[RAM] RAM Ratings affirms Sunway REIT's AA2 rating and the ratings of debt facilities issued by its funding conduits

RAM Ratings has affirmed the AA₂/Stable/P1 corporate credit ratings (CCRs) of Sunway Real Estate Investment Trust (Sunway REIT or the REIT), along with the ratings of debt facilities under its funding vehicles (see table). The suffix (s) indicates that the issue ratings have been enhanced beyond the standalone credit position of the issuers; in this instance, their debt obligations are supported by inter-company payments from the REIT.



The rating of unsecured MTNs mirrors Sunway REIT’s long-term CCR, reflecting their senior unsecured position. The secured MTNs are rated a notch above the REIT’s long-term CCR to indicate the strong likelihood of recovery in the event of default to reflect the strong recovery prospects for the rated MTNs from the pledged properties. The secured MTNs and CP Programme are subject to a minimum 1.67 times security cover. As of March 2025, this stood at 2.69 times, well above the required threshold. The Perps are rated two notches below the REIT’s long-term CCR to reflect the deferrable feature of the coupon payments and the Perps’ deeply subordinated position, senior only to common equity.  

The rating affirmations are anchored by Sunway REIT's market position as one of the largest diversified REITs in Malaysia, holding a portfolio of prime-quality properties with a large tenant network and relatively long weighted average lease expiry. Around one-fifth of its net property margin (NPI) is anchored by master leases that are structured on fixed rate, triple-net-lease arrangements which moderate earnings fluctuation risk arising from the variable lease structures of some of its hotel assets. Thanks to the REIT Manager’s continual asset enhancement initiatives, the REIT maintained lease renewal rates of over 90% and healthy rental reversions of 6.4% for FY Dec 2024. It expects mid-single-digit rental reversions for fiscal 2025. Overall revenue for 1Q fiscal 2025 saw y-o-y double-digit growth, driven by contributions from the REIT’s new retail assets, while the NPI margin stayed strong at 72%.

Sunway REIT’s ability to access capital markets, its diversified funding profile and strong commitments from financiers afford it substantial financial flexibility. This moderates its relatively high leverage position, debt-to-OPBDIT ratio and annual rollover rate of 0.43 times, 8.14 times and 62.19%, respectively, as at end-March 2025. We expect these metrics to gradually improve over the next two years, accompanied by solid earnings and de-gearing from disposal of Sunway university & college campus. The REIT’s current fixed charge cover (1Q fiscal 2025: 3.0 times) will stay adequate, if not improve, over the same period.

Analytical contacts Lai Jing Wei (603) 2708 8239 jingwei@ram.com.my		Tan Yan Choong (603) 2708 8256 yanchoong@ram.com.my
Tan Han Nee (603) 2708 8322 hannee@ram.com.my
Media contact Sakinah Arifin (603) 2708 8212 sakinah@ram.com.my