o Year-On-Year increase in Revenue and NPI
o Average Portfolio Occupancy of 92%, higher than industry average
o Balanced, Diversified Portfolio: Double-digit Rent Reversions & Encouraging Visitor Traffic Growth
Focused on Sustainability:
o In 2018:
34% reduction in monthly energy consumption (significant reduction in electricity bill & water consumption)
34% reduction in carbon emission
o Aims to reduce average energy consumption by at least 10% in its portfolio of malls by 2022
Hektar Asset Management Sdn Bhd (“Hektar”), the Manager for Hektar Real Estate Investment Trust (“Hektar REIT”), has delivered its 12th year of uninterrupted dividend distribution to its unitholders, with Dividend per Unit (DPU) of 9.01 sen for the financial year ended 31 December 2018.
Hektar REIT announced its annual results for Financial Year 2018 (“FY18”) recording RM135.1 million in revenue, up 7.6% higher compared to the same period in the preceding year, while Net Property Income (NPI) rose to RM78.7 million, registering 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.
For the year under review, Hektar REIT has succeeded in providing one of the highest DPU yields in the industry at 8.1%, reflecting the resilience of its portfolio in weathering challenging environments. Overall, the market valuation of the Hektar’s portfolio has increased by RM26.9 million in 2018. The positive result is supported by strong portfolio performances, particularly from assets outside the Klang Valley, buoyed by the post-refurbishment asset enhancement initiatives in the Kedah malls and positive rental reversion growth for the assets in Melaka and Muar.
The addition of Segamat Central Shopping Centre to the asset portfolio in 2017 has boosted the portfolio’s overall performance. With the acquisition, the number of assets under the portfolio numbers six shopping centres which are valued at RM1.2 billion, catering to a market catchment of 3.0 million shoppers.
“Hektar REIT remains committed to ensuring value for our shareholders and it has continued to deliver in terms of occupancy, year-on-year increase in revenues and net property income despite the soft market conditions. Our clear focus in terms of geographical asset diversification has proven effective in mitigating the negative exposure of economic downturns that has been affecting the industry in the last few years. We are tapping on the stable purchasing power in smaller underserved cities by bringing in new local and international brands or retailers to the area. We believe that by strategically selecting the location of our assets has in many ways secured our success to date,” said Chief Executive Officer, Dato’ Hisham bin Othman.
“We actively look into internal strategies within each mall to identify value creation opportunities and reduce operating costs. In the last year, we were very focused on improving our shopping centres under our portfolio which included asset enhancement initiatives, energy saving initiatives, extensive tenancy remixing and reconfiguration of lettable space as well as taking over the operations of Classic Hotel, which adjoins Wetex Parade in Muar. Early this year, we have carried out a market study on Segamat Central, which has helped us gain insight on how to proceed with turning around the property. 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. It is all about understanding the basics and making sure it’s being met,” continued Hisham.
The assets under Hektar REIT’s portfolio has successfully minimized the use of resources by implementing best practices in energy management, water conservation and waste management. Hektar has embarked upon Energy Efficiency (EE) initiatives by retrofitting the Air Conditioning & Mechanical Ventilation (ACMV) system at its flagship mall, Subang Parade, which involves the replacement of the less efficient chillers, pumps and cooling towers as well as installation of an automated Building Management System in 2017 with Intellisense Sdn Bhd. as its technical partner. Through these initiatives, achievements accomplished included a 34% average reduction in electricity consumption which also translated to a 34% reduction in carbon emission i.e. from 10.6 million kgCO2 in 2016 to 7.0 million kgCO2 in 2018.
Apart from that, this also translated into savings of up to 36% in the average monthly electricity bill in 2018. Hektar has also invested in progressive deployment of LED lightings at the mall. In addition to the above, we have also carried out optimization of water usage which resulted in a reduction of almost 50,000 m3 in water consumption in 2018.
Hektar has also initiated several ways to implement waste reduction and recycling policies in their malls. In one of its malls, Subang Parade has implemented electronic parking transaction through Touch n Go and Visa Pay Wave in an effort to reduce ticket printing and this will also be deployed in other malls.
Based on its various energy saving efforts, Hektar REIT was recently awarded with the Bronze Award for “Best Environmental Excellence” at the 11 th Annual Global CSR Summit & Awards held in conjunction with The Global Good Governance Awards™, by financial services intelligence house Cambridge IFA, which recognises companies that are committed in making governance and sustainability its strategic priority.
Going forward, Hektar aims to further reduce average energy consumption by at least 10% from energy-saving initiatives in its portfolio of malls by 2022.
Operating Performance Commentary
“Overall, we are pleased that rental reversions throughout the portfolio reached a positive 5.4%, mainly through 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.
Stable Portfolio Performance – Double Digit Rental Reversions for Four Malls and Encouraging Increase in Footfall
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 Net Lettable Area (NLA). Overall occupancy remained steady at 92.1%
Overall annual visitor traffic increased to 32.1 million visits, up 9.2%, mainly due to the addition of Segamat Central. Within the portfolio, the main drivers for traffic 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 (AEI) in 2015 and 2017 respectively and continue to show positive endorsement from shoppers and retailers alike. Commenting on Subang Parade, Hisham said “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 despite the temporary dip in footfall.”
As of December 2018, Hektar REIT’s portfolio has maintained a high average occupancy rate of 92.1% surpassing the average occupancy level of 85% for shopping centres in Klang Valley.
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