Singapore, July 20, 2010 -- Moody's Investors Service sees no immediate impact on the Baa3 corporate family rating of K-REIT Asia following its announcement that it has contracted to acquire a 100% interest in an office property in Australia for A$120 million (S$145 million).

The rating outlook remains stable.

The property is at 77 King Street in Sydney's central business district.

"The acquisition, which represents approximately 6% of K-REIT's total assets, will be funded by a combination of debt and cash that the trust had raised in its rights offering in November 2009," says Peter Choy, a Moody's Vice President & Senior Credit Officer, "and will modestly weaken the REIT's debt / asset leverage to 20%."

Moody's expects that K-REIT, which is sponsored by Keppel Land, will be able to raise medium-term funding at a competitive cost to complete the transaction. Any material deviation from such expectation or any onerous financing terms would warrant a reassessment of the rating.

"The investment in 77 King Street will allow for geographic diversity and growth in K-REIT's EBITDA and asset base," adds Choy. "Good tenant quality and long term leases will also support income stability."

"Moody's notes that K-REIT already owns a 50% interest in a property in Brisbane, but has yet to establish an operating track record outside Singapore," says Choy. "Partly mitigating this concern is that the acquisition will be yield-accretive and net cash flow from property should be stable given the rent guarantee and income support."

Under the agreement, K-REIT is offered rental guarantee of up to A$2 million for 24 months to top up any shortfall in rent if the property is not fully leased. The trust is also being offered minimum net property income guarantee. Income support of up to A$4 million will be provided for six years to top up any shortfall. This provides K-REIT with some cushion against low occupancy and rent rates for the acquired property.

The acquisition of the 18-storey building comprises 130,394 sq. ft. of grade-A office space and 16,856 sq. ft. of retail space. The weighted-average lease expiry is 5.8 years, with annual rental escalations.

Moody's last rating action with regard to K-REIT was taken on October 5, 2009, following the trust's announcement of a rights offering, when its Baa3 corporate rating was affirmed with a stable outlook.

The principal methodology used in rating K-REIT was Moody's Rating Methodology for REITs and Other Commercial Property Firms (January 2006), which can be found at www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab.

Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Rating Methodologies sub-directory on Moody's web site.

Sponsored by Keppel Land Limited, K-REIT was listed on the Singapore Exchange on April 28, 2006. Its portfolio of six assets in Singapore and Australia was valued at S$2.4 billion as of June 30, 2010.