Hektar REIT’s portfolio consists of six well-established shopping centres in various states on the West Coast of Peninsular Malaysia.

The portfolio provides a good geographical diversification to the REIT. The REIT is in the midst of acquiring another mall in Segamat, Johor. The acquisition is expected to complete in second half of 2017, where upon completion, the enlarged portfolio will be made up of six malls across Peninsular Malaysia, with approximately 2.0 million square feet of retail space.

The Manager aims to enhance the long-term value of the portfolio via key operating, investment and capital management strategies. The performance achieved by each centre in the financial year 2017 is set out in the following pages.

Property Subang Parade Mahkota Parade Wetex Parade Central Square Kulim Central Segamat Central
State Selangor Melaka Johor Kedah Kedah Johor
Title Freehold Leasehold* Freehold Freehold Freehold Leasehold**
Primary trade area1 1,834,000 382,200 201,600 406,870 181,195 198,000
NLA (retail)2 513,251 sq ft 519,542 sq ft 159,056 sq ft 311,230 sq ft 299,613 sq ft 210,730 sq ft
Tenancies2 122 113 76 66 78 65
Occupancy2 90.9% 96.1% 100.0% 95.3% 98.2% 94.7%
Visitor traffic FY20173 9.9 million 9.1 million 4.4 million 3.8 million 2.2 million n/a
Purchase price RM 280.00 million RM 232.0 million RM 117.5 million RM 83.3 million RM 98.0 million RM 106.1 million
Valuation4 RM 426.0 million RM 321.0 million RM 135.5 million RM 96.0 million RM 110.0 million RM 106.1 million
Gross revenue FY2017 RM 46.7 million RM 40.2 million RM 13.5 million RM 10.3 million RM 11.3 million RM 3.6 million
NPI FY2017 RM 29.8 million RM 21.8 million RM 8.2 million RM 5.5 million RM 6.2 million RM 2.2 million
  • 1 Spectrum Research Asia Sdn Bhd, December 2012 (Independent Research), within 20-minutes drive.
  • 2 As at 31 December 2017.
  • 3 Installation of upgraded footfall system for Kulim Central is underway to capture traffic at new entrances into the shopping centre. Footfall system for Segamat Square was installed only in late December 2017.
  • 4 Valuation for Subang Parade, Mahkota Parade, Wetex Parade, Central Square and Kulim Central were as of 30 September 2017. Valuation for Segamat Central was as of 22 June 2017.
  • * Until year 2101.
  • ** Until year 2116.

Geographically widespread portfolio

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Occupancy

Hektar’s portfolio of assets has achieved an aggregate occupancy rate of 95.1% as at 31 December 2017. Occupancy rates are healthy in spite of the challenging retail environment, with all malls (excluding Subang Parade) being at least 94% full.

Occupancy as at 31 december.
Property 2017 2016
Subang Parade 90.9% 93.0%
Mahkota Parade 96.1% 96.4%
Wetex Parade 100.0% 100.0%
Central Square 95.3% 96.6%
Kulim Central 98.2% 98.9%
Segamat Central* 94.7% n/a
Overall** 95.1% 96.2%
  • * Segamat Central is a new asset that was acquired in Sept. 2017.
  • ** The weighted average occupancy rate is calculated based on NLA.

Visitor traffic

Visitor traffic is measured by FootFall, a computerised video-based traffic monitoring system. Visits to Subang Parade has increased significantly, registering annual growth of 7.9%. All other shopping centres experienced a slight decline in line with market conditions. The FootFall system at Kulim Central is being upgraded to also capture traffic at its new entrances.

Number of visits.
Property 2017 2016
Subang Parade 9.9 million visits
7.6% change in traffic
9.2 million visits
(6.1%) change in traffic
Mahkota Parade 9.1 million visits
(3.2%) change in traffic
9.4 million visits
3.3% change in traffic
Wetex Parade 4.4 million visits
(4.4%) change in traffic
4.6 million visits
Central Square 3.8 million visits
(2.6%) change in traffic
3.9 million visits
Kulim Central* 2.2 million visits
(26.7%) change in traffic
3.0 million visits
(6.3%) change in traffic
Segamat Central**

Total 29.4 million visits 30.1 million visits
  • * Installation of upgraded footfall system for Kulim Central is underway to capture traffic at new entrances into the shopping centre.
  • ** Footfall system for Segamat Central was installed only in late December 2017.

