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Differing views on Prime US REIT

The Edge Singapore
The Edge Singapore  • 2 min read
Differing views on Prime US REIT
UOB Kay Hian and DBS Research have differing views on the departure of the CEO Prime US REIT's manager, and the outlook. Photo: Prime US REIT
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On March 15, Prime US REIT OXMU -

’s manager announced that the CEO of the manager, Harmeet Singh Bedi, resigned with effect from March 31 but will remain as a senior advisor to REIT Manager.

The Board appointed Rahul Rana as the new CEO.

The Prime US REIT announcement says that Rana is a shareholder of the sponsor and owns 40% of the REIT manager. Rana was previously Managing Director of Corporate and Investment Bank at Deutsche Bank Singapore from 2010 to 2015.

There are differing views on this appointment. UOB Kay Hian appears quite bullish. In a report on March 18, UOB Kay Hian says that Rana “was intimately involved in the formation of Prime”. “His experience and network would prove invaluable in steering Prime through the current downturn in the US office market.”

In addition, Rana is likely to help Prime execute US$100 million of deleveraging this year and refinance US$478 million due in July this year, UOB Kay Hian says.

On the other hand, DBS Research says the resignation of Harmeet Singh Bedi “came as a surprise as this is a crucial period for Prime”. DBS raises the question of “conflicts”. “Although Mr Rahul is from the sponsor, we raised a concern if there could be any conflicts with his appointment,” DBS says.

See also: Citi cuts Seatrium’s adjusted profit forecasts, lowers TP to $1.96 after new investigations into Operation Car Wash

DBS also says all eyes will be on the refinancing of US$600 million of credit facilities. In Prime US REIT's FY2023 results presentation, the manager said the extension of the US$600 million Bank of America facility due in July 2024 is a key management focus.

Prime’s aggregate leverage as at end-FY2023 was 48.4%, with interest coverage ratio of 3.1x. “Currently, gearing at 48.4%, though within regulatory limits, is a little too high for comfort. As such, we believe leverage risks continue to persist and we remain cautious,” DBS says. 

While UOB Kay Hian has a buy recommendation with a price target of 45 US cents, DBS has a fully valued rating with a target price of 7 US cents.

As at 2.35pm, units in Prime US REIT are trading 0.7 US cents down, at 5.3% lower, at 12 US cents.

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