Hektar Real Estate Investment Trust (Hektar REIT) announced its annual results for Financial Year 2018 (FY18) with revenue rising to RM135.1 million, up 7.6% higher compared to the same period in the preceding year, while Net Property Income (NPI) climbed to RM78.7 million, a 6.8% increase. For the twelve months ended 31 December 2018, the Realised Income was recorded at RM42.3 million which was 5.3% higher than FY2017.
Overall, the market valuation of the Hektar portfolio increased by RM26.9 million in 2018. The positive result is supported by strong portfolio performances, particularly from asset outside the Klang Valley, buoyed by the post-refurbishment asset enhancement initiatives in the Kedah mall and positive rental reversion growth in Melaka and Muar.
Diversified Portfolio Boosts Hektar 2018 REIT Performance
For the fourth quarter ended 31 December 2018, the REIT recorded higher revenue of RM33.9 million, an increase of 1.3% compared to the corresponding period in 2017 (4Q17). Net Property Income recorded was RM20.3 million, a small variation from the RM20.9 million in 4Q17. The Realised Income before taxation grew to RM12.0 million, showing a marginal increase of 1.8% from 4Q17.
Hektar REIT declared a final income distribution per unit (DPU) of 2.31 sen for the fourth quarter ended 31 December 2018. The Book Closing Date is 15 March 2019 and the final distribution will be made on 10 April 2019. Based on the closing price of RM1.11 on 31 December 2018, the annualised DPU for the year represented a DPU yield of approximately of 8.1%.
“Hektar’s solid track record for occupancy, year-onyear increase in revenues and also net property income remains steadfast. It was a very busy year for us as we focused on improving our shopping centres under our portfolio which included asset enhancement initiatives, energy saving initiatives, extensive tenancy remixing and reconfiguration of space on top of taking over the operations of Classic Hotel, the hotel adjoining Wetex Parade in Muar. We strive to make sure that we achieve our goals in ensuring we deliver value to our unitholders. For the last 12 months period, the REIT has declared a total distribution of RM41.6 millon or 9.01 sen. We are proud that the REIT has and continues to deliver returns to the unitholders and stakeholders despite the challenging market condition and growing competition,” said Chief Executive Officer, Dato’ Hisham bin Othman.
Stable Portfolio Performance – Double Digit Rental Reversions for Four Malls
The main drivers of positive rental reversions were Kulim Central with 16.4%, Mahkota Parade with 15.0%, Wetex Parade with 11.8% and Central Square with 11.5% increases. For FY2018, the overall portfolio managed to achieve a healthy rental reversion of 5.4% through approximately 160 new and renewed tenancies on over 827,332 square feet or 40.9% of the NLA. Overall occupancy remained steady at 92.1%.
Overall annual visitor trafic increased to 32.1 million visits, up 9.2% mainly due to the additional of Segamat Central. Within the portfolio, the main drivers for trafic visit increases include Central Square, up 18.4% and Kulim Central, up 81.8% from the previous years. Both malls have gone through refurbishment and asset enhancement initiatives in 2015 and 2017 respectively and continue to show positive endorsement from shoppers and retailers alike.
Hektar REIT Operating Performance Commentary
“The year was not without challenges. First, we had to work very hard to secure the right tenants, entice new retailers and increase the marketing activities in Kulim Central in an effort to pull the crowd back following the asset enhancement initiatives (AEIs) in 2017, which thankfully has been paying off well. Kulim Central’s catchment now enjoys the benefits of brands such as Starbucks Coffee, Texas Chicken, Subway, The Chicken Rice Shop, Mee Tarik Warisan Asli and Bread History. The numbers speak for themselves – traffic is up 81.8% and rental reversions postive at 16.4%”, said Hisham.
“Subang Parade is currently still going through the AEI exercise and extensive tenant remixing. It is taking slightly longer with the current economy and uncertainties in the Klang Valley and therefore, we have decided not to rush the project and allocate sufficient time to refine the formula for the shopping centre. However, it is still delivering stable results despites despite the temporary dip in footfall. With Segamat Central, we are currently carrying out a market study to understand its demographics and customers and we are in the midst of preparing and planning for Segamat Central’s turnaround. Recently we have introduced a new anchor tenant, TF Value Mart and the intelligence collected from the monthly turnover and footfall has been very encouraging, affirming new targets for the shopping centre. Out team will continue to work hard to identify the possibilities and potential in each and every shopping centre in the portfolio”, continued Hisham.
“Overall, we are pleased that rental reversions throughout the portfolio reached a positive 5.4%, mainly through the strong double-digit performance growth in our malls in Melaka, Muar, Kulim and Sungai Petani. Essentially, four of our malls which have been refurbished have recorded strong rental growth. The other two of our malls are being planned for refurbishment or asset enhancement. Five of our malls are outside of the Klang Valley. Overall, the portfolio is recording growth and that is the benefit of having a well-diversified portfolio within Hektar REIT,” concluded Hisham.
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