Hektar REIT bullish on strategies

CEO says acquiring neighbourhood malls will pay off

Hektar Real Estate Invesment Trust (REIT) is firmly confident and bullish that its strategies in acquiring neighbourhood malls that are not necessarily located in the Klang Valley will pay off for its unitholders, especially in times of economic trouble.

REIT manager Hektar Asset Management Sdn Bhd's chairman and CEO Datuk Jaafar Abdul Hamid said that despite being among smaller listed REIT entities in the industry presently, it counted its strengths as being diversified and defensive in times of economic uncertainties around the world.

"We are too small to be compared with the bigger (retail) players. But, we have our niche. Of course people will say, Hektar REIT is small, compared with others which are bigger and more stable. But you have to do your own analysis history shows that we pay quarterly dividends for the last five years," Jaafar told journalists after its EGM yesterday.

"Even though we are small, we are well diversified. The big ones (REITs), they are concentrated one big mall with big asset values. Imagine if you have any incidents (happening)," its executive director and chief financial officer Zalila Mohd Toon said.

Hektar REIT yesterday obtained the approval of its unitholders for the proposed acquisition of two shopping malls in Kedah Landmark Central Property (LCP) with a net lettable area of 280,000 sq ft in Kulim, and Central Square Property (CSP) with a net lettable area of 300,000 sq ft in Sungai Petani.

LCP opened in 2009 and its main anchor tenant is Giant Hypermarket. It has a 77% occupancy rate which is expected to rise to 99% once The Store commences its tenancy on Oct 15.

CSP was launched in December 1997 with The Store being its main anchor tenant with an occupancy rate of 99.5%.

These purchases will be partly funded by a renounceable rights issuance of up to 93 million net units in Hektar REIT, which have also been approved by its unitholders.

The manager is allocating RM19mil to refurbish the two malls which will be financed via internal funds and bank borrowings and is expected to be spent in 2013.

LCP will be bought for RM98mil and has an audited historical yields of 5.8% while CSP will be purchased at RM83mil with an audited historical yield of 6.4%.

"These are based on audited numbers that have been produced by the vendor. When we did our assessment when deciding whether or not we should acquire it is on the basis that it will be 7% at the point of entry. The minute Hektar REIT injects these two malls into its portfolio, the starting point will be 7% onwards," its senior finance manager Raziff Suhairi Shaaban said.

"Post-acquisition there may be a slight earnings per unit dilution in the short term but, in terms of dividends per unit, we assure you that the dividends that we will be paying post-acquisition will be maintained at least as per 2011. Unitholders dividends will be maintained or improved from this year onwards," Raziff said.

The acquisition signified its expansion into the northern region of Malaysia and was in accordance with its investment strategy of targeting prime neighbourhood malls as they were more resilient during times of economic downturn, capitalising on the economic growth and the vibrancy of the retail market, a statement issued by the manager stated.

Hektar REIT gets SC nod to up fund size

Hektar Asset Management Sdn Bhd, the manager of Hektar Real Estate Investment Trust (Hektar REIT), today announced it
has obtained the Securities Commission’s (SC) approval for its proposal to increase its fund size and list new units on the Main Market of Bursa Malaysia Securities Bhd.

With the approval, Hektar REIT is looking to increase its fund size by up to 93.859 million units to a maximum of 413.855 million units.

Approval was also given for the valuation of two retail properties in Kedah to be acquired by Hektar REIT, it said in a statement.

The properties are Landmark Central Shopping Centre and a major portion of the Central Square Shopping Centre, which are collectively worth RM184 million, it said.

The RM181 million acquisition of both malls at a purchase consideration price will also increase REIT’s gross asset value to RM1 billion, it said.

Hektar REIT’s enlarged net lettable area is expected to increase by about 52 per cent after Kedah malls proposed acquisition.

