Hektar REIT looks for new assets to meet acquisition criteria

KUALA LUMPUR: Hektar Real Estate Investment Trust (Hektar REIT) is continuously looking at new assets which meets the company's acquisitions criteria, says chief executive officer and executive director Datuk Hisham Othman.

He said Hektar REIT's gearing is 44.5 per cent of assets, so at this time, it would be prudent for any potential acquisition to consider equity fund raising.

"In this current market, that would be very challenging unless we secure an asset with exceptional potential. We will continue to monitor," he told The New Straits Times.

He said apart from that, the management is exploring the expansion of the physical business footprint by venturing online. This would involve partnering with platforms to complement its retailers.

"For example, we are experimenting with food delivery companies to supplement our food courts and food and beverage (F&B) operators.

"With respect to online e-commerce platforms, the challenge is usually with fulfilment as retailers on-site would have to separate inventory systems for offline and online.

"We are reviewing portal options, but they also have limitations, so at the very least, we would continue to experiment with social media platforms to drive sales campaigns and maintain presence of mind with our local shoppers," he said.

When asked, Hisham said the company has no plans to re-organise and re-strategise its portfolio and will stick to its focus on neighbourhood malls.

"Aside from Subang Parade, all our other properties are outside of the Klang Valley. Three of them are the only malls in town, such as Wetex Parade in Muar, Segamat Central in Segamat and Kulim Central in Kulim.

"The neighbourhood focus means that the mall needs to cater towards value and convenience and basic necessities matching the needs of residents.

"The short term goal now is to focus on the basics and creating confidence that safe shopping is observed at all of our malls and marketing campaigns to focus on tenant sales. Above all, maintaining the occupancy in our malls," he said.

Earnings-wise, Hektar REIT posted RM26.0 million in revenue for the third quarter (3Q) ended September 30, 2020 (FY20), a decline of 23.8 per cent same quarter last year.

Revenue fell mainly due to the rental income, carpark income and lower hotel occupancy, consistent with other retail

and hospitality REITs that were affected because of the pandemic outbreak.

Notwithstanding the fall in revenue and net property income (NPI) which declined by 31.6 per cent to RM12.9 million, the company's recovery plans are on-track as Subang Parade welcomed premium supermarket Village Grocer as a new anchor tenant in September 2020 and Parkson reopened in July 2020 following the refurbishment of the lower ground floor.

Hisham said despite portfolio leasing activities that continued to be affected by the Recovery Movement Control Order (RMCO) and in tandem with the fall in economic activities, Hektar REIT's portfolio of properties remained steady with an occupancy rate of 88.5 per cent.

Elaborating further on Village Grocer, Hisham said based on the company's exit market survey for 2017, it was found that Subang Jaya households have an average monthly income of RM11,390 per month.

Subang Jaya is therefore one of the more affluent neighbourhoods in the Klang Valley and Subang Parade is one of the leading malls in Subang Jaya.

"Thus, we were of the view that Village Grocer is the right grocer to elevate the shopping experience at Subang Parade We partnered with them to create a 25,000 sq ft anchor space with a full service supermarket with food kiosks," he said.

When asked if the company foresee shopping mall traffic/crowd to increase after the Conditional Movement Control Order CMCO, Hisham said the government is on the right track in combating the Covid-19 pandemic.

"We expect the number of new cases to decline over time and public confidence will return. On our part, we will continue to ensure our malls are safe for shoppers. This along with the expected recovery of the economy in 2021 bodes well for our malls," he said.


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