Hektar REIT renewed 25% of leases by NLA expiring in 2023

• Going forward, Hektar REIT executive director and chief executive officer Johari Shukri Jamil shared that there are 94 tenants covering 528,121 sq ft of space that is set to expire in 2024, followed by 58 tenants with 187,202 sq ft expiring in 2025. .
• In 2022, Hektar REIT said a total of 178 tenancies covering 466,357 sq ft have been renewed as of Dec 31, 2022, representing 22.8% of total NLA. 

KUALA LUMPUR (April 6): Hektar Real Estate Investment Trust (Hektar REIT) has renewed 25% of its leases which are expiring this year, or 234,000 sq ft out of 962,565 sq ft of retail space involving 213 tenancies expiring in 2023.

The leases which were scheduled to end this year represent 47.1% of the trust’s total net lettable area (NLA) measuring 2.05 million sq ft at end-March.

Hektar REIT executive director and chief executive officer Johari Shukri Jamil said the trust is optimistic to achieve renewal of the remaining expiring tenancies on the back of tenant sales recovering to pre-Covid-19 pandemic levels, while shopper traffic improved to 75% of pre-pandemic levels. 
 
“I think most tenants are doing well as visitors' footfall has increase and businesses have improved, which gives them opportunities to grow business and make better revenue. That is why we are optimistic to achieve renewal of the remaining expiring tenancies," Johari told at press conference after the company's annual general meeting.  
 
Johari also noted that visitor traffic surged 60% year-on-year in 2022 to record 21.1 million across its malls, compared to 13.2 milllion in 2021. 
 
Going forward, Johari shared that there are 94 tenants covering 528,121 sq ft of space that is set to expire in 2024, followed by 58 tenants with 187,202 sq ft expiring in 2025. 
 
In 2022, Hektar REIT said a total of 178 tenancies covering 466,357 sq ft have been renewed as of Dec 31, 2022, representing 22.8% of total NLA. 

Hektar REIT is solely a retail player with six neighbourhood and regional malls in its portfolio — Subang Parade in the Klang Valley, Mahkota Parade in Melaka, Wetex Parade and Segamat Central in Johor, and Central Square and Kulim Central in Kedah.

Retail sector to grow amid economic recovery post-Covid

When asked about diversifying itself from “pure play” retail malls, Johari did not discount the possibility, citing that the group will evaluate the proposal once the opportunity arises. 

Nonetheless, he said there are still opportunities to explore within the retail sector. 

“We are also confident of growth in the [retail] sector as our neighborhood shopping malls remain at the heart of each community and we believe people still wish to interact, dine and shop [physically] in the future. 

“We have always focused on neighborhood assets and localisation. We study the demographics of the catchment area and we have a good balance between local and national retailers to suit the catchment,” he added. 

Speaking on its outlook, Johari is mindful of the challenges facing the sector, such as an increase in cost due to rising inflationary pressure and a surge in electricity bills, especially after a higher electricity tariff surcharge of 20 sen per kilowatt an hour (kWh) was introduced by the government this year.   

In view of rising costs, the Trust said it has appointed an energy-saving consultant to perform an audit group-wide and proposed energy-saving initiatives to cut down the hefty electricity bill. 

According to Johari, in the first phase, the company has replaced most of the lightings at its portfolio with energy-efficient LED lights and optimised its chiller air-conditioning system. 

“The second phase of [the] strategy is to have solar panels. After implementing the first and second phases, hopefully we will be able to reduce the electricity bills.   

However, he did not disclose the potential investment required for these cost optimisation efforts. 

"We're not in the position to share that (capital expenditure) at this moment in time because the energy saving consultant is working on the audit," he said. 

Electricity bills currently constitute approximately 89% of the company's total utility costs, with an annual bill of more than RM19 million, he said.  

For the full year ended Dec 31, 2022 (FY2022), Hektar REIT’s net property income (NPI) climbed 24.82% to RM58.69 million from RM47.02 million last year, thanks to the retail sector's continued recovery after the reopening of economy activities. 

As for FY2021, higher rental support was provided to tenants due to businesses being hit hard by the Covid-19 pandemic and with the implementation of various movement control orders, it said in the filing. 

The REIT’s full-year revenue increased 21.58% to RM117.45 million from RM96.6 million a year prior. 

At 4pm, Hektar REIT units rose 0.5 sen or 0.72% to 69.5 sen, translating into a market capitalisation of RM347 million.