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Saizen REIT Having A Better Third Quarter After Massive Writedown

saizen logoSaizen REIT (SGX: T8JU) is the only REIT listed in Singapore that exclusively focuses on the Japanese residential market. The REIT currently has 139 properties all around Japan. The asset values of the properties are valued at S$505million. Saizen REIT announced its third quarter result on 9th May 2014.

Operating Result

In term of Japanese Yen, the REIT achieved a 4.8% improvement year on year in gross rental revenue at YEN 2.97billion for the 9 months into its financial year. Combining with much lesser write-downs from fair value losses compared to last year, the REIT achieved a net profit attributable to unit-holders of YEN 1.04billion for the first 9 months of its financial year, which is 54% higher than last year.

Occupancy rate for the quarter has been stable, around 91.1%. However, overall rental reversion has been reducing slightly as most contracts are entered before 2008 which has demanded higher rental rates. Overall, the average rental rates have been maintained above YEN 1,500/sqm for the past 5 years.

One unique feature about Saizen REIT is that most of its debts are long term, from 5 to 30 years loans. This is quite difference from most REITs where they are financed by shorter term debts. Furthermore, about 90% of the interest rates on the loans are fixed, which is another positive point for Saizen REIT. The current gearing ratio for the REIT is 38% and the net asset value of the REIT is S$ 1.17 per unit.

No distribution has been declared for the quarter as Saizen REIT has a policy of distributing every 6 months. The main risk involved for the REIT has to be the currency risk as the Japanese Government is still engaging in a huge stimulus exercise, it might continue to pressure the strength of the Japanese Yen in general. The REIT ended the trade on 8th May 2014 at S$ 0.91 per unit. It is trading at 0.77 times book value and has a distribution yield of about 7.1%

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.