“Our next step is to meet our unitholders to obtain their approval for the proposed acquisition and rights issue through an extraordinary general meeting,” said Datuk Jaafar Abdul Hamid, Chairman and Chief Executive Officer of Hektar Asset Management Sdn Bhd. — Bernama

Hektar REIT profit jumps to RM58mil

Hektar Real Estate Investment Trust’s (Hektar REIT) net profit jumped to RM57.7mil for the fourth quarter ended Dec 31, 2011 from RM11.3mil a year earlier.

Its revenue rose to RM24.2mil against RM24mil previously.

Hektar REIT’s net profit increased to RM86.6mil for the financial year ended Dec 31, 2011 (FY11), up from RM39.1mil previously on RM47.7mil gain on revaluation of investment properties. Its full-year revenue stood at RM94.9mil from RM90.8mil previously.

Hektar REIT declared a final quarter dividend per unit of 3 sen.

Hektar REIT said buying 2 malls for RM180m

Hektar REIT is buying two malls in Kedah for an estimated RM180 million, sources say.

The malls are believed to be Kulim Landmark Central and Central Square Sg Petani.

An announcement from the company is expected to be made as early as today.

‘Hold’ ratings for Hektar Reit

CIMB Research and AmResearch have put a “hold” recommendation on Hektar Reit.

CIMB Research said as a pure retail REIT, Hektar REIT stands to benefit from the improving retail sector outlook in Malaysia.

In its research note, CIMB Research said it is projecting gross yields of eight to nine per cent for Hektar REIT for the financial year 2011-2013, supported by rental reversion, annual step-up rates and asset enhancement initiatives.

AmResearch, meanwhile, said while the REIT is fundamentally sound, the “hold” rating is mainly premised on the lack of newsflow on the asset acquisition front.

“Hektar has identified a few assets to be injected into the REIT but no deal has been concluded,” AmResearch said.

AmResearch downgraded the rating on Hektar REIT from “buy” to “hold”.

“We are cautious about the competition faced by its main asset, Subang Parade,which provided 51 per cent of the portfolio’s net operating income (NOI) last year,” it added. — Bernama

Hektar REIT Q3 profit rises to RM9.7m

Hektar Real Estate Investment Trust’s (Hektar REIT) pre-tax profit for the third quarter ended Sept 30, 2010 rose to RM9.73 million from RM9.58 million in the same quarter in 2009.

Revenue increased to RM22.68 million from RM22.56 million previously.

For the ninth-month period, its pre-tax profit rose to RM28.9 million from RM27.56 million in the corresponding period of the preceding year.

Revenue increased to RM67.89 million from RM66.18 million previously.

In a filing to Bursa Malaysia, the company attributed the good results to improvement in rentals and car park income.

“In addition, the application of Financial Reporting Standard 117 commencing Jan 1, 2010 also contributed to the higher revenue,” it said.

Hektar REIT said it would continue to optimise the property portfolio through selective asset enhancement in the existing malls, including a proposed cinema for Subang Parade and a new retail zone for Wetex Parade.

“The company will also continue to explore and negotiate potential acquisition opportunities,” it said.

It said following the completion of Mahkota Parade’s refurbishment in the second quarter of 2010, it would maintain the retail centre’s leadership position in Bandar Melaka.

Hektar REIT said it would maintain its view of cautious optimism for the Malaysian retail sector. — Bernama

Buy, fair value price RM1.23

AMRESEARCH Sdn Bhd has maintained a “buy” call on Hektar REIT Bhd’s (5121) due to its future earnings potential which are in line with expectations despite a weak occupancy.

Hektar REIT Q2 net income up 3.2pc

Hektar Real Estate Investment Trust’s (Hektar REIT) net income for the second quarter ended June 30, 2010 rose by 3.2 per cent to RM9.1 million, or 2.85 sen per unit.

Its revenue rose by 1.6 per cent to RM22.2 million compared with the preceding year’s quarter.

In a statement today, Hektar Asset Management Sdn Bhd, the manager for Hektar REIT, said the results demonstrated the advantages of diversity within its portfolio.

