KUALA LUMPUR: Tower Real Estate Investment Trust’s (REIT) net profit fell 49% to RM4.3 million in the third quarter ended Sept 30 of financial year 2014 (3QFY14), from RM8.4 million in the previous corresponding period.

Tower REIT is part of Tan Sri Quek Leng Chan’s (pic) stable of Hong Leong Group of companies. Revenue dropped 24% to RM10.1 million from RM13.3 million previously, which the REIT, in its filing with Bursa Malaysia yesterday, blamed on lower occupancy rates in Menara ING and Menara HLA.

Its basic earnings per unit also fell 49.5% on-year to 1.52 sen from 3.01 sen.

Tower REIT, which focuses on commercial properties, also reported a significantly lower net realised income of RM4.2 million in the quarter, down 49% from last year’s RM8.3 million, which it said was mainly due to lower revenue and higher operating expense.

The higher operating expense was mainly due to assessment and electricity tariff hike, it added. Its net asset value per unit also came in lower to RM1.79 as at Sept 30, 2014, compared with RM1.82 in the preceding quarter.

Net profit for the nine-month period of stood at RM16.5 million versus RM24.8 million in the previous corresponding period, down 33.47%. Revenue for the period was at RM33.9 million, down 16.3% from RM40.5 million a year ago.

The REIT said its prospects will continue to be “challenging” due to the oversupply of office space.

Recalling the last quarter, it said both office occupancy and rental rates continue to come under pressure due to the incoming supply of newer buildings with better specifications and limited demand growth.

Year-to-date, Tower REIT paid an interim income distribution of 3.83 sen per unit in August. Its unit closed unchanged at RM1.32 yesterday, with a market capitalisation of RM370.3 million.

This article first appeared in The Edge Financial Daily, on November 5, 2014.