Chairman's Message (Extracted from Annual Report 2007)
On behalf of the Board, it gives me great pleasure to present A-REIT's fifth annual report for the financial year ended 31 March 2007.
I am pleased to report another successful year in which the strategies pursued by the Manager have delivered stable and predictable distributions and achieved long term capital stability for A-REIT's unitholders.
A-REIT's distribution per unit (DPU) increased by 9.2% to 12.75 cents as compared to 11.68 cents in the previous financial year. The portfolio grew to 77 properties versus 64 properties last year, and total assets were $3.3 billion as at 31 March 2007, an increase of about 18%.
FY06/07 was challenging with increased competition for both physical assets in the property market and funds in the capital markets. Nonetheless, A-REIT has delivered an impressive set of results by focusing on its core competencies and successfully implementing a three pronged strategy of disciplined and value-adding investments, proactive asset management and prudent capital management.
Strengthening A-REIT's valued portfolio
During the year, the Manager was successful in increasing the overall occupancy rate of A-REIT's portfolio to 96.6% from 95.0% a year ago. There was also positive rental reversions across all sub-sectors within the portfolio as a result of active asset management and a recovering industrial property market.
As part of A-REIT's proactive asset management program, we have undertaken asset enhancement projects at the Alpha and Telepark. The additional areas created in both buildings have been fully committed, resulting in increased income.
The past year saw the Manager broadening A-REIT's investment strategy to include development activities as this provides potential for greater returns to investors as development profits are enjoyed by A-REIT rather than by third party developers from whom such properties are acquired. This can be seen from the completion of A-REIT's first development projects during the financial year - two separate built-to-suit warehouse retail facilities which were completed on schedule and within budgeted cost. A-REIT recorded an unrealized capital gain of $24.3 million on these projects.
In addition, A-REIT commenced a partial build-to-suit business park development, HansaPoint @ Changi Business Park and a Logistic & Distribution Centre development in Changi North. In the financial year, A-REIT committed to 17 acquisitions and development projects worth $488 million, of which $148 million worth are pending completion.
We will continue to pursue quality and sustainable yield accretive acquisitions and, at the same time, pursue development opportunities for enhanced returns.
Enhancing A-REIT's financial position
Through an active capital management strategy, we continue to optimize A-REIT's capital structure. As at May 2007, A-REIT has 95% of its interest rate exposure fixed for a weighted average term of 4.5 years at a weighted average cost of borrowing of 3.4%. We expect the positive results of our active asset management and widened investment strategies to continue to underpin the steady performance expected from A-REIT's portfolio.
Looking Ahead
Given the positive outlook for the economy, the manufacturing sector and the industrial property sector, the Manager expects to be able to deliver total returns that are in line with the performance of established REITs in mature markets.
Building on our position as the leader in business space and industrial properties, we will continue to maintain a disciplined investment strategy to continue to offer stable and predictable distributions through a portfolio of diversified tenants from a broad mix of industries.
Unitholder's Meeting
There have been numerous opportunities for the Board to meet with Unitholders over the past few years due to the frequency of Extraordinary General Meetings of Unitholders. However, in the last year, this has not been the case. Therefore, the Board has decided to hold a Unitholder's Meeting for A-REIT on 28 June 2007 at 3pm. Together with this annual report is a Notice of Meeting and accompanying circular which sets out details of the resolutions that will be put to Unitholders for approval. Management seeks the support of all Unitholders for these initiatives in the interest of continuing the success and growth of A-REIT.
In Appreciation
A-REIT's success would not have been made possible without the concerted effort of many parties. Firstly, I would like to thank my fellow Board members for their invaluable advice and contributions throughout the last year. I would also like to express my gratitude to our tenants and business partners for their unwavering support. I also would like to extend my appreciation to the A-REIT team for their dedication in pursuing the growth strategies that the Manager has set out. Last but not least, I would like to thank you, our Unitholders, for your trust and confidence in us.
With continued focus on our core strategies, I am confident that we will continue to deliver another year of stable and growing returns.
