Keppel Pacific Oak US REIT (KORE) FY2025 Financial Results Analysis

Keppel Pacific Oak US REIT (KORE) has released its FY2025 financial results, offering insights into its operational performance, capital management, and portfolio strategy amid a recovering US office market. Below, we provide an in-depth analysis tailored for investors and market observers.

Key Financial Metrics and Performance Table

Key Points:

• Gross revenue grew by 2.5% YoY for the full year, with a stronger 4.9% growth in 2H 2025 compared to 2H 2024.
• Net Property Income (NPI) increased 3.0% YoY, while Adjusted NPI was flat (+0.3% YoY) due to higher operating income and recoveries, partially offset by lower cash rental income.
• Income available for distribution declined 9.6% YoY, mainly due to higher finance costs and trust expenses.
• Distribution to Unitholders resumed in 2H 2025 at 0.25 US cents per unit following a suspension period.

Balance Sheet and Capital Management

• Total Assets (as at 31 Dec 2025): \$1,389.7m (up 0.1% YoY)
• Net Asset Value (NAV) per Unit: \$0.68 (down from \$0.69 in 2024)
• Aggregate Leverage: 44.1% (remains within regulatory limits)
• Interest Coverage Ratio: 2.5x
• Average Cost of Debt: 4.53% p.a. (excluding upfront debt costs); 4.66% p.a. (all-in)
• Debt Profile: 64.4% fixed-rate debt, 35.6% floating; no secured loans
• All 2025 and 2026 term loan maturities have been addressed through new facilities

Historical Performance Trends

• Occupancy has consistently outperformed the US average and gateway cities, standing at 87.2% at the end of 2025, though down from 90% in 2024.
• Leasing volume moderated to 622,029 sf in 2025, from 938,655 sf in 2024, reflecting both market normalization and asset repositioning.
• Portfolio value remained stable at \$1.33bn despite a net fair value loss of \$40.5m, mitigated by capex and select property revaluations.
• KORE’s distribution per unit was suspended for two years (2H 2023 to 1H 2025) under the Recapitalisation Plan and has now resumed at a modest level, with management intending to gradually increase payouts as performance improves.

Exceptional Earnings, Expenses & Asset Valuations

• Adjusted NPI was slightly up YoY, but higher finance and trust expenses (notably from increased finance costs, tax, and professional fees) weighed on distributable income.
• The portfolio saw both positive and negative revaluations:
  • Significant positive revaluations: Bellaire Park (+9.1%), One Twenty Five (+9.0%), Westech 360 (+8.7%).
  • Significant negative revaluations: 105 Edgeview (-8.9%), Westmoor Center (-6.4%), The Plaza Buildings (-4.1%).

Divestments, Fundraising & Corporate Actions

• KORE completed a Recapitalisation Plan which included temporary suspension of distributions and refinancing via new term loan facilities totalling \$152.5m, addressing near-term debt maturities.
• No mention of asset divestments, IPOs, or share buybacks in the period.

Macroeconomic and Market Commentary

• The US office market showed clear signs of recovery in 2025, with leasing and net absorption at post-pandemic highs and capital market liquidity improving for seven consecutive quarters.
• Supply remains tight in KORE’s target submarkets, with new construction at a 30-year low.
• Structural shifts—such as the “flight to quality,” hybrid work, and preference for amenity-rich, lifestyle-oriented locations—favor KORE’s portfolio positioning.
• Portfolio is concentrated in “rising phase” US markets (notably Sun Belt and tech-driven cities), well-positioned to capture the upturn.

Distribution and Dividend Policy

• Distribution resumed for the period 1 July to 31 December 2025 at 0.25 US cents per unit, with management intending to progressively increase payouts in line with long-term performance.

Asset Enhancement Initiatives

• Several asset enhancement initiatives (AEIs) were completed or initiated in 2025, including lobby upgrades, spec suites, expanded amenities, and outdoor space enhancements, aimed at increasing leasing appeal and future-proofing the portfolio.

Chairman’s Statement

No direct Chairman’s Statement was provided in the report. However, management’s tone throughout the release is cautiously optimistic, emphasizing the successful recapitalisation, early resumption of distributions, robust capital management, and KORE’s strategic positioning in high-demand lifestyle office markets.

Conclusion and Investor Recommendations

Overall Assessment: KORE’s FY2025 results show operational resilience and prudent capital management amid a challenging but improving US office market. While distributable income is still recovering and portfolio valuations have seen both uplift and impairment, the REIT’s proactive refinancing, focus on high-growth markets, and amenity-led asset enhancements position it well for a cyclical upturn. The cautious resumption of distributions and management’s stated intention to increase payouts as performance improves signal a turning point.

• If you currently hold KORE: Consider maintaining your position. The REIT has addressed near-term refinancing risk, resumed distributions, and is strategically positioned to benefit from a US office market recovery. However, monitor progress on occupancy stabilization, rental reversion, and the gradual increase in payouts.
• If you do not currently hold KORE: KORE may be worth adding to a watchlist or considering for exposure, especially as a recovery play in US office REITs focused on tech and lifestyle markets. However, investors should be mindful of the still-low distribution and ongoing risks in the US office sector, including potential further valuation adjustments and tenant churn.

Disclaimer: This analysis is based strictly on information provided in the FY2025 KORE financial report. It does not constitute investment advice. All investments carry risk, including possible loss of principal. Please conduct further research or consult your financial advisor before making investment decisions.

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