Friday 29 Mar 2024
By
main news image

This article first appeared in The Edge Financial Daily, on June 21, 2016.

 

KUALA LUMPUR: Sunway Real Estate Investment Trust (REIT) is buying a tract of land measuring 143,225 sq ft (13,306 sq m) that is adjacent to its Sunway Carnival Shopping Mall in mainland Penang from its parent Sunway Bhd for RM17.2 million cash.

In a bourse filing, the trust’s manager Sunway REIT Management Sdn Bhd said the acquisition is to facilitate its plans to expand Sunway Carnival’s net lettable area. The extension will comprise a nine-storey shopping mall that also includes a six-storey parking bay above the retail space, with a one-floor basement parking.

Sunway REIT signed the sale and purchase agreement yesterday, it said, with the land owner Commercial Parade Sdn Bhd — a wholly-owned unit of Sunway. The land, located in Seberang Perai, makes up 0.27% of Sunway REIT’s total asset value of RM6.45 billion.

The tract’s 99-year lease will expire on Oct 21, 2092.

Sunway REIT expects to complete the buy by the second half of this year. The buy is, however, subject to the REIT gaining the approval of the Securities Commission Malaysia (SC) for a waiver to Clause 8.44(b) and (c) of the REIT Guidelines, which state that a fund is not permitted to conduct property development activities and acquisition of vacant land.

“Application to the SC for the proposed waiver is expected to be submitted within one month from the date of this announcement (yesterday),” said Sunway REIT.

It expects the mall extension to enhance its earnings in the future, and thus create value for its unit holders “given Sunway REIT’s proven track record”.

Besides enabling Sunway REIT to meet larger retail space requirements that international and regional retailers seek, the new buy will allow it to enhance its tenant mix, reduce the impact of economic cycles on overall rental income, and continually meet discerning shoppers’ lifestyle, the REIT said.

Sunway REIT said the plan to enlarge Sunway Carnival will also allow it to stay relevant to consumer preferences and the ever-evolving market trends.

The land’s purchase consideration will be funded through existing debt financing, Sunway REIT said.

Up to March 31, the trust had net borrowings of RM2.08 billion, after deducting the RM82.26 million cash available. The net debt was equivalent to 0.52 times its unitholders’ funds of RM3.998 billion.

Sunway REIT ended the day up three sen or 1.86% at RM1.64, bringing its market capitalisation to RM4.8 billion. Its 12-month historical distribution per unit yielded 5.82%.

      Print
      Text Size
      Share