KIP REIT mall tenants less impacted by rising cost, says executive director

• "Consumers will still patronise our malls. As the economy reopens and recover from the pandemic and more people feel confident enough to go out, we are [also] seeing an increase in the footfalls and occupancy rate in our malls.”

KUALA LUMPUR (Sept 14): KIP Real Estate Investment Trust (KIP REIT) said the increase in costs due to inflationary pressures has had a negative impact on mall tenants’ profit margins.

“Tenants are unable to pass those cost increases on to consumers as the latter become more price sensitive,” its executive director Valerie Ong told reporters at the “Invest Malaysia: Pivoting for the Future” conference on Wednesday (Sept 14).

However, the impact on tenants of KIP REIT’s malls is less because they are mainly small and medium store operators that provide essential goods, she said. “Consumers will still patronise our malls. As the economy reopens and recover from the pandemic and more people feel confident enough to go out, we are [also] seeing an increase in the footfalls and occupancy rate in our malls.”

KIP REIT’s portfolio of assets comprises six community-centric malls strategically located in Bangi in Selangor, Tampoi, Kota Tinggi and Masai in Johor, Senawang in Negeri Sembilan and Melaka.

Last week, the Bank Negara Malaysia had raised its overnight policy rate by 25 basis points (bps) to 2.5% — the third consecutive rate hike this year — in line with expectations for further normalisation of the monetary policy as the country's economic growth and inflation gain momentum.

Ong said while the REIT’s mall tenants have expansion plans in the pipeline, they are constrained by labour shortages.

“Obviously, that is impacting the tenants' opening hours, as well as the operational methods. It remains an issue that is not resolved yet.

"This will be a major challenge because the shortage of manpower will also ultimately impact our malls' operation. Thus, I hope to see some improvement in bringing more manpower from overseas," she noted.

For the full financial year ended June 30, 2022 (FY22), KIP REIT saw net profit rise to RM75.51 million from RM35.22 million, arising from changes in fair value on investment properties during the year. This was despite revenue slipping to RM73.7 million from RM74.25 million, mainly due to lower promotional income on the back of restrictions on activities and events at the mall level for the first two quarters and lower average occupancy rate.

KIP REIT units closed unchanged at 89.5 sen on Wednesday, valuing the trust at RM518.16 million.