WHAT are Malaysian real estate investment trusts (REITs) up to these days amid the continued challenging retail and office markets?
UOA REIT has said it will remain cautious about its expenditure and new asset injections this year as demand continues to outstrip supply in the office sector.
Chief executive officer (CEO) Kong Sze Choon said at the company’s shareholders’ meeting in April that now is not the best time for expansion.
He said the management has chosen to adopt a more prudent approach in terms of expenditure instead of following rising interest rates.
According to Kong, UOA REIT has no plans to acquire or dispose of any assets in the immediate future.
“We are always open to possible acquisitions should the opportunities arise, but it is very difficult to find yield-accretive buildings now,” he said.
Kong also said UOA REIT will be allocating about RM2 million for asset enhancement initiatives (AEIs). This is to upgrade Wisma UOA Damansara II, located adjacent to Wisma UOA Damansara, fronting Jalan Semantan in Kuala Lumpur
UOA REIT has six assets in its portfolio with an average occupancy rate of around 84 per cent.
The six assets are UOA Centre, UOA II, UOA Damansara, Wisma UOA Pantai, Wisma UOA Damansara II and Menara UOA in Bangsar.
HEKTAR REIT AND ITS STRATEGY
Hektar Asset Management Sdn Bhd CEO and executive director Datuk Hisham Othman said the company aims to continue gaining consumer confidence this year.
He said Hektar REIT will be focusing on customer engagement exercises to increase visits and spending, as well as create and maintain retail environments that are favourable to consumers and retailers.
“We will also continuously adapt our tenancy mix to changes in consumer needs, preferences and lifestyles, as well as introduce new brands that represent quality and offer trendy products at our less urban shopping centres,” he told NST Property.
Hisham said Hektar REIT plans to collaborate with tenants and partners to enhance retail experience by focusing on customer satisfaction through stronger marketing campaigns.
It also plans to encourage tenants to adopt an omni-channel approach to sales by increasing their online point-of-sale channels while offering the much-needed smell, touch and feel experiences only brick-and-mortar stores could provide.
“A good asset manager is an active manager who knows how to add value. We have embarked on AEIs to extend the physical and functional capacity of existing assets.
“Decisions on the timing of an AEI is contingent on a number of factors, one of which is the stage of the asset within its lifecycle. It is also influenced by the direction shown by key data, including net income trends, tenant sales turnover trends and visitor traffic trends.
“This year we are focusing on Subang Parade. Works on the initial phase began last year to enhance the internal systems of the shopping centre. We have today completed the deployment of the new energy-efficient air-conditioning and mechanical ventilation psystem, which has resulted in substantial savings in electricity cost, while reducing our carbon footprint,” said Hisham.
He said to support changing lifestyles and preferences, Hektar REIT will also introduce a selection of dining options consisting of new food and beverage zones.
In addition, it is expected to bring aesthetic improvements, increase accessibility to the shopping centre for a much-improved visitor experience.
”We are targeting mid-2019 for the full completion of Subang Parade’s AEI, subsequent to which we will focus on Segamat Central, which is currently in the planning stage,” said Hisham.
Hektar REIT plans to double its asset portfolio to RM2.4 billion by 2026 from RM1.2 billion.
Its current portfolio consists mostly of neighbourhood malls, with several of the malls enjoying being the only shopping centre in town, such as Wetex Parade, Segamat Central and Kulim Central.
“Neighbourhood malls are relatively defensive in nature. The tenancies are more stable in these malls. The proximity of neighbourhood malls to shoppers’ homes and good tenant mix play a major role in the success of our malls.
“On the other hand, ‘price wars’ for rental are more apparent among malls in top-tier cities where markets are saturated or competition is intensified by oversupply of good retail space and/or underwhelming demand, which often results in rental rebates to secure tenants and landlords offering capex provisions to tenants,” said Hisham.
“The key is to also be flexible as times are tough for retailers as well as landlords. Over the last few years, we have seen the rental structure change to become more adaptive to the nature of tenant’s business which has proved to be a success when implemented in our malls,” he added.
Hektar REIT is constantly on the lookout for acquisition opportunities. However, the properties have to meet its key investment criteria.
“Our strategy is to locate and penetrate under-served areas within the country. We believe that there are still many untapped opportunities in Malaysia, including in Sabah and Sarawak, as there are more than 50 cities and municipalities with a sizeable population.
“We will continue to focus on the neighbourhood and community centre segments but not limit ourselves to other types of malls,” said Hisham.
