A-REIT's profit surge 3.3% for 3Q FY10-11

The property developer's 3.7% YoY revenue jump was offset by higher operating expenses and an enlarged property portfolio.

Tan Ser Ping, A-REIT's CEO and Executive Director, said revenue increased due to additional rental income from the completion of investments since December 2009.

Tan said operating costs simultaneously jumped not only because of the company's enlarged portfolio of properties, but also because of the cessation of land rent and property tax rebates granted by the Singapore Government in 2009.

The measures resulted in a smaller net property and related finance lease interest income increase of 3.3% to S$84.1 million.

As of 31 December 2010, A-REIT registered an improvement in occupancy for its entire portfolio and for its multi-tenanted properties to 95.6% and 91.1% respectively compared to the prior quarter.

The rental rates for new space leased in the Business & Science Parks as well as the Light Industrial sectors continued on a positive trend for the second consecutive quarter, registering a growth of 12.2% and 6.0% respectively over the prior quarter's signing rate.

A-REIT noted, however, that the growth be a rebound from a lower base.

"Sustainability of the uptrend will be largely dependent on the strength of the improving economy," the developer said.

Ongoing projects

Despite the uncertainties prevailing in the property market due to the new round of cooling measures the government has implemented, A-Reit has started work on its new development project-- a built-to-suit logistics facility in the eastern part of Singapore.

The facility is fully pre-committed for a period of 10 years upon completion which is expected in 4Q FY2011/12.
Aside from the logistics facility, A-REIT has also embarked on three other asset enhancement initiatives. They are:

1. The redevelopment of 1 Senoko Avenue (FoodAxis @ Senoko)

Estimated to cost about S$59.0 million, the redevelopment will create an additional gross floor area of 34,519 sqm with the maximization of plot ratio from 0.6x to 2.5x.

Situated within the designated food zone in the north of Singapore and easily accessible by major expressways, this facility will be positioned as a food hub for the food & beverages industry to address the relative shortage of suitable food processing space in Singapore. Completion is expected in 4Q FY2011/12.

2. Asset Enhancement for Techview

A-REIT has commenced work on the reconfiguration of selected floors through the creation of an internal courtyard on the upper levels of the building. When the planned Downtown Line (DTL3) MRT station is ready by 2017, Techview will have a station exit within its compound. This asset enhancement initiative has an estimated cost of S$4.3 million and is expected to complete by 1Q FY2011/12.

3. Asset Enhancement for 10 Toh Guan Road
A-REIT is in the process of obtaining the necessary regulatory approvals for the asset enhancement works to reposition the building for higher value usage.

The above asset enhancement initiatives are expected to deliver a weighted average yield in excess of 8.5%.

Despite having only 2.9% of its revenue up for renewal, A-REIT is confident of maintaining its previous financial yearÅfs level of net income for FY 2010-11 due to its diversified portfolio.

"[With our presence] across five segments of the business space and industrial property sector and a good mix of long and short term leases with a weighted average lease to expiry of about 4.8 years, A-REIT aims to provide sustainability and steady growth for earnings of the portfolio," the developer said.