RAM Ratings affirms Pavilion REIT Capital's MTN and CP ratings; outlook stable

RAM Ratings has affirmed Pavilion REIT Capital Berhad's (the Issuer) unsecured RM8.0 bil MTN Programme and unsecured 
RM200.0 mil CP Programme at AA3(s)/Stable and P1(s), respectively. The secured MTNs remain rated one notch higher at AA2(s)/Stable, reflecting the benefit of a strong 1.67 times minimum collateral coverage ratio. 

The issue ratings reflect the credit strength of Pavilion REIT (PavREIT), for which the Issuer acts as funding conduit 
and ultimate obligor. The affirmation is underpinned by the REIT's resilient retail-focused portfolio, comprising 
prime mall assets with strong market positions, improved income visibility from master-leased properties, and a
broader earnings mix following its diversification into hospitality assets. These strengths are balanced against its exposure to interest rate volatility given the still high proportion of floating-rate debt. As at FY Dec 2025, 
PavREIT's eight assets were valued at RM9.1 bil. Master leases for its hotels and Da Men Mall support income
stability, while providing upside through profit-sharing arrangements. Da Men Mall's ongoing repositioning and improving tenant profile should add support to its operating performance over time, although execution risks remain relevant until stabilisation is fully demonstrated. 

In fiscal 2025, PavREIT's revenue grew 6.6% y-o-y to RM901.5 mil, alongside portfolio occupancy improvement to 94.5% 
from 90.4% a year earlier. The stronger performance was driven by a lease renewal rate of over 90% and mid-single-digit
positive rental reversions, indicating sustained tenant demand across its key assets. Tenant concentration risk remains low, with the top 10 tenants accounting only 17.2% of gross rental income, supporting earnings resilience. 
The reconfiguration of Level 3 at Pavilion Kuala Lumpur following Parkson's exit is expected to support further rental
growth once complete