Ascendas Real Estate Investment Trust (A-Reit) yesterday reported improved earnings for the three months to June 30, when it benefited from better occupancy rates and positive rental reversions.

The Reit, with a portfolio of 105 business and science park properties in Singapore and China, posted a 5.5 per cent year-on-year rise in distribution per unit (DPU) for the quarter to 3.841 cents.

This came as net property income rose 6.9 per cent to $124.3 million, and gross revenue for the period gained 10.6 per cent to $180.5 million.

Earnings per unit was 3.813 cents for the quarter, up 6.5 per cent year on year from 3.58 cents previously, while net asset value per unit was $2.05 for the group, up 1.49 per cent from $2.02 a year earlier.

The better results were "underpinned by higher occupancy as well as positive rental reversion on lease renewals", chief executive of the Reit manager Tan Ser Ping said yesterday.

Rental reversion refers to adjustment in rental rates after a lease expires. For A-Reit, its average rental reversion on leases renewed during the quarter was 6.6 per cent, and new leases signed in the same period had an average term of 3.6 years.

As A-Reit locked in stronger rental income, occupancy rates for its portfolio grew to 88.8 per cent, up from the previous quarter's 87.7 per cent. The improvement was due mainly to higher occupancy at 40 Penjuru Lane, 9 Changi South Street 3 and Aperia.

"With 11.2 per cent vacant space in A-Reit's portfolio, there could be potential upside when some of the space is leased, the speed of which will largely depend on prevailing market conditions," it said when announcing its latest results after the market closed yesterday.

"However, industrial property market conditions are expected to remain challenging. With significant new supply and more stringent government regulations, there may be pressure on occupancy growth," it added.

In response to the mixed outlook, A-Reit launched or completed several asset enhancement projects in the quarter to boost returns from existing buildings. These included an investment of $17.2 million to expand amenity space at Singapore Science Park II, and the extension of DBS Asia Hub in Changi. Both were completed in the quarter, when three new enhancement projects were also started.

Meanwhile, the Reit divested its property at 26 Senoko Way to JTC Corporation for $24.8 million, and the divestment of BBR Building in Changi for $13.9 million is expected to be completed in this quarter.