K-REIT – BT

K-Reit results in Q4 boosted by acquisitions

Distributable income surges 19% to $23.2 million

K-REIT Asia yesterday posted improved results for the fourth quarter ended Dec 31, 2010, as acquisitions boosted earnings.

Property income for the office real estate investment trust was $21.4 million in Q4, up 26 per cent from a year ago.

This was largely due to contributions from six strata floors at Prudential Tower which K-Reit bought in November 2009, as well as contributions from a 50 per cent stake in 275 George Street in Australia which the Reit purchased in March last year.

As a result, net property income rose 30 per cent over the same period to $17.5 million.

Distributable income to unitholders went up 19 per cent to $23.2 million. This translated to a distribution per unit of 1.71 cents, which is 18 per cent higher year-on-year.

For the full year ended Dec 31, K-Reit’s net property income was $67.3 million, rising 38 per cent from the previous year.

This pushed distributable income to unitholders up 21 per cent to $85.6 million. The DPU was 6.37 cents, up 21 per cent.

Based on K-Reit’s closing unit price of $1.41 at Dec 31, the distribution yield for the year would be 4.5 per cent.

The counter ended trading at $1.44 yesterday, unchanged from the previous day.

The commercial property market has picked up as the economy recovered. K-Reit, citing figures from CB Richard Ellis, noted that Grade A offices commanded an average monthly rent of $9.90 per square foot (psf) in December last year, up from $8.10 a year ago.

Nevertheless, office rents are still below the heights reached in the boom years before the financial crisis. This has led to concerns that office landlords could be hit by negative rental reversions when leases expire this year.

According to K-Reit, average monthly rents across its portfolio in Singapore range from $8 to $9.40 per square foot. It expects rental renewals this year to be within this range.

The office leasing market is vibrant, with tenants committing to leases more quickly and rents rising considerably, said Ng Hsueh Ling, CEO of K-Reit’s manager, at a briefing yesterday.

The occupancy rate for K-Reit’s entire portfolio was 97 per cent as at Dec 31, dropping from 99.2 per cent a quarter ago. The dip happened partly as the portfolio grew to include the office tower at 77 King Street, which was 76.7 per cent leased.

K-Reit’s aggregate leverage at Dec 31 was 37 per cent. The Reit is comfortable with this level, Ms Ng said.