Hektar REIT slips into the red in 4Q on fair value loss

KUALA LUMPUR (Feb 17): Fair value adjustment arising from revaluation of its assets led Hektar Real Estate Investment Trust (Hektar REIT) to post a net loss of RM28.92 million in the fourth quarter ended Dec 31, 2015 (4QFY15) compared to a net income of RM17.58 million a year ago.

The fair value loss amounted to RM39.93 million in 4QFY15 compared to a RM6.13 million fair value gain in 4QFY14.

This was despite its net property income (NPI) rising 3.6% to RM19.5 million from the year-ago period, on higher revenue, which also grew 3.6% to RM31.93 million in 4QFY15 from 30.83 million in 4QFY14.

Hektar REIT also declared a final distribution per unit (DPU) of 2.7 sen, amounting to RM10.82 million, for 4QFY15, payable on March 18. This brings total DPU distributions for the year to 10.5 sen.

Based on the closing price of RM1.52 on Dec 31, 2015; FY15 DPU represented a dividend yield of 6.9%.

In a statement yesterday, Hektar REIT said for the cumulative 12 months (FY15), net income, which includes unrealised income, fell 90.6% to RM4.76 million from RM50.39 million in FY14 due to the fair value adjustment arising from the revaluation of its assets.

The NPI for FY15, however, improved 4.4% to RM76.48 million from RM73.28 million in FY14, while revenue was up 2.9% to RM125.51 million from RM121.99 million in FY14.

Its realised net income for FY15 remained positive, up 1% to RM44.69 million or 11.16 sen net income per unit from RM44.26 million or 11.05 sen net income per unit in FY14.

Hektar Asset Management Sdn Bhd chief executive officer Datuk Jaafar Abdul Hamid said the fair value loss arose as it needed a longer time to crystallise the returns to its investments.

At Mahkota Parade in Melaka, the trust had acquired individual lots and embarked on an asset enhancement initiative (AEI) to increase the number of screens at its cinema.

“While the capital expenses were incurred and recognised upfront in our books, it will take longer than a year for them to generate additional income to improve Mahkota Parade’s overall market value,” said Jaafar in the statement.

“The same applies for the AEI spent to revitalise Central Square in Sungai Petani, Kedah, where income returns would require several rental cycles to recover the amount spent,” he added.

Hektar REIT’s portfolio of shopping malls include Subang Parade in Subang Jaya, Selangor; Mahkota Parade, Wetex Parade in Muar, Johor; Central Square and Landmark Central in Kulim, Kedah.

The portfolio’s catchment serves a market size of three million shoppers. As at Dec 31, 2015, the portfolio had an average occupancy of 96.6%, and recorded over 30.5 million shopper visits.

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