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K-REIT unveils strong returns

THE listed trust of Keppel Corp, K-REIT Asia, has reported a 16 per cent rise in distributions for the nine months to September 30, boosted by its expanding Australian office portfolio.

THE listed trust of Keppel Corp, K-REIT Asia, has reported a 16 per cent rise in distributions for the nine months to September 30, boosted by its expanding Australian office portfolio.

The Singapore trust, which owns a half-share in 77 King Street (where the Apple store is) and 8 Chifley Square, both in Sydney, and 275 George Street, Brisbane, says it will remain on the acquisition trial in the coming months.

In the latest nine months, conditions in the Australian and Singaporean office sectors have been stable, leading the trust to unveil a rise in distributable income by 17.7 per cent to $S26.6 million ($20.4 million).

For the year to September 30, the distributable income jumped by 23.6 per cent to $S77.2 million. That rise was due to the trust's increase in the share of results from the Singaporean BFC Development Pte Ltd and One Raffles Quay and higher interest income.

K-REIT manages $S3.7 billion of assets, including seven commercial assets in Singapore and Australia. It owns a third of the $S4 billion Marina Bay Financial Centre, which could increase, as its parent, Keppel Corp, sells down its interest in the development as it nears completion.

The directors said they were focused on active asset management, retaining and attracting good tenants and improving operational and capital efficiencies within its existing portfolio.

"The trust will also selectively pursue opportunities for strategic acquisitions so as to deliver sustainable returns to unit-holders," they said.

Analysts are tipping for the smaller real estate investment trusts (REITs) to be more active in the coming year by making more acquisitions and expanding into new markets. Jonathan Kriska, the property analyst at Patersons Securities, says over the past year the situation for smaller REITs has improved. Unlike their larger counterparts, smaller REITs did not undertake widespread equity raisings during the global financial crisis.

"Over the past year we have witnessed widespread debt reduction, privatisation and improved earnings for these securities," Mr Kriska said. "Recent mergers and acquisitions activity suggests there is real demand by private investors for our smaller REITs.

"Acquisitions have been very beneficial to both acquirers and investors. Typically deals have been done on a 17 per cent discount to net tangible assets and caused the share price to rise 37 per cent on the announcement, a win-win for the acquirers and investors in those stocks."


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