MACARTHURCOOK Industrial Reit (MI-Reit) yesterday posted net property income of $9.3 million for its second quarter ended Sept 30, 2008 – up 58 per cent from a year earlier. The improvement was largely due to rental income from nine properties MI-Reit acquired in the past financial year.

Distribution to unitholders rose 27 per cent quarter on quarter to $6.1 million in Q2. This translates to a 26 per cent increase in distribution per unit (DPU) to 2.35 cents.

Taking DPU in Q1 and Q2 into account, MI-Reit’s annualised yield is 19.2 per cent, based on its closing unit price of 49 cents on Sept 30.

‘Given the rising worries over a global recession and fears in credit markets that have intensified, our immediate priority is to actively manage MI-Reit’s assets to maintain our high tenant retention and occupancy levels,’ said Craig Dunstan, CEO and executive director of MI-Reit manager MacarthurCook Investment Managers (Asia).

All 21 properties in MI-Reit’s portfolio were fully leased at Sept 30. Only 2.7 per cent of its rental income will be subject to lease expiry in FY2009 and FY2010.

Tenant diversification improved. At Sept 30, no single tenant accounted for more than 20.3 per cent of rental income.

Deteriorating market conditions and refinancing risks facing MI-Reit led Moody’s Investors Service to place its Baa3 corporate family rating on review for a possible downgrade last month.

At Sept 30, MI-Reit had an aggregate leverage ratio of 39.6 per cent. Its medium-term target gearing is in the range of 40-45 per cent.

‘The manager is currently advanced in negotiations in relation to a new facility that will refinance an existing facility of $220.8 million due in April 2009 and also to provide funding for the settlement of Plot 4A, International Business Park in December 2009,’ said MI-Reit.

MI-Reit signed a deal for the business park in August last year. The Reit did not announce any acquisitions in Q2.

‘In the near term, organic growth in the portfolio will drive returns,’ said Mr Dunstan. ‘However, we expect to resume our active acquisition growth strategy once capital market conditions improve.’

For the rest of the financial year, the MI-Reit manager expects returns to be in line with recent performance.

Units of MI-Reit closed 0.5 cents higher at 39 cents yesterday.