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Hektar REIT eyeing more malls in smaller towns

KUALA LUMPUR: Hektar Real Estate Investment Trust (Hektar REIT) is actively looking to acquire neighbourhood malls outside of main city areas that other larger REIT players or investors shy away from.

Executive director and chief financial officer Zalila Mohd Toon said the company’s strategy is to tap the increasing purchasing power of residents in these geographical locations.

“By spreading out our assets strategically across peninsular Malaysia, we are diversifying our portfolio risk. And by doing so, we are also tapping the strong purchasing power in smaller towns by bringing in new local and international brands or retailers.

“We believe that strategically selecting the location of our assets has in many ways secured our success to date, as our portfolio of malls now has a track record of high occupancy with a current average occupancy rate of 95%,” she said in a statement yesterday.

Hektar REIT currently owns five malls — Wetex Parade in Muar, Johor; Mahkota Parade in Melaka; Subang Parade in Selangor; Central Square in Sungai Petani, Kedah; and Landmark Central in Kulim, Kedah.

Zalila said Hektar REIT has changed the retail mix in growing towns to include brands found in larger cities, like Kuala Lumpur and Penang, to take advantage of the increasing purchasing power of residents in smaller towns.

She said this strategy has been successful and was well received in Wetex Parade in Muar. The company will replicate the same business model in Central Square and Landmark Central in Kedah, two of the REIT’s latest additions to its asset portfolio.

The two malls in Kedah are currently undergoing refurbishments, with works on Central Square, costing RM23 million, to be completed in the middle of this year. Refurbishment works on Landmark Central will begin after that, and they are expected to be completed by 2015.

The company said it has invested an additional RM15 million to expand Mahkota Parade.

Hektar REIT posted a 16.5% increase in revenue to RM120 million for the financial year ended Dec 31, 2013 (FY13). Net property income improved by 16.3% to RM74 million.

The company declared distribution per unit (DPU) of 10.50 sen for FY13, which is the same as FY12’s. Based on the closing price of RM1.50 on Dec 31, 2013, the company’s DPU represented a distribution yield of approximately 7%.

 

This article first appeared in The Edge Financial Daily, on March 26, 2014.

 

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