MI-REIT – SGX
MACARTHURCOOK INDUSTRIAL REIT’s maiden quarter DPU in line with forecast
Financial Highlights
– 1QFY2008 distribution per unit (“DPU”) of 1.52 cents for first quarter
– Annualised DPU of 7.58 cents is 3.0% higher than forecast
– Net income of S$3.2 million is 3.9% above forecast
Singapore, 26 July 2007 – The Board of Directors of MacarthurCook Investment Managers (Asia) Limited (“the Manager”), the Manager of MacarthurCook Industrial REIT (“MI-REIT”), are pleased to announce a DPU of 1.52 cents per unit for the period from the listing date of 19 April 2007 to 30 June 2007 (“1QFY2008”). The annualised DPU of 7.58 cents is 3.0% above the 7.41 cents forecast1 for FY2008, as stated in the MI-REIT prospectus dated 12 April 2007.
The total income available for distribution to unitholders of S$3.9 million exceeded the forecast by S$0.11 million or 2.9%, after the inclusion of S$7.12 million in non-tax deductible and non-taxable items2. A key reason for the positive variance in distributable income against forecast was the S$0.12 million higher than forecast net income of S$3.2 million, due to:
- Property expenses of S$0.91 million being 48.6% lower than forecast, offsetting the one time, non-recurring variance in gross revenue of S$0.92 million3, and resulting in net property income (“NPI”) of S$4.70 million. The variation of 14.1% and 48.6% for gross revenue and property expenses respectively, is due to a number of tenants paying their expenses directly during the quarter whilst our payment procedures are being formalised.
- Non-property expenses of S$1.49 being 10.9% lower than forecast, due mainly to a smaller loss on re-measurement of financial derivatives and lower borrowing costs. Borrowing costs were 6.5% lower than forecast due primarily to actual interest rates
being lower than those used in the calculation of forecasts.
Mr Chris Calvert, Chief Executive Officer of the Manager said: “We are pleased that MIREIT’s distributable income is in line with our forecasts and attains our goal of providing unitholders with a stable, growing income stream. Income stability and growth is supported by strong fundamentals, such as our quality industrial assets, quality tenants and long lease maturity profile.”
Disciplined Acquisition Growth Strategy
The Manager will also continue to drive the growth of MI-REIT via its acquisition growth strategy of acquiring yield-accretive and high-quality industrial properties.
Mr Calvert said: “Acquisition growth is an integral driver of our business that will provide both growth and diversification benefits to our portfolio. We have a target to acquire up to S$500 million in property assets over the next 12 months and are working extremely hard to achieve this goal.
Our strategic alliance with United Engineers Development Pte Ltd (“UEL”) and our strong relationships with agents across Asia have created numerous potential investment opportunities. We also expect our regional footprint to grow as existing tenants in Singapore expand their operations throughout the region.”
Mr Calvert added: “Our disciplined investment approach to asset selection and requirement for all acquisitions to undergo a thorough due diligence process ensures that we will acquire only quality income-producing assets that strengthen the portfolio and provide growth and diversification benefits.”
The Manager expects that the majority of acquisitions over the next 12-18 months will be made in Singapore. With its Pan-Asian mandate however, MI-REIT will also look to acquire industrial property in selected countries throughout Asia, such as Japan, Hong Kong and Malaysia.
Increased Financial Flexibility to support growth
MI-REIT recently obtained a corporate Baa3 ‘stable’ rating outlook by Moody’s Investors Service (“Moodys”). The credit rating enables MI-REIT to increase its gearing capability to up to a maximum of 60% from its current aggregate gearing level of 8.6%. With available debt capacity of approximately S$200 million to fund acquisitions, MI-REIT has greater operational flexibility to execute its acquisition growth strategy. The Manager expects to maintain a long term target gearing ratio of between 40%-45% to maintain the appropriate risk profile of MI-REIT. The Manager also successfully negotiated with its bank lending syndicate to increase its facility from S$128.8 million to S$220.8 million.
Outlook for FY2007/08
As a result of the continued strong economic growth underpinned by strong growth in the construction and manufacturing sectors, the Urban Redevelopment Authority recorded the highest quarter to quarter increase for the industrial property market since the up-trend in early 2004. Prices of overall industrial space rose 4.0% and rents increased by 4.5% in the first quarter of the year.
Growth in the knowledge-based industries and the tight office supply situation has also contributed to the climb in rentals of high tech industrial space, which are expected to rise to as much as 10% for 2007. The demand for industrial space in the countries in which MIREIT may invest is also expected to expand on the back of firm GDP growth.
Given the positive outlook and barring any unforeseen circumstances, the Manager expects to deliver an annualised distribution per unit of 7.58 cents for the current financial year that is in line with forecasts.
1 No comparisons against a corresponding period in the previous year can be made as no pro forma financials are available. SGX-ST had granted MI-REIT a waiver from the requirement to prepare historical pro forma statements of total return, cash flow statements and balance sheets for the purpose of its initial public offering.
2 These include the net change in fair value of investment properties and other non-tax deductible and nontaxable items which will not affect the DPU as MI-REIT’s distributions are based on taxable income.
3 This variance was mainly due to monies being held back for a period from settlement on one of the properties, resulting in subsequent reduction in rent. Pro-rated monies were held back whilst the vendor awaited receipt of a Certificate of Statutory Completion on construction of a new building.
Source : SGX