MRCB Quill Management Sdn Bhd (MQM), which is 41 per cent owned by Malaysian Resources Corp Bhd says proactive lease management, tenant retention, and maintaining a strong balance sheet remain its top priorities in overcoming the challenging operating environment.
MQM is the main thrust of MRCB-Quill Real Estate Investment Trust (MQREIT) activities which include acquiring and investing in commercial properties in Malaysia to provide unitholders with long-term and sustainable distribution of income.
It expects the Klang Valley office market to remain challenging.
MQM chairman Tan Sri Saw Choo Boon said the company is committed to weather through this challenging period.
Saw said MQM has put in place the necessary precautionary measures at its properties to mitigate the risk of exposure to Covid-19.
He said during this unprecedented Covid-19 pandemic, the company will extend assistance via rental support to its retail tenants who have been badly affected by the nationwide Movement Control Order (MCO) initiated since March 18, 2020.
"Covid-19 has affected economies and businesses in all property sectors. As the impact of Covid-19 is currently fluid and evolving, there remain significant market uncertainties. Nonetheless, we will proactively manage the MQREIT's portfolio to mitigate its impact and maintain a sustainable income," he said.
Currently, MQREIT owns five buildings in Cyberjaya, four in Kuala Lumpur, one each in Shah Alam, and Penang. The assets are valued at RM2.143 billion as at December 31, 2019.
Despite market uncertainties, MQREIT has been able to sustain a stable occupancy and healthy weighted average lease expiry, which stood at 4.65 years as at March 31, 2020.
The REIT's average occupancy rate as at March 31, 2020, was 90.5 per cent.
In terms of lease renewal, MQREIT has about 370,000 square feet (19 per cent of its total leased net lettable area) due for renewal in 2020 with the bulk of these leases due in the fourth quarter of 2020 (4Q 2020).
At least 93 per cent of the leases due in 1Q 2020 have been renewed and early negotiations have commenced for the bulk of the leases due in 4Q 2020.
In a filing with Bursa Malaysia, MQM said that MQREIT's net property income for the quarter ended March 31, 2020, increased 1.29 per cent to RM32.8 million, from RM32.38 million last year. It attributed this to higher revenue generated from Menara Shell, Wisma Technip, and Tesco.
Quarterly earnings per unit increased to 1.85 sen, from 1.81 sen for 1QFY19, as net profit climbed 1.94 per cent to RM19.79 million from RM19.41 million.
Revenue for the quarter was up 1.19 per cent to RM42.22 million, from RM41.72 million, on higher contributions from Menara Shell, Wisma Technip, and Tesco.
MQM chief executive officer Yong Su-Lin said that amidst market uncertainties, MQREIT will remain vigilant on managing cash flow and exercising financial discipline to continue delivering value to its unitholders.
Yong said in terms of capital management, MQREIT continues to be in a stable financial position to meet its financial and operational obligations, with a gearing ratio of 38.3 per cent as at March 31, 2020, well within Securities Commission's threshold of 50 per cent.
MQREIT's RM335 million borrowings due on March 30, 2020, was successfully refinanced for another tenure of five years, thereby increasing its debt average term to maturity to 3.32 years as at March 31, 2020, she said.
"After this refinancing, about 54 per cent of its total borrowings are on floating interest rate. While we expect the low-interest rate environment to persist, MQREIT will consider swapping some of its floating interest rate exposure to fixed-rate at an appropriate time, to cushion it from any potential rise in interest rates in a volatile market environment."