Tuesday, 2 May 2017

(The Edge) ‘Sunway REIT on track to RM10b property value’

KUALA LUMPUR: Sunway Real Estate Investment Trust (Sunway REIT) says it is on track to achieve its RM10 billion property value target by the fi nancial year ending June 30, 2020 (FY20) — which is just a little over three years away — via both asset enhancement initiatives and acquisitions of new strategic assets.

In particular, Datuk Jeffrey Ng Tiong Lip, the chief executive of the REIT’s manager, Sunway REIT Management Sdn Bhd, highlighted that the environment is more conducive for the REIT to acquire new assets to boost its property value, as the gap between the prices at which vendors are willing to sell and at which buyers are willing to fork out is narrowing.

“The current market condition is that third-party opportunities seem to be entering the market much more than before, at a price level that is more acceptable between the buyer and the seller,” Ng said in a recent interview with The Edge Financial Daily.

Ng added that as the gap further narrows, it will be easier to enter into transactions, adding that he foresees acquiring new strategic assets in good locations, which will bode well for the group’s future rental growth.

As at the first quarter ended Sept 30, 2016 (1QFY17), the REIT’s property value was at RM6.46 billion with 14 assets, comprising four retail malls, five hotels, four offices and a medical centre.

It is now in the midst of acquiring its first industrial asset in Shah Alam for RM91.5 million, which will raise its portfolio’s property value to RM6.52 billion on completion of the purchase.

The new buy is in line with the mandate sought by Sunway REIT in FY15 to further diversify its asset portfolio into a stable income-generating asset class, though new investments in this category are capped at a maximum exposure of 15% of its total property value.

Under this category of investment, classified as “others”, Sunway REIT will seek to acquire assets other than its core assets of retail, hotel and office properties, for which it has an investment headroom of RM550 million.

“Some assets within this category which we are exploring are logistic warehouses, industrial assets, data centres and education assets, among others,” Ng said.

Sunway REIT’s distribution per unit (DPU) for 2QFY17 fell 11.3% to 2.28 sen from 2.57 sen a year ago, while its net property income eased 3.1% year-on-year to RM94.06 million from RM97.05 million.

The lower earnings were attributed largely to the closure of its Sunway Pyramid Hotel since April 2016 for an accelerated refurbishment — which caused its hotel earnings to shrink by 26.4%.

“We suffered a drop in our DPU [because of the closure for refurbishment]. But once it reopens, things will be back in order,” said Ng, adding that the move was necessary to ensure that the asset remains relevant for the next 10 years.

Meanwhile, the group is working with its sponsor, Sunway Bhd, to further penetrate international markets, such as China and the Middle East, to encourage more tourist activity within Sunway Resort City in Bandar Sunway to boost its hotel segment earnings.

“We are employing various strategies in addressing the performance [of our hotels], including tactical marketing strategies to improve the revenue per available room, penetrating [international] markets through incorporation of sales representative offices, collaboration and alliances, and by leveraging on multichannel marketing.

“We are also hoping to make inroads into India, along with Japan and the Middle East [markets],” he said. 

Currently, about 75% of Sunway REIT’s assets are located within the integrated township of Sunway Resort City.