Chairman's Statement
Attractive Distribution Yield
The global equity markets took a turn
for the worse in the last months of
2008 as the economic outlook became
grimmer. The S-REIT sector was not
spared by the market tumult. As at
end-2008, K-REIT Asia's unit price
closed at $0.70, down by 67.1% from
the price at the beginning of the year.
As a result, based on K-REIT Asia's
DPU of 8.91 cents for 2008
and the closing unit price of $0.70 on
31 December 2008, the distribution
yield of 12.7% was higher than the
average 12-month 7.7% gross dividend
yield of the Straits Times Real Estate
Index for the year.
Stable Property Portfolio Value
Against the backdrop of market
concerns over falling capital values and
the possibility of further asset deflation,
K-REIT Asia's portfolio retained its value
of $2.1 billion as at 31 December 2008,
unchanged from the year before.
K-REIT Asia is sufficiently buffered
against breaching the statutory
leverage limit in the event of a decline
in its property values. At present, the
aggregate leverage will only exceed
the regulatory 60.0% limit if its average
portfolio valuation falls by more
than 54.0%.
Quality Portfolio
As at 31 December 2008, the
committed occupancy rate of
K-REIT Asia's portfolio was 99.0%,
registering a slight decline from the
99.9% occupancy at the end of the
previous year.
The weighted average lease terms in
K-REIT Asia's portfolio and for its top
10 tenants are 5.6 years and 7.6 years,
respectively. These above-average
lease terms provide stable income for
Unitholders in the current uncertain
economic climate.
Despite a 26.4% increase from a year
ago, K-REIT Asia's average gross
portfolio rent of $7.61 psf per month
remains below the market average,
providing some prospects of positive
rental reversion. It is also worth
highlighting that the income from the
one-third interest in One Raffles Quay
Pte Ltd is buffered against downside
risks as income support is provided
until end-2011.
Healthy Balance Sheet
With the tight credit market, focus has
shifted to the S-REIT sector’s credit
health and refinancing risks, with
investors mindful of rising loan-to-value
ratios should asset values fall.
In this respect, K-REIT Asia took
prudent action to strengthen its
financial position in 2008. Net
proceeds of $550.7 million from the
rights issue completed in May 2008
were used to reduce borrowings.
This reduction has lowered K-REIT
Asia’s aggregate leverage to 27.6% as
at 31 December 2008, compared with
53.9% a year ago.
K-REIT Asia has no debt refinancing
needs until 2011. A $1 billion
multi-currency medium-term note
programme has also been established
to further provide K-REIT Asia with
an additional source of funding and
greater flexibility to manage capital
requirements.
| 
