Office fund falls into the red and cuts dividend

Citing weak market conditions and continued asset sales, the Australian and US office fund warned that earnings for the 2010 financial year were expected to be lower than the annualised second-half core earnings of 4.14c a unit for the 2009 financial year.

After taking out goodwill impairments and asset value write-downs, the trust revealed a bottom-line profit of $185.8 million, in line with expectations.

Distributions were also lower with an annual payment of 3.75c a unit, down from 11.2c the previous corresponding year.

Investors remained concerned about the lower guidance and warnings of flat office rental markets, and sold the stock down 5.77 per cent to 24.4c a unit.

The trust's chief executive, Adrian Taylor, said the lower earnings reflected slower leasing conditions and the full-year impact of previously announced initiatives such as asset sales, the June quarter underwritten dividend reinvestment plan and the removal of debt cross-currency swap income.

"For the 2010 financial year, the trust will revise its distribution policy to adjust the frequency of payments from quarterly to half-yearly, in line with the majority of its peers in the REIT sector," Mr Taylor said.

Looking ahead, our near-term focus remains on maximising returns to our investors through active management of the trust's portfolio of high-quality office properties and continuing to take actions designed to restore unit holder value."

Peter Zuk, a property analyst for Goldman Sachs JBWere, said the like-for-like income growth  rent  was down 1 per cent, driven by a poor result in the US and offsetting comparative growth in Australia, which was up 1 per cent with Europe up 6 per cent.