MI-REIT – BT

MI-Reit ups Q3 distribution; refinancing talks still on

MACARTHURCOOK Industrial Reit (MI-Reit) yesterday reported improved results for the third quarter ended Dec 31, 2008, helped by rental income from additional properties acquired.

But good news has yet to come on debt refinancing – the Reit is still negotiating with lenders on a $220.8 million facility coming due in April.

For the third quarter ended Dec 31, 2008, MI-Reit reaped a net property income of $9.39 million – up 49 per cent from a year ago.

This ‘was largely driven by rental income from the nine additional properties acquired during the last financial year’, said Nick McGrath, CEO of trust manager MacarthurCook Investment Managers (Asia).

Distribution to unitholders rose 23 per cent to $6.15 million. This translates to a distribution per unit (DPU) of 2.35 cents, exceeding the 1.92 cents in 3Q 2008.

The trust manager expects MI-Reit to deliver a DPU that is in line with its recent performance for the rest of the financial year.

But MI-Reit is still in talks with its lenders to refinance an existing facility worth $220.8 million. The facility will mature on April 17 and had been drawn to $201.3 million as at Dec 31.

Just last week, Moody’s Investors Service cut the Reit’s corporate family rating from Ba2 to B1 to reflect the refinancing risk. The rating also remains on review for a possible downgrade. As at Dec 31, the Reit had $225.0 million repayable within a year and its gearing ratio stood at 39.7 per cent.

MI-Reit also believes that capital values of industrial properties fell during Q3 2009 ‘although there is little transactional evidence to support a change in values’.

This being so, the trust manager decided to conduct and adopt internal valuations for all its properties. For four of them, values were lower than those produced by external valuations earlier. As a result, MI-Reit’s total portfolio fair value as at Dec 31 was $556.3 million, marginally below the $560.1 million from external valuations.

Units of MI-Reit gained two cents or 8.7 per cent to close at 25 cents yesterday.