BTO: A-Reit full-year DPU rises 7.4%

Business Times - 18 Apr 2009

A-Reit full-year DPU rises 7.4%

By LYNETTE KHOO

 

ASCENDAS Real Estate Investment Trust (A-Reit) yesterday reported a distribution per unit (DPU) of 3.23 cents for its fourth quarter ended March 31. This raised full-year DPU to 15.18 cents, a rise of 7.4 per cent on the back of sturdy growth in rental and occupancy rates.

 

The Q4 DPU of 3.23 cents was 12.5 per cent lower than the year-ago DPU of 3.69 cents. A-Reit said this was because of dilution by new units and the payment of performance fees in cash for the year. Otherwise, Q4 DPU would have been 3.8 cents, a rise of 3 per cent.

 

Full-year net property income (NPI) grew 21.8 per cent to $296.6 million, with organic growth - rentals and occupancy rate growth - contributing 39.3 per cent of the NPI growth. The rest of NPI growth was derived from investment and development projects completed over the course of the year.

 

A healthy portfolio occupancy of 97.8 per cent was achieved while occupancy rate for multi-tenanted properties was 95.3 per cent as at March 31, thanks to active leasing efforts by the property manager. Positive rental reversion in renewal rental rates was seen across the portfolio.

 

For the year, A-Reit completed three development projects at a total development cost of $178.2 million and made two acquisitions totalling $271.8 million.

 

A-Reit recorded a revaluation loss of 2.5 per cent to about $4.43 billion as at March 31 following a portfolio revaluation.

 

The NPI outlook for fiscal 2009 is expected to be about the level achieved for fiscal 2008, the trust manager said.

 

But with the expected higher cost of borrowing, distribution income may be lower and will also spread over a larger unit base due to recent fund-raising exercises.

 

A-Reit expects to keep a payout ratio of 100 per cent of distributable income, a policy it has maintained since listing, Tan Ser Ping, CEO of the trust manager, told reporters and analysts at a briefing last evening.

 

Explaining the payment of performance fee in cash, Mr Tan said: 'This is to minimise the gap between the earnings per unit (EPU) and DPU to avoid paying distribution out of capital.'

 

Some 14.1 per cent of portfolio gross revenue is due for renewal over the next 12 months.

 

The current passing rentals for space due for renewal in some sub-sectors of the portfolio are lower than the spot rates and Mr Tan said he expects this weakness to persist for a while.

 

A-Reit has a total development pipeline costing $158.7 million. Some $132.7 million of investment is committed, of which $76.3 million has been spent and another $56.4 million of development cost require funding.

 

'Over time, there may be some distressed assets opportunities that may come along but our focus is on high-quality tenants and properties that have good potential in terms of upside,' Mr Tan said.

 

To strengthen its balance sheet and fund committed development projects, A-Reit raised $408 million in January and February through a private placement and a preferential offer. As at March 31, its aggregate leverage was 35.5 per cent, down from 38.2 per cent a year ago.

 

It also secured new loans of $200 million and incorporated a $1 billion medium term note (MTN) programme. Some 90 per cent of interest rate exposure is hedged into fixed rate for the next 3.4 years with weighted average all-in funding cost of 3.67 per cent.

 

Its interest cover ratio as at March 31 was 4.6 times, down from 5.1 times a year ago.

 

A-Reit's $300 million of commercial mortgage backed securities that will mature this year will be repaid by existing credit facilities while its $246 million revolving credit facilities due this year will be partially paid down and partially refinanced.