Thursday, 4 July 2013

Sunway REIT enter into a second supplementary agreement with Sunway Putra Hotel

Sunway REIT announced that it has entered into a second supplementary agreement for the hotel master lease made with Sunway Putra Hotel Sdn Bhd in 29 Jun 2011. In the second supplemental agreement, both parties agreed to vary the guaranteed rent for the 3rd fiscal year of the agreement (1 Jul 2013 - 30 June 2014). This is in light of the major refurbishment being carried out at Sunway Putra Mall, located next to the hotel for two years from May 2013, which is expected to have an adverse impact on the hotel operations.

  • The total rent for the 3rd fiscal year would be calculated on the basis of the variable rent formula under the Hotel Master Lease agreement, i.e. the amount of the Guaranteed rent shall not apply in the 3rd fiscal year
  • The differential sum between the variable rent and the guaranteed rent would be adjusted in agreed proportions from the 5th fiscal year until the 11th fiscal year and added into the guaranteed rents for 5th to 11th fiscal years.
  • Sunway Putra Hotel may request, in writing, to apply the same variation for the guaranteed rent in the 4th fiscal year.
  • The estimated differential sum between the variable rent and the guaranteed rent is approximately RM3.3m for FY06/14. (BMSB)

The supplemental agreement would not have any major impact on Sunway REIT's EPU and DPU for FY06/14, given the variation in rental income of RM3.3m only accounts for 1-2% of its overall rental income. We estimate that the shortfall in rent would result in less than 0.5% decline in its EPU.

Source: CIMB Daybreak - 04 July 2013

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