Tenancy mix

The largest rental contributors to the portfolio are tenants from the fashion and footwear categories as well as food and beverage segment. Both segments contributed towards 44% of portfolio’s total rental income. In terms of NLA composition, department stores and supermarkets continue to dominate the portfolio by taking up 36.6% of all available NLA.

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Top 10 tenants

The top ten tenants in the portfolio contributed approximately 27% of total monthly rental income, providing a diversified revenue base. After the top tenant, Parkson, which contributed approximately 9% of monthly rental income, no other tenant contributed more than 6.0%.

Tenant Trade sector NLA % of total NLA % of monthly rental income*
1 Parkson Department Store/Supermarket 254,009 sq ft 12.6% 9.3%
2 The Store Department Store/Supermarket 273,198 sq ft 13.6% 5.6%
3 Seleria Food & Beverage 36,511 sq ft 1.8% 1.7%
4 Giant Department Store/Supermarket 96,283 sq ft 4.8% 1.6%
5 MBO Cinemas Leisure & Entertainment/Sports & Fitness 84,147 sq ft 4.2% 1.6%
6 Mr DIY Houseware & Furnishing 64,050 sq ft 3.2% 1.6%
7 Watsons Health & Beauty 10,296 sq ft 0.5% 1.4%
8 KFC Leisure & Entertainment/Sports & Fitness 15,786 sq ft 0.8% 1.2%
9 Digital One Electronics & IT 21,361 sq ft 1.1% 1.2%
10 McDonald’s Food & Beverage 14,124 sq ft 0.7% 1.2%
Top 10 tenants (by monthly rental income) 869,765 sq ft 43.2% 26.4%
Other tenants 1,143,657 sq ft 56.8% 73.6%
Total 2,013,422 sq ft 100.0% 100.0%
Top 10 tenants (by monthly rental income)
869,765 sq ft NLA 43.2% of total NLA 26.4% of monthly rental income*
Other tenants
1,143,657 sq ft NLA 56.8% of total NLA 73.6% of monthly rental income*
Total
2,013,422 sq ft NLA 100.0% of total NLA 100.0% of monthly rental income*
  • * Based on monthly rental income for December 2017.

Rental reversions

For the year ended 31 December 2017, the portfolio recorded 156 new and renewed tenancies, with an overall weighted average rental reversion of -4% within a challenging retail environment.

Market confidence arising out of our acquisition of Segamat Central generated a healthy 11% reversion.

Property No. of new tenancies / renewals NLA % of total NLA % increase / (decrease) over previous rent rates
Subang Parade 47 147,002 sq ft 29% (2.0%)
Mahkota Parade 33 222,089 sq ft 43% (7.0%)
Wetex Parade 16 17,661 sq ft 11% 0.3%
Central Square 30 63,308 sq ft 20% (10.0%)
Kulim Central 21 29,439 sq ft 10% 2.0%
Segamat Central 9 34,460 sq ft 16% 11.0%
Total / average 156 513,979 sq ft 25% (4.0%)
Total / average of rental reversions
156 new tenancies / renewals
513,979 sq ft NLA
25% of total NLA
(4.0%) change over previous rent rates
  • Full year (12 months) ended 31 December.
  • Figures as at 31 December 2017.

Tenancy expiry profile

282 tenancies will expire in 2018, representing approximately 64% of NLA and 60% of monthly rental income as at 31 December 2017. This represents the REIT with opportunities to continually pursue its tenancy remixing exercise to refresh the mix as contracts expire. Having mentioned that, tenancies are secured with options-to-renew and negotiation are initiated six months prior to their expiries.

For year ending 31 December No. of tenancies expiring NLA of tenancies expiring NLA of tenancies expiring as % of total NLA % of total monthly rental income*
2018 282 1,286,121 sq ft 64% 60%
2019 138 241,971 sq ft 12% 20%
2020 93 373,855 sq ft 19% 20%
  • * Based on monthly rental income for December 2017.

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Tenancy provisions

As at 31 December 2016, turnover rent provisions were present in approximately 93% of the tenancies in the portfolio. Step-up rent provisions were present in approximately 41% of tenancies within the portfolio.

A turnover rent provision allows for rent calculated as a proportion of annual turnover of the tenant’s business. Turnover rent is paid to the REIT if it exceeds the base rent specified in tenancy agreements on an annual basis. A step-up rent provision as specified in tenancy agreements is a pre-determined increase in rent at defined intervals during a tenancy agreement, typically each year and forms the base rent of any tenancy agreement.

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