Hektar REIT seeks to double its asset value

KUALA LUMPUR: Hektar Real Estate Investment Trust (Hektar REIT) is looking to double its current total asset value of RM1 billion through the refurbishment of current malls and remixing its tenants to increase rental yields.

The company has five malls in its stable — Subang Parade in Selangor; Mahkota Parade in Malacca; Wetex Parade in Johor; and two recently acquired malls in Kedah.

Hektar REIT executive director and CFO Zalila Mohd Toon said the company’s total asset value has reached the RM1 billion mark.

“We would like to double it, although there is no specific timeframe as to when this will take place,” she said after the company AGM yesterday.

The group will refurbish its two shopping malls in Kedah — Central Square in Sungei Petani and Landmark Central in Kulim — at a total cost of RM19 million. The refurbishment work is expected to be completed by the middle of next year.

Hektar REIT will also undertake a tenant remixing exercise to further boost rental yields. Currently, Subang Parade, Mahkota Parade and Wetex Parade have an occupancy rate of around 90% each.

“Hektar has more than 1.5 million sq ft of net area to be leased out within our asset portfolio, and we are constantly on the lookout for acquisition opportunities that are in line with the REIT’s investment strategy,” Zalila said.

Hektar REIT senior finance manager Raziff Suhairi Shaaban said the refurbishment of the two shopping malls in Kedah will be funded by borrowings. These additional borrowings, he added, are not expected to affect the group’s current gearing ratio of 41%.

“We shall create a stable value for the malls. Thus, the group’s gearing ratio will not be compromised, as we don’t think the percentage of gearing ratio is at a dangerous level.”

Analysts and fund managers have recommended the gearing ratio for REITs to be below 40%, although the Securities Commission’s guideline is 50% of total loan or assets.

Hektar REIT declared a final distribution per unit of 2.7 sen for its financial year ended Dec 31, 2012.

This article first appeared in The Edge Financial Daily, on April 19, 2013.

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