Tower REIT’s 1Q2010 net income falls 8%

KUALA LUMPUR: Tower REIT recorded a net income drop of 8% for 1Q2010 to RM7.115 million from RM7.718 million over the same period last year, Bursa Malaysia announced on May 19.

Meanwhile, the REIT’s gross revenue for 1Q2010 saw a drop to RM11.036 million from RM12.547 million in the same quarter last year, representing a 12% dip.

The decrease was attributed to a drop in the average occupancy rate of Menara HLA, with two long-term anchor tenants moving out of the premises, the announcement said.

The occupancy rate is however, set to jump back to 90% due to replacement tenants commencing tenancies mostly in 2Q2010.

Tower REIT’s portfolio consists of Menara HLA, HP Towers and Menara ING.

The net asset value (NAV) and NAV per unit after distribution of the REIT as at March 31, 2010, were RM454.038 million and RM1.61187 respectively. Its unit price closed at RM1.20 per unit, an increase of 5% compared with the opening unit price of RM1.41 per unit on Jan 1, 2010.

Tower REIT reports that although the economy has improved in the quarter reviewed, it noted that office occupiers remain cautious about expansion, with leasing activity driven mainly by consolidation and relocation.

With limited new office buildings completed in 1Q, the overall occupancy and rental rates remain stable across all submarkets. The announcement stated that no major investment transactions were recorded.

The yields of office investments remain between 6% and 8%. Moreover, the economic outlook by Bank Negara Malaysia projects a 4.5% to 5.5% growth in GDP and this will stablise the office market as the economy improves.

However, there is still increasing downward pressure on rental and occupancy rates owing to the considerable amount of incoming supply.

The entry of newly completed buildings is expected to intensify the competition for tenants and hence, rental values are expected to ease.

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