Pavilion REIT 3Q net property income falls 22% on higher operating expenses, lower revenue

Pavilion REIT 3Q net property income falls 22% on higher operating expenses, lower revenue
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KUALA LUMPUR (Oct 28): Pavilion Real Estate Investment Trust's (REIT) net property income (NPI) for the third quarter ended Sept 30, 2021 (3QFY21) fell 22.02% to RM47.47 million against RM60.88 million in the same quarter last year on higher operating expenses and lower revenue.

Meanwhile, its quarterly revenue also declined, by 4.55% to RM113.32 million from RM118.72 million a year ago, on lower revenue rent and advertising income from the Pavilion Kuala Lumpur mall.

Elite Pavilion Mall's gross revenue was lower mainly due to loss of advertising and rental income from the various Movement Control Orders (MCOs) and National Recovery Plan, according to the trust's bourse filing on Thursday.

The REIT noted its total operating expenses rose 13.84% to RM65.85 million from RM57.84 million in 3QFY20, mainly due to the rent rebates given to tenants who were not allowed to operate during the MCO period.

"This was mitigated by utilities savings, lower property upkeep costs and lesser marketing expenses incurred during the period. This has resulted in net property income reducing by RM13.4 million or 22% in 3QFY21 compared with in 3QFY20," it said.

Manager's management fees incurred for 3QFY21 declined to RM6.08 million from RM6.61 million in line with the decrease in NPI.

Borrowing costs incurred during the quarter under review were lower at RM22.17 million compared with RM23.09 million due to lower interest rates for borrowings.

"Distributable income for the quarter under review was RM22 million or 0.73 sen per unit, consisting of income after tax of RM20 million and non-cash adjustments for depreciation of RM100,000, amortisation of borrowings transaction cost of RM400,000 and 25% of manager's management fees payable in units amounting to RM1.5 million," said Pavilion REIT.

For the nine-month period ended Sept 30, 2021 (9MFY21), Pavilion REIT's cumulative NPI was down by 6.74% to RM153.93 million versus RM165.06 million in the previous year.

Cumulative revenue for 9MFY21 declined 3.98% to RM364.31 million from RM379.43 million.

The REIT manager's chief executive officer Datuk Philip Ho said Pavilion REIT is optimistic about the recovery and growth of the retail industry in the year ahead.

"Pavilion REIT is determined to remain resilient as the world transits from pandemic to endemic phase and is committed to driving performance and creating long-term value for its stakeholders.

"We will continue to support our tenants through proactive lease management and aggressive marketing strategies to welcome shoppers back. These include the introduction of loyalty programmes, leveraging on technology to reach new audiences such as the launch of the Pavilion KL mobile app, and exciting shoppers with new services and experiences, while always ensuring peace-of-mind shopping," he added.

Shares of Pavilion REIT closed unchanged at RM1.42, giving it a market value of RM4.33 billion.

Lam Jian Wyn