K-REIT – BT

K-Reit Asia’s Q2 distributable income rises 23%

OFFICE trust K-Reit Asia yesterday said that distributable income for the second quarter ended June 30 rose 23.4 per cent to $17.5 million from $14.2 million a year ago on the back of higher rental rates for new and renewed leases.

Distribution per unit (DPU) rose to 2.64 cents from 2.18 cents.

The trust, which is a unit of Keppel Land, also reported a 34.2 per cent rise in net property income to $12.3 million, from Q2 2008’s $9.2 million.

K-Reit’s portfolio – which includes Bugis Junction Towers and a one-third stake in One Raffles Quay – attained 94.9 per cent committed occupancy by the end of June. This is a drop from the 99 per cent occupancy the trust reported at the end of 2008. But income went up even as occupancy dipped slightly as rents climbed. The portfolio’s average gross rental rate was $8.13 per square foot in June this year as compared with $7.37 psf in June 2008.

For the quarter, the all-in interest rate was 4.25 per cent, as compared with 2.64 per cent for Q2 2008. The aggregate leverage remained the same at 27.6 per cent on June 30 and March 31 this year, and the weighted average term to expiry of debt was reduced from 2.0 years in March to 1.8 years in June.

K-Reit said that the pace of decline for office rents eased in Q2 and the office leasing market is more active. However, it expects demand for office space to remain subdued in 2009. But despite this, K-Reit ‘is well positioned with its high-quality asset portfolio, strong tenancy profile and diverse tenant business mix’, the trust said.

Based on committed leases at the end of June, K-Reit’s gross rental income for FY2009 already exceeds that for FY2008, the trust pointed out in a statement. The weighted average lease term to expiry for the trust’s portfolio is 5.4 years while that of its top 10 tenants is 7.1 years. This provides stable rental income, the trust said.

Going forward, K-Reit’s manager will continue to place emphasis on tenant retention and seek to improve operational and cost efficiencies. K-Reit will also make selective asset acquisitions should opportunities arise, it said.

K-Reit gained 2 cents, or 1.9 per cent, to close at $1.05 yesterday.