KUALA LUMPUR (Sept 14): KIP Real Estate Investment Trust (KIP REIT) foresees effects of high inflationary pressures as rising costs hurt its tenants' profit margins, according to its executive director Valerie Ong. 

“The impact is specifically on our tenants, as these costs are hurting their profit margins. And these rising costs cannot be passed on to the end consumer, as people are generally more price sensitive, especially [during hard times] now,” she said during the “Invest Malaysia: Pivoting for the Future” conference on Wednesday (Sept 14). 

“But, with the recovery of the economy and more people feeling confident going out, we are seeing quite a good improvement in our malls’ footfall, as well as the occupancy rate,” Ong added. 

Last week, the Bank Negara Malaysia Monetary Policy Committee raised its overnight policy rate (OPR) by 25 basis points (bps) to 2.5% — the third consecutive 25bps OPR hike this year — in line with expectations for further normalisation of monetary policy, as the country's economic growth and inflation gain momentum.

On the other hand, the REIT's executive director also mentioned that there are a lot of expansion plans from the REIT's tenants but they are facing manpower issues. 

“Obviously, that is impacting their opening hours, as well as the operational methods. So, it is still an issue that is not resolved yet. 

"This will be a very big challenge because that will also ultimately impact our mall operation and I hope to see some improvement in bringing more manpower from overseas," Ong explained.

KIP REIT is a retail focused property trust with a portfolio of community centric malls strategically located across the Peninsula Malaysia. The initial portfolio at listing consisted of six community-centric KIPMalls strategically located in populated suburban areas in Johor, Negeri Sembilan, Melaka and Selangor. 

For the full financial year ended June 30, 2022 (FY22), KIP REIT’s net profit rose to RM75.51 million from RM35.22 million, arising from changes in fair value on investment properties during the year. 

This was despite its FY22 revenue slipping to RM73.7 million from RM74.25 million, mainly due to lower promotional income on the back of restrictions on activities and events at the mall level for the first two quarters and lower average occupancy rate. 

At Wednesday’s noon break, KIP REIT shares had fallen half a sen or 0.56% to 89 sen, valuing the group at RM515.27 million.