MI-Reit Q1 DPU drops 36% to 1.51cents on higher loan costs

MACARTHURCOOK Industrial Reit (MI-Reit) has announced a distribution per unit (DPU) of 1.51 cents for its first quarter ended June 30, down 36 per cent from a year ago.

Higher borrowing cost was one factor for the fall. Borrowing costs were higher because of the increase in interest margins and facility fees when the repayment date of the Reit’s Singapore term loan facility was extended to Dec 31, 2009 during the quarter.

Net property income for Q1 was $9.3 million, 3.2 per cent higher year-on-year, as the portfolio’s high occupancy was maintained.

The Reit said organic rental growth was supported by built-in rental escalations staggered throughout the leases of 19 of the properties.

In FY2010, seven properties are scheduled to experience 5 per cent rental increases and three properties will see rental increases of 3.25 per cent, 3 per cent and 1.5 per cent.

With the higher cost of borrowing, the income available for distribution in FY2010 will be lower than in FY2009, the Reit said. ‘However, barring any further unforeseen events, the manager expects rental income to remain stable.’

SALE OF UNITS IN MI-REIT TO MACARTHURCOOK LIMITED

MacarthurCook Investment Managers (Asia) Limited (the “Company”), as Manager of MacarthurCook Industrial REIT (“MI-REIT”), wishes to announce that the Company sold 3,500,000 units in MI-REIT (“Units”) to its immediate holding company, MacarthurCook Limited (“MCK”), on 10 July 2009 at $0.315 per Unit, the last done market price of the Units on the date of sale, via an offmarket transfer.

MacarthurCook Industrial REIT (“MI-REIT”)

MacarthurCook Limited is the parent company of the Manager.

The Manager wishes to assure unitholders that the AIMS offer does not represent an offer to acquire units in MI-REIT nor does it directly impact the current operation of MI-REIT.

MI-Reit’s auditors raise going-concern flag

Trust manager says in response that it is working to effect refinancing of debt and funding of acquisition

MACARTHURCOOK Industrial Reit’s (MI-Reit) independent auditors have flagged the trust’s going-concern status in an emphasis of matter released yesterday.

‘At March 31, 2009, the group and the trust have interest-bearing borrowings of $224.4 million and $201.3 million, respectively, which are due for repayment within the next 12 months as well as an existing capital commitment of $91 million.

‘The refinancing of the borrowings and financing of the capital commitment have not been completed at the date of this report. These conditions indicate the existence of a material uncertainty that may cast significant doubt on the trust and its subsidiaries’ ability to continue as a going concern,’ KPMG LLP’s emphasis of matter, dated June 19, stated.

In response, MI-Reit’s manager, MacarthurCook Investment Managers (Asia), said yesterday: ‘The manager, together with its adviser, Standard Chartered Bank Limited, is working to effect the refinancing of the borrowings and to fund the capital commitment to acquire the property, and will make further announcements at the appropriate time.’

Last month, MI-Reit gained approval from its lenders, National Australia Bank and Commonwealth Bank of Australia, to extend to Dec 31, 2009, its $202.3 million loan facility – that had been reduced from $220.8 million – as it continues negotiation for longer-term refinancing.

Under the terms of the extension, failure by MI-Reit to settle the acquisition of the $91 million property at the International Business Park would be considered an event of default.

According to MI-Reit’s financial statement for the year ended March 31, 2009, the property was under construction and was due to be completed by the fourth quarter of this year.

‘Change in market conditions has meant that the fair value of the property is lower than the contracted amount. Consequently, a provision for onerous contract of $20 million has been recognised in the statements of total return,’ MI-Reit had said in the financial statements.

MI-Reit’s share price closed one cent higher at 33.5 cents in trading yesterday.

MI-Reit clears conditions for further debt extension

$202.3m debt facility now due to Aussie lenders on Dec 31

THE managers of MacarthurCook Industrial Reit (MI-Reit) – MacarthurCook Investment Managers (Asia) Ltd – announced yesterday the fulfilment of conditions needed for the extension of MI-Reit’s $202.3 million debt facility.

The facility will now come due on Dec 31 and is MI-Reit’s second extension in a bid to negotiate longer- term refinancing of its debt with lenders National Australia Bank and Commonwealth Bank of Australia.

At the end of March, MI-Reit was granted its first extension – a 60-day one for its $220.8 million debt facility that would have matured in April.

The debt facility’s limit was later reduced to $202.3 million as part of the second extension approved in May, with an ‘all in interest margin’ of 5 per cent per annum.

This debt facility accounts for about 90 per cent of its borrowings, with the remainder based in Japan, which the firm is also trying to refinance.

The extension had been subject to documentation and satisfaction of certain conditions precedent, which the investment managers stated were ‘within the control of MI-Reit’.

MI-Reit declined to elaborate on what the conditions were when contacted by BT yesterday.

Under the terms of the second extension, an event of default under the extension includes a failure by MI-Reit to settle the acquisition of a property in the International Business Park.

‘The manager understands the settlement of the property is likely to occur late fourth calendar quarter 2009,’ MI-Reit’s manager stated late last month. ‘The manager, together with its adviser, Standard Chartered Bank Ltd, is considering the most appropriate longer-term capital structure for MI-Reit inclusive of funding options for the property.’

For its fourth quarter ended March 31, MI-Reit posted a 13.9 per cent drop in distribution to unitholders, from $5.8 million to $5 million for the quarter, year-on-year.

For the full year, however, it saw a 19.4 per cent increase in distribution to unitholders, with net property income rising 48.5 per cent to $36.9 million.