High operating costs hit Hektar REIT’s 2Q net income


Hektar Real Estate Investment Trust’s (REIT) net property income for the second- quarter ended June 30, 2017 (2Q17), fell 4.5% to RM18.04 million from RM18.89 million a year earlier.

The decrease is attributed to higher operating expenses, which increased by RM935,865.

Its 2Q revenue fell slightly to RM30.79 million from RM30.94 million registered a year ago, while net profit came in marginally higher at RM10.5 million in the quarter compared to RM10.43 million in the same period last year.

The REIT told Bursa Malaysia Bhd recently that the cumulative realised net profit was lower by 7% mainly due to the lower revenue from Subang Parade.

Hektar REIT CEO Datuk Hisham Othman said in a statement yesterday that mar- ket conditions have become more challenging, following the weak economic sentiment and the recent oversupply of shopping malls in the Klang Valley.

“Against this backdrop, our net property income decreased despite the steady occupancy rate.

“Performance is affected by higher operating expenses and slower growth in the retail industry which is causing reversions to remain flat,” he said.

He said the REIT’s strategy involves asset enhancement initiatives and tenant remixing activities at its malls, with the aim of strengthening its portfolio position.

He added that the company’s asset enhancement initiatives at Landmark Central, Kulim, Kedah, will be completed in September 2017 and to date, 85% of the new lots have been secured with new tenants.

Meanwhile, the acquisition of 1Segamat Shopping Centre is also expected to be completed in September 2017.

“We expect both initiatives to contribute positively to our performance,” Hisham said.

Apart from Landmark Central in Kulim, the REIT’s portfolio also includes Subang Parade in Subang Jaya, Mahkota Parade in Melaka, Wetex Parade in Muar, Johor; and Central Square in Sungai Petani, Kedah.

The portfolio’s catchment serves a market size of three million shoppers and had an average occupancy rate of 96.2% as at end-2016.

The REIT declared a second interim distribution per unit (DPU) together with an advance distribution for the period of July and August 2017 of four sen per unit.

It said the advance distribution is in line with the upcoming completion of the rights issue and its underlying proposed acquisition of 1Segamat Shopping Centre.

Based on the closing price of RM1.36 on June 30, 2017, the annualised DPU for the year represented a distribution yield of approximately 6.9%.

The book closing date is Aug 25, 2017, with the payment of distribution to be made on Sept 22, 2017.