Tower REIT’s earnings further weighed down by higher electricity tariff, wages

• The office rental market remains challenging with the over-supply of office space particularly in the Klang Valley as more organisations, especially multinational corporations, continue to re-evaluate their workplace strategies and requirements, the REIT said.
• “This situation is further exacerbated by increase in electricity tariff, inflation of input costs, rising interest rates and labour costs.”

KUALA LUMPUR (April 20): Office-focused Tower Real Estate Investment Trust (REIT) reported an 87% year-on-year drop in net trust income or net profit in its third quarter ended March 31, 2023 (3QFY2023), as earnings were weighed down further by higher electricity tariff, minimum wage hike, as well as interest, housekeeping and security expenses.

Net profit fell to RM146,000 from RM1.16 million a year ago, while net property income dipped 4.6% to RM3.96 million from RM4.15 million, the REIT's Thursday (April 20) bourse filing showed. No income distribution was declared for the latest quarter.

The weaker performance came despite revenue going up to RM8.61 million from RM8 million on higher occupancy rates in Menara HLX and Plaza Zurich, which was partially offset by lower occupancy in Menara Guoco.

For the nine months ended March 31 (9MFY2023), the REIT's net profit fell 77% to RM1.11 million from RM4.82 million for 9MFY2022, amid increased building operating expenses and interest expenses; net property income dropped 14% to RM12.06 million from RM14.04 million.

Revenue rose to RM25.22 million from RM24.36 million, again due to the same reason that drove its higher quarterly revenue.

The office rental market remains challenging with the over-supply of office space particularly in the Klang Valley as more organisations, especially multinational corporations, continue to re-evaluate their workplace strategies and requirements, the REIT said.

“This situation is further exacerbated by increase in electricity tariff, inflation of input costs, rising interest rates and labour costs.

“While there are improvements in leasing activities, tenants remain cautious to make commitments and taking time to recover to pre-pandemic levels,” it said.

Nevertheless, Tower REIT said its manager — GLM REIT Management Sdn Bhd — will continue to take proactive steps to improve its offering to target markets, enhance its service level, adopt strategies and operational measures to manage costs.

The REIT's units closed unchanged at 45 sen, giving it a market capitalisation of RM126.26 million.