Hektar Asset Management Sdn Bhd (Hektar Asset Management), the manager of Hektar Real Estate Investment Trust (Hektar REIT), completed the acquisition of Kolej Yayasan Saad Melaka (KYSM) for RM148.5 million.
This acquisition marks a pivotal moment in Hektar REIT's strategic expansion and diversification efforts, being the first educational asset in its portfolio, the company said after it taking over KYSM, a prestigious fully residential and co-educational private school in Melaka.
The acquisition of KYSM brings numerous benefits to Hektar REIT, as the asset is secured under a 30-year quadruple net lease agreement, providing incremental revenue annually and an average yield of 8% over the lease tenure. This strategic acquisition increases Hektar REIT's Assets Under Management (AUM) by 12% to RM1.38 billion. With demand consistently far surpassing the annual intake for the placement in KYSM, the REIT sees further growth potential in the asset that can be unlocked.
The Manager of Hektar REIT said, "This marks the beginning of our diversification with the acquisition of our first non-retail asset. Hektar REIT is in an active acquisition stage, looking to inject more income-generating assets and targeting to double our portfolio size to RM3.0 billion by 2027. Several assets are already in the pipeline for our consideration with the strategy to mix non-retail assets up to 20% in our portfolio."
According to the manager, Hektar REIT is on track with its growth strategy and that they are already in active discussion with several parties for the next acquisition. In selecting new assets, the REIT focuses on yield accretive assets that can provide sustainable and defensible recurring income, with particular interest in education and industrial assets.
Given their resilient nature to market movements, these sectors present opportunities for Hektar REIT to invest in. For instance, the private sector education market size is expected to grow at CAGR 6.5%-7.0% with further capital gain moving forward based on market research. Concurrently, the manager is continuously monitoring the performance of other asset classes for any investment potential.
KYSM has consistently ranked among the top 10 schools nationally for its Sijil Pelajaran Malaysia (SPM) results and is renowned for excellence in both academic and co-curricular achievements since its establishment in 1995. The institution offers a comprehensive range of activities including rugby, orchestra, netball, swimming, triathlon, and debate, further enhancing its reputation as the leading educational institution in Malaysia.
Enhancement Initiatives (AEIs) To Improve The REIT's Current Assets, Especially Subang Parade
The Company added that another main focus for the REIT right now is to execute the asset enhancement initiatives (AEIs) to improve the REIT's current assets, especially Subang Parade.
The total repositioning of Subang Parade will be done in phases starting from Q4 2024, covering the façade, internal spaces and tenancy remixing to enhance the mall's overall ambiance and offerings. Subang Parade has recently welcomed FlyProject, and following up with exciting new openings that are approaching soon ranging from Oriental Parade (The Oriental Group), SWET Fitness, Sushi Kazoku and a renowned edutainment provider.
Significant improvements in the asset valuation, revenue and rental reversion are expected post AEIs work. There are also smaller AEIs planned for other assets to extract and maximize their value, and to improve customers' experience and satisfaction.
Ultimately, Hektar REIT's goal is to extract more value from its assets and continuously deliver attractive and sustainable returns to the Unitholders.