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Hektar unfazed by mega retail REITs

KUALA LUMPUR (July 6): Hektar Real Estate Investment Trust (REIT) will stay focused on its existing niche strategy, unfazed by the two anticipated mega retail-focused REITs, said chairman Datuk Jaafar Abdul Hamid yesterday.

Jaafar maintained that the changing Malaysian REIT landscape does not affect Hektar REIT’s strategy of buying, refurbishing and turning around neighbourhood malls outside the Klang Valley.

“We are too small to be on the radar with [the likes of] Pavilion REIT but we have our niche. We will position ourselves the way we are positioned now.

We won’t be any different. Our numbers speak for themselves,” Jaafar told a press conference after Hektar REIT’s AGM. Hektar REIT was one of the earliest REITs to be listed on Bursa Malaysia in December 2006 but its allure has since been dimmed by larger REITs.

There are at least two mega REITs in the pipeline. IGB Corp Bhd’s 63.5% owned KrisAssets Bhd is in the process of injecting Mid Valley Megamall and The Gardens Mall, worth a combined RM4.6 billion, into a REIT which is expected to list in August. KLCC Property Holdings Bhd recently announced it would explore a possible REIT for its prime assets which include the Petronas Twin Towers and Suria KLCC Mall.

Some property analysts opine that the smaller REITs cannot be immediately written off as they do offer strong yields. For example. Hektar REIT’s yield last year was 8% based on its dividend payout of 10.5 sen per unit and its closing unit price of RM1.32 for financial year 2011 (FY11).

Hektar REIT’s current dividend yield is estimated at 7.48% based on its closing share price of RM1.39 yesterday and annualised dividend payout of 10.4 sen for FY12. In the first quarter ended March 31, Hektar REIT declared a dividend of 2.6 sen.

Hektar REIT chief financial officer Zalila Mohd Toon said although Hektar REIT may be smaller than other retail REITs, it is a trust with properties in diverse locations. Hektar REIT’s assets include Subang Parade in Selangor, Mahkota Parade in Melaka and Wetex Parade in Muar, Johor.

It is in the process of completing the acquisitions of two malls in Kedah, namely Landmark Central Property in Kulim and Central Square Property in Sungai Petani.

The Kedah assets will expand Hektar REIT’s presence in the west coast of Peninsular Malaysia. “Our objective is to go all over Peninsular Malaysia to find properties to own and turn around.

We are open to buying assets in east Malaysia but for now we are covering the west coast of Peninsular Malaysia first,” Zalila said. Declining to say where Hektar REIT’s acquisition targets are, Jaafar would only say that mall acquisitions are done on an opportunistic basis.

Zalila said Hektar REIT will likely raise funds to acquire more assets as its gearing ratio now stands at about 42%.

This article appeared in The Edge Financial Daily July 6, 2012.

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