Prime US REIT Delivers Robust FY2025 Performance with Strong Portfolio Fundamentals, Leasing Momentum, and Improved Distributions

Key Highlights from FY2025 Investor Report

• Portfolio Valuation: Portfolio value increased by 3.5% year-on-year to US\$1.4 billion, driven by broad-based gains across most assets, mainly due to improved contracted cash flows.
• Occupancy & Leasing: Portfolio occupancy improved significantly to 82.7% from 78.9% at its low point. Weighted average lease expiry (WALE) was extended to 5.6 years (from 4.4 years). A total of 680,000 sq ft was leased during FY2025, representing 16% of net lettable area, with a positive rental reversion of +5.6%.
• Financial Performance & Distributions: FY2025 Distribution per Unit (DPU) rose to 0.61 US cents (from 0.29 US cents in FY2024). Distribution payout ratio normalized to 65%, up from 10% in 2024. Net Property Income and Distributable Income both showed recovery, supporting higher payout levels.
• Capital Management: Aggregate leverage was reduced to 45.0%, with US\$144 million debt headroom and US\$65 million of undrawn committed facilities. A US\$25 million equity fund raise in October 2025 further strengthened the balance sheet.
• Market and Strategic Positioning: The REIT is focused on non-gateway, high-growth U.S. markets with no single market contributing more than 12.1% of total cash rental income. The portfolio comprises 13 Class A, freehold U.S. office properties across 12 submarkets.

Detailed Portfolio Updates and Value Drivers

• Major Leasing Transactions:
  • Park Tower (Sacramento): Signed a 121,000 sq ft lease with Sacramento County District Attorney’s Office in December 2025, raising occupancy from 65.1% to 89.9%.
  • 222 Main (Salt Lake City): Signed a 61,000 sq ft lease with the U.S. Attorney Office – District of Utah, lifting occupancy close to 90% and increasing valuation by 9.1% year-on-year.
  • Waterfront At Washingtonian (Suburban Maryland, DC): Secured a 120,000 sq ft lease with X-energy, pushing occupancy above 87.3% and driving a 29.2% uplift in valuation.
  • Promenade I & II (San Antonio): 10,000 sq ft lease with UBS, extending WALE to 5 years and supporting a 13.8% increase in asset value.
  • Village Center Station I (Denver): In final stages of a 39,000 sq ft lease and expansion negotiations, expected to bring occupancy above 80%.
• Underperforming Assets:
  • 171 17th Street (Atlanta): Valuation declined by 6% due to higher cap and discount rates linked to a distressed comparable sale in the market.
  • Tower I at Emeryville (San Francisco Bay Area): Valuation fell 48.7% as higher cap and discount rates were applied, reflecting subdued leasing in the submarket. Management expects recovery as leasing momentum in core San Francisco returns.
• Tenant & Sector Diversification: The top 10 tenants account for 42.4% of annualized cash rental income, with significant exposure to finance, communications, healthcare, government, and legal sectors.
• Lease Expiry Profile: WALE of 5.6 years as at 31 December 2025, with 2-3% annual rent escalations built into most leases. Committed future cash flows provide strong visibility, with 446,000 sq ft of new leases commencing from 2026 onwards.

Market Trends & Outlook

• U.S. Office Market Recovery: The market is showing clear signs of entering an expansionary cycle. Leasing volume increased by 5.2% year-on-year in 2025, with large-scale transactions up 15%. Net absorption has turned positive for two consecutive quarters. The flight to quality continues, with highly-amenitized Class A buildings outperforming the broader market.
• Investment Market: Office transaction activity grew 35% year-on-year in 2025, with sustained improvement in capital markets liquidity and investment volume rising for seven straight quarters.
• Return-to-Office Trends: At the end of 2025, 97% of Fortune 100 company employees are subject to hybrid or full-time office requirements, driving increased demand for quality office space.
• Macro Environment: U.S. GDP grew 0.7% in 4Q2025. Unemployment remained low at 4.4% (Feb 2026), CPI inflation at 2.4%, and the Federal Reserve maintained rates at 3.50–3.75%.

Strategic Initiatives and Management Actions

• Active Asset Enhancement: Notable capex and improvements, including a re-amenitization of Village Center Station I (new lobby, lounge, conference rooms, and workspace) to attract higher-quality tenants and support occupancy growth.
• Disciplined Capital Deployment: The REIT maintains capital discipline, focusing on property income growth, tenant retention, and prudent leverage.
• Liquidity and Financial Strength: The REIT is trading at a steep 63% discount to NAV (unit price US\$0.197 vs NAV per unit US\$0.53). Management highlights ample liquidity to pursue tenant prospects and support growth.

Shareholder-Relevant and Potentially Price-Sensitive Information

• Distribution Recovery: The normalization of the distribution payout ratio (from 10% in 2024 to 65% in 2025) and the rebound in DPU are significant positive developments for investors.
• Portfolio Value Up & Leasing Momentum: The broad-based increase in portfolio value and the signing of several large anchor leases may signal further upside in NAV and distributions if market conditions continue to improve.
• Discount to NAV: The unit price continues to trade at a significant discount to NAV, potentially creating a value opportunity if the positive leasing and distribution trends persist.
• Risks: Some assets (notably Tower I at Emeryville and 171 17th Street) have seen valuation declines, and while management expects recovery, these assets remain under watch.
• Capital Structure: The REIT’s leverage remains at 45%, with ample headroom for further growth or defensive actions if market volatility returns.

Conclusion

Prime US REIT’s FY2025 update demonstrates a clear turnaround in leasing momentum, occupancy, and portfolio value, supporting a normalization of distributions and positioning the REIT for further recovery in line with U.S. office market trends. The REIT’s strong liquidity, improved tenant mix, and strategic focus on high-quality, non-gateway markets provide resilience amid a cautiously optimistic market outlook. Investors should note the substantial discount to NAV and the potential for share price re-rating if positive trends continue, but also remain mindful of risks associated with select assets and market uncertainties.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should conduct their own due diligence and consult with professional advisers before making investment decisions. Past performance is not indicative of future results. The value of units in Prime US REIT and the income derived from them may fall as well as rise. This article is based on information provided as at 31 December 2025 and may be subject to change without notice.

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