Sunway REIT records NPI of RM131m in Q1’24
Retail segment’s future set to thrive with recent acquisition of six hypermarkets in April
Sunway REIT Management Sdn Bhd, the manager of Sunway Real Estate Investment Trust (Sunway REIT), revenue narrowed marginally by 2% to RM178.6 million for the first quarter ended March 31, 2024 (Q1’24), from RM182.8 million in the first quarter of 2023 (Q1’23).
Correspondingly, Net Property Income (NPI) was also marginally lower at RM130.5 million in Q1’24, compared to RM138.3 million in Q1’23. The contraction in both revenue and NPI was primarily owing to lower contribution from the services segment in light of the cessation of rental contribution from Sunway Medical Centre (Tower A & B) which was disposed in Q3’23, cushioned by the improved performance from the hotel, office and industrial & other segments.
The retail segment’s revenue remained stable at RM126.3 million in Q1’24 despite the temporary disruptions from ongoing refurbishments of the two major malls, Sunway Pyramid Mall and Sunway Carnival Mall. NPI tapered off by 3% to RM86.9 million in Q1’24, in view of the higher marketing costs for festive season in the current quarter. The prospect for this segment in upcoming quarters will be boosted by the completion of the acquisition of six hypermarkets on April 30.
In Q1’24, the hotel segment’s revenue edged up 3% to RM19.1 million, from RM18.5 million in Q1’23, supported by an improved average occupancy rate of 60% in Q1’24 compared to 59% in Q1’23. Correspondingly, NPI grew 3% to RM18.1 million in Q1’24, from RM17.5 million in Q1’23.
This performance was fueled by an overall improvement in domestic and leisure tourist arrivals in conjunction with the festive seasons and school holidays, a steady recovery in international business supported by improved flight connectivity, alongside a sustained demand for meetings, incentives, conferences, and exhibitions (MICE) activities.
The office segment recorded moderate revenue growth of 4% to RM21.3 million in Q1’24, underpinned by a stable average occupancy rate of more than 80%. NPI increased by 3% to RM13.9 million in tandem with the growth in revenue in Q1’24. The resilience in the earnings of the segment is commendable given the continued overhang of vacant office space amidst the incoming supply of new offices.
The services segment registered revenue and NPI of RM9.6 million for Q1’24, representing a drop of 40% compared to Q1’23, primarily due to the disposal of Sunway Medical Centre (Tower A & B) which was completed on Aug 30, 2023. On the other hand, the rental contribution for Sunway university & college campus increased by 2.3% subsequent to an annual rental reversion, in accordance with the master lease agreement.
The industrial & others segment reported a jump of 35% in revenue to RM2.3 million and 48% increase in NPI to RM2 million in Q1’24. The performance was attributable to the rental contribution from a new tenant, occupying 27% of net lettable area at Sunway REIT Industrial – Petaling Jaya in Q1’24. The manager is in the advanced stage of negotiations with prospective tenants for the remaining space.
Sunway REIT Management Sdn Bhd CEO Clement Chen (pix), remarked “We are pleased to finally complete the acquisition of the six hypermarkets on April 30. With an initial yield of approximately 8% based on the purchase consideration, the rental income will more than fill the void in earnings following the disposal of Sunway Medical Centre (Tower A & B) and will boost our NPI for the remaining year. With this acquisition, Sunway REIT expanded its asset portfolio to 25 properties including its first property in Johor and now has assets under management (AUM) of RM9.5 billion, solidifying our position as the second largest listed REIT in Malaysia, measured by AUM.”
He further said, “Looking ahead, we remain cautiously optimistic for 2024, buoyed by resilient performance of the retail segment and steady recovery of tourist arrivals. Furthermore, we anticipate unlocking additional NPI potential upon the completion of our proposed acquisitions and ongoing asset enhancement initiative in Sunway Pyramid Mall which are targeted for completion in the second half of 2024.”