REIT Financial News - Q2 2010 Quarterly Earnings Report for Saizen

Second quarter 2010 results for Saizen Reit:

• Financial Statements

Key Points

• Resumption of distributions. Saizen REIT has declared a distribution of 0.26 Singapore cents per Unit for the financial year ended 30 June 2010. This distribution relates to distributable cash accumulated over two months (May 2010 and June 2010), after the repayment of the loan of Yugen Kaisha (“YK") Keizan in April 2010.
• YK Shintoku refinancing issue. The JPY 7.1 billion (S$112.0 million) CMBS loan of YK Shintoku went into maturity default in November 2009. The Board of Japan Residential Assets Manager Limited, the manager of Saizen REIT, is pleased that there has been a further development in this respect. Discussions with a financial institution on the terms and timing of a loan, which will potentially enable the loan of YK Shintoku to be refinanced, have commenced. Currently, the main impact of the maturity default is the increase in interest rate on the outstanding loan amount from 3.07% per annum to a default interest rate of 7.07% per anum.
• Property operations remained stable in the fourth quarter ended 30 June 2010 ("4Q FY2010") and in FY2010. The overall occupancy rate as at 30 June 2010 was 91.3%, while overall rental reversion of new contracts entered into in FY2010 was marginally lower by about 5.3% from previous contracted rates. The average turnover rate was 20% in FY2010, as compared to 22% in FY2009.
• Financial position strengthened with loan repayments, new banking relationships and loan refinancing. The capital structure of Saizen REIT had changed substantially in FY2010. Three CMBS loans, amounting to an aggregate of JPY 7.0 billion (S$110.4 million), were fully repaid in FY2010 with operational cash flow and proceeds of a rights issue conducted in May 2009. New banking relationships were established with Mizuho Bank Ltd and Tokyo Star Bank Ltd in FY2010, representing new financing amounting to an aggregate of JPY 3.0 billion (S$47.3 million). Further, the JPY 5.9 billion (S$93.1 million) loan of Godo Kaisha (“GK") Choan, which was due to mature in July 2011, was successfully refinanced with a maturity date of 15 June 2013.
• Divestment of five properties. Five properties from the property portfolio of YK Shintoku were sold in the first half of FY2010 as part a deleverging plan implemented to reduce the absolute amount of the loan of YK Shintoku and the leverage of the corresponding property portfolio, so as to facilitate refinancing efforts. One of the five properties was sold at a premium of about 7% over its valuation, while the other four properties were sold at discounts of between 5% to 9% to valuation.

Author's Note
The book closure date for the distribution of 0.26 cents will be on 13 Sep 2010, and will be paid on 29 Sep 2010. Note that while the distribution is for the financial year ended 30 June 2010, it is actually the distributable cash accumulated over only two months (May 2010 and June 2010).


This is the first time the Reit is distributing dividend since 2008. The last time the Reit has distributed dividend was in Sep 2008 for the period from 09/11/2007 to 30/06/2008. The DPU for the period then was S$0.0467.