2 factors that could dampen long-term growth of KREIT's Aussie assets

Income support from exisiting assets feared to drop.

KREIT continued to exhibit its ability to acquire yield-accretive assets, with its latest acquisition being a 50% interest in 8 Exhibition Street in Melbourne.

As highlighted previously, although CIMB was positive about its acquisitions in Australia, CIMB expects its long-term growth to be dampened by 1) lost of income support from its existing properties, and 2) dilution from new units. During the quarter, KREIT issued 95m units to financeits latest acquisition.

Here's more from CIMB:

As a result, 3Q13 DPU was flat qoq. During this period, OFC Phase 2 (comprising a 7-storey retail structure and car-park annexe) received Temporary Occupation Permit. However, due to the rent-free fitting out period, we expect contribution from the retail segment to be minimal in 2013.

Proactive loan management
In 3Q13, management refinanced S$282m and S$60m of loans due in 2014 and 2015, respectively. Thus, the weighted average term to expiry of borrowings has been extended to 3.8 years (from 3.6 years).

Currently, KREIT's all-in interest rate stands at a healthy 2.15% with its aggregate leverage ratio dropping slightly to 43.9%. 

Positives factored in
By refinancing its debts early, the overhang of rising interest rates has essentially been removed. However, we believe that these positives have already been factored in its share price. We remain Neutral on this stock as it is currently trading in line with its peers' valuations.