K-REIT – BT

K-Reit sees 2011 DPU rising by up to 10.2%

Its Q3 net property income rises 42% to $17.5 million

K-REIT Asia is expecting a series of property transactions to boost its distribution per unit (DPU) for FY2011 by as much as 10.2 per cent.

The commercial real estate investment trust released the projections yesterday together with results for the third quarter ended Sept 30.

K-Reit forecasts that with the acquisition of an office block at 77 King Street in Australia, the proposed purchase of a one-third stake in Phase One of the Marina Bay Financial Centre (MBFC), and the proposed sale of Keppel Towers and GE Tower, its DPU for FY2011 would be 6.68 cents.

This would be higher than the 6.06 cents which could be generated by its existing portfolio, comprising Keppel Towers, GE Tower, Bugis Junction Towers, an interest in Prudential Tower, an interest in One Raffles Quay, and a stake in 275 George Street in Australia.

Based on the forecasts, the three deals would actually cause net property income and total return after tax to be lower in FY2011. But after net tax adjustments, income available for distribution would rise, leading to the higher projected DPU.

The projections shed some light on the impact of a proposed asset swap between K-Reit and its parent. K-Reit said last week that it is buying the MBFC stake from Keppel Land for $1.427 billion, and selling Keppel Towers and GE Tower to it for $573 million.

K-Reit will be holding an extraordinary general meeting in December to seek unitholders’ approval for these two deals.

Recent acquisitions have helped to raise K-Reit’s earnings. In Q3, its net property income was $17.5 million, 42 per cent higher than a year ago due mainly to contributions from an additional six strata floors it bought at Prudential Tower in November last year, and a 50 per cent stake it acquired in 275 George Street in March.

Distributable income to unitholders rose 26 per cent to $22.7 million.

DPU in Q3 was 1.69 cents, 25 per cent more than the 1.35 cents a year ago, which has been adjusted for the effect of a rights issue completed in November last year. Without the adjustment, DPU last year was actually higher at 2.69 cents.

K-Reit closed unchanged at $1.37 yesterday.