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Sunway REIT eyes 3rd party assets

KUALA LUMPUR (Aug 9): Apart from asset injection by parent Sunway Bhd, Sunway Real Estate Investment Trust (Sunway REIT) is also looking at acquiring third party property assets in “key growth cities” in Malaysia, said its CFO Wai Sow Fun.

“Our focus [for third party acquisitions] will be in retail and mixed use segments. We look at key growth cities such as the Klang Valley, Johor, Penang and even Sabah,” Wai said during Sunway REIT’s fourth quarter results announcement briefing yesterday.

However, Wai said the company would consider acquiring property assets in small cities where “we can identify an opportunistic investment”. Sunway REIT is also currently assessing some of Sunway Bhd’s completed property assets including Sunway Hotel, Monash University, Sunway Giza Shopping Centre and Sunway Medical Centre.

“When the time is right and when the price is right, we will make the acquisition,” said Wai in response to a question on the acquisition timeframe. For the financial year ended June 30, Sunway REIT’s realised net income grew 13.9% to RM190.58 million from RM167.31 million a year ago. However, full year net profit dropped 24.1% to RM420.46 million due to lower revaluation gains compared to the previous year’s.

Ng: The REIT’s retail and hotel assets are likely to register healthy growth for the coming year.

“For REITs, what is important is the realised net income achieved for the year and the distributable income declared, not so much of the net profit as it includes net unrealised income which only weighs more significance when the REIT decides to sell the assets,” said Sunway REIT CEO Datuk Jeffrey Ng.

For FY13, Ng expects Sunway REIT to maintain its distributable income despite temporary loss of contribution from Sunway Putra Mall which is currently undergoing a major refurbishment exercise. The REIT declared distributable income totalling RM201.97 million or 7.5 sen per unit for FY12.

This represents an increase of 14.4% from a year ago where distribution per unit was at 6.58 sen. Sunway REIT closed at RM1.48 yesterday, giving it a historical yield of 5.07%. Ng said the REIT’s retail and hotel assets are likely to register healthy growth for the coming year while its office assets remain “challenging” due to oversupply of office space in the Klang Valley.

At present, the REIT’s assets base is 70% dominated by retail property which is the Sunway Pyramid shopping mall. Sunway Pyramid maintained its 100% renewal rate of 327,326 square feet with average rental revision rate of 16.3% over a three-year period for FY12.

Ng believes that its current portfolio of assets within Sunway City Resort is in a sweet spot as it will benefit from the proposed bus rapid transit and road upgrading announced by Sunway Bhd, making it more accessible to the public.

Sunway REIT’s net asset value (NAV) per unit increased by 8% to RM1.10 per unit for FY12 compared with a year ago where the NAV per unit sat at RM1.02.

This article appeared in The Edge Financial Daily on August 9, 2012.

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