Published February 14, 2009

No distribution from Saizen Reit for Q2

By UMA SHANKARI

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SAIZEN Real Estate Investment Trust (Saizen Reit) yesterday said that it will not be giving out any distribution for its FY2009 second quarter.

'In view of the current uncertain credit environment and the maturity schedule of Saizen Reit's loans, the board believes it will be prudent for Saizen Reit to conserve cash at this juncture. As a temporary measure, the board therefore does not propose to declare any distribution for Q2 2009,' the Reit told the Singapore Exchange.

Saizen Reit, listed on the Singapore Exchange in November 2007, invests in Japanese regional residential properties. The Reit reported that income attributable to its unitholders for the three months ended Dec 31, 2008 (Q2 2009) came to 214.7 million yen (S$3.5 million). In Q2 the previous year, Saizen Reit recorded income attributable to its unitholders of negative 565.2 million yen on the back of high IPO expenses. Due to an increase in the size of the Reit's property portfolio, gross revenue and net property income rose by 24.5 per cent and 24.7 per cent respectively in Q2 2009 compared to a year ago.

Saizen Reit has a total of 5.28 billion yen of loans due in the first half of 2009. The Reit said that while it has sufficient cash resources on hand to fully repay that amount, it has a further 13.40 billion yen of loans due in November and December 2009. 'Discussions with various potential lenders on their refinancing is ongoing,' it informed. To facilitate and improve the likelihood of refinancing, the Reit's manager in December 2008 announced a proposed rights-cum-warrants issue to strengthen the Reit's capital base. Documentation of the rights-cum-warrants issue is in progress and regulatory clearance is now being obtained, it said. The relevant EGM could be convened in or around end-March or early-April 2009.

On Jan 13, the manager further proposed a scrip-only dividend scheme, subject to unitholders' approval, 'to provide the flexibility for Saizen Reit to pay out part or whole of a dividend by way of new scrip dividend units (in the event that a dividend is announced) and allows cash to be conserved for loan repayments'. Yesterday, the trust said that the payment of dividends in the form of units will be a 'temporary measure to conserve cash during this uncertain period'. Saizen Reit will resume its dividend payment in the form of cash once the loan refinancing issues are resolved, it said.

Looking ahead, the trust said that while deteriorating economic conditions have resulted in increased leasing competition in certain cities, the negative impact on portfolio's occupancies and operations have been relatively subdued as Saizen Reit's portfolio properties cater to the local mass market segment instead of the high-end or expatriate markets.