Complete Property Market Updates of Singapore

June 19, 2008

MI-Reit sees organic growth driving returns

Filed under: Commercial,General,REIT — Propertymarketupdates @ 4:51 am

A SERIES of acquisitions boosted fourth-quarter results for MacarthurCook Industrial Reit (MI-Reit), but weak capital market conditions will limit fresh opportunities in the short term.

MI-Reit purchased nine properties in FY2008, five of them in Q4 alone.

‘Since MI-Reit’s listing in April 2007 we have successfully executed our strategy to grow MI-Reit through yield-accretive acquisitions,’ said acting CEO of MacarthurCook Investment Managers Craig Dunstan.

Rental contributions from the acquisitions translated to distributable income of $5.8 million for Q4 ended March 31, 2008 – 19.9 per cent higher than the forecast $4.8 million.

Going forward though, MI-Reit expects economic growth in Asia to moderate, and says organic growth may soon become the bigger driver of returns.

On the trust’s outlook for FY2009, Mr Dunstan said: ‘We will focus on optimising yield from MI-Reit’s existing portfolio through active asset management.’

He added that ‘we expect to resume our active acquisition growth strategy once capital market conditions improve’.

Weak markets have hampered MI-Reit’s plans to issue equity.

In January it postponed a $200 million equity fund-raising exercise and said yesterday it is unlikely to revisit this plan until early next year.

As part of the strategy to extract greater value from its existing portfolio, MI-Reit has identified properties with built-up plot ratios below the maximum allowable plot ratio of up to 2.5 per cent under the Urban Redevelopment Authority’s Master Plan.

The trust said at a media briefing yesterday: ‘Returns from such additional space additions are likely to provide higher than normal property yields, as they are not subject to land costs.’

The manager of MI-Reit has also been searching for a CEO since the previous CEO, Chris Calvert, left in March.

According to Mr Dunstan, it has been challenging finding a high-quality candidate who knows how to run a Reit and knows about real estate in Asia.

Nevertheless, the temporary absence of a CEO has not evolved into a worrying issue, as MI-Reit has no plans to undertake strategic initiatives in a weak market.

Source : Business Times – 23 May 2008

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