Saizen Reit's Q1 attributable income down 53.1% on fair-value loss

SAIZEN Real Estate Investment Trust (Saizen Reit) on Wednesday posted a 53.1 per cent drop in attributable income to 204.1 million yen (S$2.36 million) for the first quarter of its financial year 2016, dragged down by net fair-value loss on financial derivatives as well as investment properties.

The net fair-value loss on investment properties of 69 million yen in Q1 was mainly due to acquisition-related expenses, such as consumption taxes and acquisition fees paid to the manager, Japan Residential Assets Manager, for the acquisition of Strasse Nanokawa in August this year.

A fair-value loss on forward contract of 112.2 million yen was recognised in the first quarter of FY2016 as the yen had strengthened against the Singapore dollar.

Comparatively, a fair-value gain on forward contract of 63.5 million yen was recognised in Q1 FY2015.

The unrealised fair-value loss on interest-rate swap of 11.3 million yen in Q1 FY2016 arose mainly due to interest-rate swap arrangements entered into to fix the interest rates of loans. In the same period in FY2015, an unrealised fair-value gain on interest-rate swap of 14.6 million yen was recorded.

Gross revenue for the quarter edged up by 0.3 per cent to 976.6 million yen, due largely to a year-on-year increase in occupancy rates, but this was partially offset by the divestment of three properties between July 2014 and August 2015.

Net property income for the three months ended September slid 1.1 per cent to 667.7 million yen, due to an increase in property operating expenses, which in turn was driven up by a rise in repair and renovation costs due to upgrading works.

Earlier this month, Saizen Reit announced the proposed divestment of all its residential properties in Japan to global private-equity firm Lone Star Funds for 44.66 billion yen.

Its manager intends to distribute the net proceeds from the proposed transaction to unitholders as soon as the deal is completed, said the Reit.

"Meanwhile, property operations are expected to remain stable, generating steady cash flow to enable Saizen Reit to continue paying out semi-annual distributions in accordance with distribution policy. Saizen Reit had previously hedged the distribution payments for the six-month financial periods ending December 31, 2015 and June 30, 2016, at average rates of JPY87.0/S$ and JPY84.4/S$ respectively."