Its chief executive officer, Datuk Jaafar Abdul Hamid, said the refurbishment and re-launch of Mahkota Parade has been fruitful as occupancy and rental reversions were showing positive signs.

Hektar REIT declared a second quarter dividend per unit of 2.50 sen, up 4.2 per cent.

It said based on the closing price of RM1.24 on June 30, this represented an annualised yield of 8.1 per cent. — Bernama

Hektar REIT posts lower net income

Hektar Real Estate Investment Trust (REIT) registered a net income of RM9.58mil for the fourth quarter ended Dec 31, 2009, down 70.7% from RM32.6mil in the previous corresponding period.

Its revenue decreased 3.3% to RM21.5mil from RM22.3mil a year ago.

In a filing with Bursa Malaysia, Hektar REIT said its net income for the year ended Dec 31 (FY09) fell 38.5% to RM37.1mil, on account of a smaller fair value gain during the year, against RM60.4mil in FY08.

Its revenue for FY09 rose 4.3% to RM87.7mil, primarily due to the full year performance of its Wetex Parade in Muar.

It declared dividend per share of 3.1 sen for the fourth quarter.

REIT manager Hektar Asset Management Sdn Bhd chief executive officer Datuk Jaafar Abdul Hamid said after an unpromising start and over the course of a volatile year, Hektar REIT had managed to maintain the level of the financial performance of its shopping complexes.

“Our solid and stable assets have continued to perform, proving that Hektar REIT has a resilient property portfolio, a focused business model and quality execution by management,” he said.

Hektar REIT has shopping centres in Selangor, Malacca and Johor with assets valued in excess of RM700mil and an average occupancy of 95.8%.

Hektar REIT in talks to buy new assets


Most of the potential acquisitions are located in Peninsular Malaysia, says Hektar Asset Management chairman

Hektar Real Estate Investment Trust (REIT), an investor in shopping malls, says it is in talks to buy new assets and plans to sell more units to fund future purchases.

“We are in the midst of negotiating for new acquisitions, but cannot divulge any more details at this time,” Hektar Asset Management Sdn Bhd chairman and chief executive officer Datuk Jaafar Abdul Hamid told Business Times in an interview.

Most of the potential buys are located in Peninsular Malaysia, he said, adding that it was in talks with township developers and other asset managers.

“The typical shopping acquisition is quite significant, starting from RM100 million and above, and will definitely require us to raise equity-financing to place that acquisition in the REIT.”

While there was no firm plan yet to place out additional units, Jaafar said he was pleased that the capital markets had rebounded substantially in the past few months.

“Hopefully the timing would be conducive (for us to sell new units) when we close any acquisitions,” he said.

Units of Hektar REIT have risen 36 per cent this year to end-November, but still trails the 44 per cent gain in the benchmark FTSE Bursa Malaysia KLCI in that period.

Hektar REIT owns the Subang Parade shopping centre in Subang Jaya, Selangor; Mahkota Parade in Malacca; and Wetex Parade in Muar, Johor. The fund’s gearing ratio was 41 per cent as at end-June, quite close to the 50 per cent limit set by the regulator for a REIT.

Although a unit placement exercise will pare down its gearing and raise more cash for potential acquisitions, Jaafar said it was careful not to dilute the dividends received by existing unitholders.

“We believe it is important to deliver steady growth in the form of dividends to our unit-holders. We hope to establish a track record as an asset manager that delivers stable returns. So if we were to do a placement, it would be to acquire productive assets which would support the REIT’s income and dividend growth.”

While rival Axis REIT has garnered more investor attention after converting into an Islamic REIT, Jaafar said that Hektar had no plans to follow in Axis’ footstep.

“We have studied the Islamic REIT model since before our initial public offering and will continue to monitor the feasibility of the model,” he said.

“(But) we realised it was not a simple proposition for retail properties because it meant that we would eventually, over time, have to eliminate various types of tenants, such as conventional banks, conventional insurance branches, health clubs, cinema, to name a few.

“This is a challenge, especially for a shopping centre, to remain relevant without these amenities for consumers.”