KUALA LUMPUR (Feb 15): Sunway Real Estate Investment Trust’s (REIT) distribution per unit (DPU) for the second quarter ended Dec 31, 2016 (2QFY17) fell 11.3% to 2.28 sen from 2.57 sen a year ago, on the cessation of manager’s fee payable in units, effective FY17.

“On an annualised basis, this translated into a distribution yield of 5.3% based on the market closing price of RM1.72 as at Dec 31, 2016,” Sunway REIT said in a media release yesterday.

Its net property income for the quarter slid 3.1% year-on-year (y-o-y) to RM94.06 million from RM97.05 million, with net realised income down 8.8% y-o-y at RM67.13 million compared with RM73.58 million previously.

It said its hotel segment — Sunway Resort Hotel & Spa — was affected by subdued corporate and leisure demand, though its retail segment’s income improved 1.4% y-o-y to RM98.8 million, on the commencement of a major rental reversion cycle at Sunway Pyramid Shopping Mall and Sunway Carnival Shopping Mall. The office segment income also grew 5.2% y-o-y to RM7.9 million.

For the first half ended Dec 31, 2016, Sunway REIT’s DPU came in at 4.55 sen, down 3% from the 4.69 sen it gave out last year, while net realised income slipped 0.2% to RM133.86 million from RM134.14 million, though net property income was up 1.7% at RM190.12 million from RM187 million.

Sunway REIT blamed the lower earnings to the closure of Sunway Pyramid Hotel since April 2016 for an accelerated refurbishment, which caused its hotel earnings to contract by 26.4%. The office segment also posted a low average occupancy rate at Sunway Tower, due to the massive oversupply of office space.

Going forward, Sunway REIT’s manager — Sunway REIT Management Sdn Bhd — expects the business environment to remain tough, though its property value will increase 1.4% to RM6.52 billion from RM6.43 billion (as at June 30, 2016) on completion of its proposed acquisition of an industrial property in Section 23, Shah Alam, its maiden industrial asset.

“In view of the higher DPU accretiveness of such assets, we will continue to be on the lookout for such assets under the ‘Others’ category,” Ng said.

He added the completion of Sunway Pyramid Hotel’s refurbishment should contribute positively to the REIT. “The hotel has progressively reopened for business since December 2016, with expected full reopening in 4QFY17.”

This article first appeared in The Edge Financial Daily, on Feb 15, 2017.

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