K-REIT – BT

K-Reit Asia’s distributable income up 19.7% in Q2

It will pay up to A$169.8 million for stake in Sydney office building

K-REIT Asia yesterday reported a higher distributable income for the second quarter and said it is buying a stake in an office building in Australia for A$154.4 million (S$203 million) to A$169.8 million.

For the quarter ended June 30, K-Reit’s property income had actually dropped 22.2 per cent over the year to $18.1 million, largely from the sale of Keppel Towers and GE Tower in December last year. Net property income fell 22.2 per cent to $14.3 million.

However, a larger interest income lifted K-Reit’s earnings. It also benefited from a higher share of results of associated companies. This line item brought in $8.3 million – more than three times the $2.4 million last year – from the inclusion of a one-third interest in Marina Bay Financial Centre Towers 1 & 2 and Marina Bay Link Mall.

Distributable income to unitholders eventually came up to $26.3 million, up 19.7 per cent over the year. Distribution per unit (DPU) rose 17.7 per cent to 1.93 cents. The annualised DPU in Q2 was 7.74 cents. This works out to a distribution yield of 5.8 per cent, based on K-Reit’s closing unit price of $1.33 as at June 30.

For the half-year, K-Reit’s distributable income to unitholders rose 27 per cent from the previous year to $50.5 million, and its DPU surged 25.3 per cent to 3.72 cents.

K-Reit has been actively growing its portfolio and its latest acquisition is a 50 per cent stake in 8 Chifley Square, bought from a unit of Australia-listed Mirvac Group.

8 Chifley Square is a 30-storey premium grade office building in Sydney’s central business district. It is due for completion in the third quarter of 2013 and will have an estimated 205,700 square feet of net lettable area.

K-Reit will pay A$154.4 million to A$169.8 million, depending on what the committed rental rates are when 8 Chifley Square is completed. The seller will also provide a five-year rental guarantee, if the property is not fully leased at pre-agreed rental rates when it is completed.

K-Reit estimates that the acquisition would have generated an incremental DPU of 0.07 cents – a 1.1 per cent accretion on a pro forma basis for financial year 2010.

On the stock market yesterday, K-Reit closed unchanged at $1.33.