Published January 20, 2009

K-Reit Asia's Q4 distributable income soars to $17.4m

Net property income up 68% to $11.8m; DPU down due to rights issue last year

By EMILYN YAP

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KEPPEL Land's listed office trust, K-Reit Asia, yesterday reported a distributable income to unitholders of $17.4 million for the fourth quarter ended Dec 31, 2008 - a 152 per cent jump from a year ago.

Mr Tan: K-Reit will adopt a 'cautious and prudent' approach to asset acquisitions across Asia

This followed a 68 per cent year-on-year increase in net property income to $11.8 million, due to lower property expenses and higher rental income.

Investment properties held directly by K-Reit achieved an average gross rental rate of $6.08 psf in December last year, compared with $4.65 psf in December 2007.

Despite the higher earnings, K-Reit's distribution per unit (DPU) in Q4 2008 was 2.67 cents, lower than the 2.8 cents in the same period last year.

This was due to K-Reit's rights issue in May last year, which added more than 390 million new units to the market.

On an annualised basis, K-Reit's DPU in Q4 was 10.62 cents, generating a distribution yield of 15.2 per cent based on its unit closing price of 70 cents as at Dec 31, 2008. K-Reit last closed unchanged at 67 cents yesterday.

For FY2008, K-Reit reaped a net property income of $39.7 million, 40 per cent higher than in FY2007. This led to a 167 per cent surge in distributable income to $58.1 million.

DPU for FY2008 was 8.91 cents, marginally higher than the 8.82 cents a year ago. This translates to a distribution yield of 12.73 per cent.

For the period July 1, 2008 to Dec 31, 2008, K-Reit will pay out 5.07 cents per unit on Feb 23 this year. This will bring the total DPU payout to 13.04 cents for the period Jan 1, 2008 to Dec 31, 2008.

Trust manager K-Reit Asia Management sought to reassure investors about K-Reit's financial strength yesterday. Having raised proceeds of $551.7 million from the rights issue in May 2008, K-Reit has a low aggregate leverage level of 27.6 per cent as at end-December 2008 and has no debt refinancing needs until 2011, said CEO of the trust manager, Tan Swee Yiow.

K-Reit also established a $1 billion multi-currency medium term note programme yesterday as an additional source of funding.

Mr Tan added that it would take a more than 54 per cent drop in K-Reit's portfolio value for the leverage level to exceed 60 per cent. Under current rules, a Singapore-listed Reit's aggregate leverage should not exceed 60 per cent of its deposited property if it obtains a credit rating and publicises it.

And while the year ahead could be challenging, K-Reit is still keeping an eye out for selective asset acquisitions across Asia. The Reit will adopt a 'cautious and prudent' approach to this, said Mr Tan.