RAM Ratings has reaffirmed the P1(s) rating of SUNREIT Capital Berhad's (the Issuer) RM3.0 bil Commercial Papers (CP) Programme. 

The reaffirmation is premised on Sunway Real Estate Investment Trust's (Sunway REIT or the REIT) adequate credit metrics given that the Issuer, as the REIT's wholly owned financing vehicle with no operations of its own, relies on inter-company payments from the REIT to meet its obligations under the CP Programme.

The suffix (s) to the issue rating incorporates the strong likelihood of recovery by way of liquidation of collaterals pledged to the CP Programme in the event of default. As at end-December 2021, the REIT's combined asset valuation was 7% higher at RM8.49 bil. The CP Programme had a collateral cover of 2.30 times as at the same date, markedly above the 1.67 times required under RAM's rating methodology for well-secured debt.

Sunway REIT's diversified prime quality assets, favourable tenant profile and strong financial flexibility kept its financials in check. The REIT performed better than expected in CY 2021 amid a challenging operating environment, thanks to the rebound in its last quarter results and a full-year contribution from The Pinnacle Sunway. For the financial period ended 31 December 20211 , the average occupancy rates of the REIT's retail and office segments improved to a respective 97% and 84% (FY Jun 2020: 95% and 78%) although at the expense of the rental reversion rate in the short term. 

Tenant support measures like rental rebates, more flexible lease terms, marketing incentives and third-party financing helped keep Sunway REIT's tenancy renewal rate above 96%. Its overall portfolio weighted average lease expiry reduced to 4.36 years as at end-December 2021 (end-June 2020: 5.94 years) but is still longer than that of comparable retail-centric REITs.

The REIT's earnings will likely recover gradually as consumers regain confidence in visiting malls and travel picks up as international borders reope