SINGAPORE (THE BUSINESS TIMES) - First Reit's manager issued a profit warning late on Monday (July 20) that it is expecting a year-on-year decline of 40 to 50 per cent in its available distribution income to unit holders for the six months ending June 30 in its upcoming half-year results.

Its distribution per unit for H1 2020 is expected to decline by 40 to 50 per cent from 4.30 cents recorded a year ago, while its total return after tax for H1 2020 is expected to fall by 50 to 60 per cent from $30.9 million previously.

This comes on the back of the extension of two months' rental relief for May and June 2020 to all its tenants in Singapore, Indonesia and South Korea to alleviate the economic distress caused by the Covid-19 pandemic. The relief tab will come to $19.6 million.

The manager said that the prolonged pandemic has brought about significant impact to all businesses globally, including First Reit's assets across all markets; revenues for its healthcare assets declined significantly due to lower patient volumes and the temporary closure of its integrated properties comprising retail malls, hotels and country club.

For its Singapore properties, which include Pacific Healthcare Nursing Home @ Bukit Merah, Pacific Healthcare Nursing Home II @ Bukit Panjang and The Lentor Residence, the two months' rental relief will be provided on top of the property tax rebates announced by the Singapore government on Feb 18 and March 26. All property tax rebates will be passed on to First Reit's Singapore tenants through rental relief or capital expenditure works, said the manager.

The manager added that all rental relief provided to PT Lippo Karawaci or its subsidiaries as tenants of First Reit, would be regarded as interested-person transactions, in accordance with the Listing Manual of Singapore Exchange Securities Trading Limited. PT Lippo Karawaci is a controlling shareholder of First Reit.

The amount of rental relief regarded as interested-person transactions is $16.4 million, representing 2.1 per cent of First Reit's latest net tangible assets as at Dec 31, 2019.

First Reit's manager said that it will monitor the situation and consider further rental relief if appropriate.

It is possible that a further relief similar to that announced for the first half of the year may be considered and announced in the second half, said the manager.

The manager also said that it will continue with the practice of valuing First Reit's assets once a year at the end of the financial year, and any fair-value gains or losses on properties will be recorded only in the full-year results.

However, the manager cautioned that there may be uncertainty relating to the carrying amounts of First Reit's investment properties as at June 30, 2020 as the carrying amounts are based on the independent valuations as at Dec 31, 2019, and have not taken into account the impact of the Covid-19 pandemic, which may be significant.

Even so, First Reit's manager said that it continues to be in a secure financial position, and has adequate liquidity to meet its operational needs and financial commitments to navigate through the crisis.

Further details of First Reit's financial performance will be disclosed when its results are released on or before this Wednesday.