Hektar REIT targets 20% non-retail assets, aims to double portfolio to RM3b in five years

• The REIT is eyeing assets with medium- to long-term leases, triple net lease structures (where tenants cover taxes, insurance and maintenance), and at least a 6.5% yield.

KUALA LUMPUR (May 21): Hektar Real Estate Investment Trust (REIT) (KL:HEKTAR) aims to grow its non-retail assets from 13% to 20%, and double its portfolio size to RM3 billion within five years.

Hektar REIT’s non-retail assets make up just 13% of its portfolio but are expected to contribute 18% of net property income (NPI), according to the trust’s chief operating officer Sabrina Halim.

The REIT is eyeing assets with medium- to long-term leases, triple net lease structures (where tenants cover taxes, insurance and maintenance), and at least a 6.5% yield.

It [tenancy under triple net lease] contributes directly to NPI, without reducing operating expenditure (opex)," Sabrina said, while speaking at the trust's post-AGM press conference. "That is why we are pivoting to non-retail."

As a result, the REIT expects its NPI margin to begin improving gradually from 2025 onwards, with a target of reaching 60%, up from 50.39% in FY2024.

The REIT is actively seeking to expand its non-retail portfolio with assets in sectors such as education, industrial and renewable energy concessions.

Executive director and chief executive officer Zainal Iskandar Ismail said the REIT is also looking at healthcare and wellness acquistions.

While it owns seven mainly retail properties like Subang Parade and Mahkota Parade, it has started diversification efforts by acquiring industrial and educational assets, including a Penang facility for RM30 million and a Melaka college for RM148.5 million.

Subang Parade, a key asset contributing 24% of total income, is undergoing upgrades to boost value and performance. Its rental rates improved by 6.5% in 2024 (up from a decline in 2023), and occupancy rose to 84.1%, with a goal of surpassing 90% in 2025. Market value is expected to rise over 20% after renovations finish in 2026.

Hektar REIT plans to double the F&B space at Subang Parade from 15% to 30% of total area to attract more foot traffic from nearby homes and offices. Tenants are selected based on strategic planning and must offer at least a 6.5% yield.

At Segamat Central, occupancy fell to 58.4% in 2024 but is expected to recover above 80% with a new anchor tenant. The boost is supported by a 20% rise in foot traffic, partly due to the mall’s location near the upcoming Johor Bahru-Singapore RTS link and creative moves like converting rooftop parking into a pickleball court.

Improved footfall is helping the REIT secure better tenant deals.

The REIT is targeting 5% to 6% of rental reversion for its retail assets this year compared to 5.7% in FY2024.

The stock closed up 1.2% to 44 sen a share on Wednesday, giving it a market capitalisation of RM312.1 million.

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