retain tech companies within California
Sacramento continues to attract tech companies relocating from the Bay Area. It is a stone’s throw away from Silicon Valley and in close proximity to UC Berkeley and UC Davis.
Vacancy at Folsom sub-market is low at 6.2%. KORE is expected to achieve positive rent reversion for Iron Point at Folsom, which have 35.2% of NLA up for renewal in 2022.
Employees returning to their offices
Sunbelts markets have outperformed gateway cities in workplace occupancy. Texas is leading with Austin, Houston and Dallas registering
workplace occupancy of 62.4%, 56.3% and 51.8% respectively.
VALUATION/RECOMMENDATION
Keppel Pacific Oak Reit growth comes from in-migration and magnet cities. Our target price of US$1.07 is based on DDM (cost of equity: 7.0%, terminal growth: 1.5%).
KORE is unique due to its focus on suburban offices in magnet cities. KORE provides a distribution yield of 9.0% and yield spread of 7.3% for 2022. It trades at P/NAV of 0.86x.
KORE offers brighter growth prospects due to growth from in-migration at Super Sun Belt and 18-hour cities and technology tenants.
Keppel_Pacific_Oak_US_Reit price chart
You can find the full report here and the company website here
Be A Valued Client of Augustine in Lim&Tan Securities
Receive Augustine’s regular stock updates via Telegram plus full access to his private client hub with exclusive research, astrology and Bazi insights.
(Exclusive Readings for Clients Only)
BaZi investment loss prediction is an ancient yet highly practical approach to understanding financial timing using Chinese astrology. In BaZi (八字), also known as the Four Pillars of Destiny, your birth chart reveals how the Five Elements (Wood, Fire, Earth, Metal, Water) interact to shape your personality, opportunities, and wealth potential. Among these, the Wealth
When market sentiment turns upbeat and investors begin looking beyond the large-cap names for fresh drivers of growth, Singapore’s small cap stocks could quietly offer outsized upside. With interest rates stabilising, infrastructure spending picking up, and niche sectors recovering, several overlooked companies may shine in the next market rally. Here are four SGX-listed small-caps worth
You don’t need to be the next Warren Buffett to succeed in investing. But you do need to find your own investing style – so that you compound your wealth that fits your personality, lifestyle, and long-term goals. The truth is, there’s no “one size fits all” approach. Some investors love diving into spreadsheets. Others
Investing in the stock markets can be tricky and you will probably lose hell a lot of money even before making any if you lack the right guidance. Thus, as a beginner, it’s important to avoid making the common mistakes that others have made. In fact, these mistakes offer paramount lessons for you to cut
