K-Reit's Distributable Income Up 173% To $14.2m In Q2

Source : The Business Times, July 29, 2008

K-REIT Asia said yesterday its second-quarter distributable income rose 173 per cent to $14.2 million, from $5.2 million a year ago.

Major boost: K-Reit's better showing was mainly due to income from its one-third stake in One Raffles Quay, which was absent in Q2 2007

The better showing was mainly due to income from its one-third stake in One Raffles Quay, which was absent in Q2 2007. Distribution per unit rose 1.9 per cent to 2.18 cents, from 2.14 cents in Q2 2007.

Net property income for the three months ended June 30, 2008 rose 26 per cent to $9.2 million, from $7.3 million the year before.

K-Reit also saw better rental income, with higher rents achieved for new and renewed leases, as well as improved occupancy. The average gross rental rate for investment property held directly by K-Reit rose to $5.66 per sq ft in June 2008, from $4.28 psf a year earlier.

For the first half of 2008, distributable income rose 169.8 per cent to $25.6 million, from $9.5 million in 2007. DPU for the first six months of the year rose 0.8 per cent to 3.94 cents, from 3.91 cents in 2007.

The trust also reduced its leverage to 27.7 per cent at June 30, 2008, from 53.9 per cent at Dec 31, 2007. Based on a 60 per cent aggregate leverage limit, this provides K-Reit with an additional debt headroom of $680 million to fund acquisitions and for working capital. Based on K-Reit's existing portfolio, there will be no debt re-financing requirement until 2011, the trust said.

For the longer term, the trust's manager is establishing a medium-term note programme to allow the Reit to swiftly tap the debt capital market.

K-Reit is upbeat about its prospects, even though the global economy is slowing. Some 35.4 per cent of its tenants are from the banking, insurance and financial services sectors. Most of these tenants have lease terms of six years or more, and 'provide very stable income going forward', said Tan Swee Yiow, chief executive of the trust's manager.

Mr Tan pointed out that despite the weaker external environment, Singapore's office rents rose slightly in Q2 2008, reflecting the tight supply of space.

'Office rents will be supported by continued demand for prime office space as Singapore transforms itself into a global city and with spin-off multiplier effects from the two integrated resorts currently under construction,' K-Reit said in a filing to the Singapore Exchange.

K-Reit's stock closed unchanged at $1.40 yesterday. The stock has shed 29.6 per cent since the start of the year.