Canada Pension Plan may buy stake in Pavilion Bukit Jalil

This article first appeared in The Edge Malaysia Weekly, on July 9, 2018 - July 15, 2018.
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CANADA Pension Plan Investment Board (CPPIB) is in talks with Malton Bhd, a company controlled by Tan Sri Desmond Lim Siew Choon, on the purchase of up to a 49% stake in Pavilion Bukit Jalil mall, sources say.

Should the discussions bear fruit, this will be the third partnership between Lim and CPPIB, after the Pavilion Damansara Heights project in Kuala Lumpur in 2015 and Pavilion Dalian in China in 2016.

“CPPIB is looking to invest in the mall portion of the Bukit Jalil development. It has been very happy working with Desmond and he is someone it knows,” a source tells The Edge. The source adds that moving forward, the partnership could extend to other projects in which Lim is participating.

The professional investment management organisation invests the assets of the Canada Pension Plan that are not currently needed to pay pension, disability and survivor benefits to its 20 million contributors and beneficiaries. It invests in public equities, real estate, infrastructure and fixed income instruments.

CPPIB is one of the 10 largest retirement funds in the world. As at March 31, its total assets under management was C$356.1 billion (about RM1.1 trillion) of which C$72.5 billion has been invested in Asia. In Malaysia, the organisation has also invested in AREA Industrial Development Fund I, which was set up by private equity firm AREA Capital Partners Ltd and is managed by AREA Management.

Another source says Pavilion Bukit Jalil mall, which is located in southern Kuala Lumpur, is likely to be placed under a special purpose vehicle to accommodate the partnership.

The entire Bukit Jalil City project, with a gross development value of RM4 billion, is being undertaken by Pioneer Haven Sdn Bhd. Pavilion Bukit Jalil mall, scheduled to open in the third quarter of 2020, will have a net lettable area (NLA) of 1.8 million sq ft. Industry experts place the GDV of the mall at between RM1.4 billion and RM1.6 billion. It is estimated that a 49% stake could be valued at RM200 million to RM300 million.

According to Malton’s 2017 annual report, the Bukit Jalil City project sits on a 50-acre site and is expected to be completed by 2021. It is being built in three phases — Phase 1 comprises Pavilion Bukit Jalil mall and Signature Shops, Phase 2 involves The Park Sky Residence and The Park Point Shop Offices and Phase 3 is The Park 2. The Signature Shops have already been completed and handed over.

In August 2015, CPPIB teamed up with Lim for his Pavilion Damansara Heights project. CPPIB holds a 49% stake in Jendela Mayang Sdn Bhd, the company developing the mixed-use project along Jalan Damansara.

CPPIB had said then that it would commit up to RM485 million for the stake. The venture was its first real estate investment in Malaysia. It holds the stake via CPPIB HK RE Ltd.

With a GDV of RM9 billion, Pavilion Damansara Heights will comprise 10 blocks of corporate towers and four blocks of serviced residences on top of a four-level shopping mall. The development will have eight levels of basement parking. The mall, with an NLA of one million sq ft, is scheduled to open in the first quarter of 2021.

In November 2016, CPPIB paid US$162 million for a 40% stake in Pavilion Dalian, a mall that opened for business in April 2015. The organisation said the venture was part of its real estate strategy of investing in high-quality, well-located retail assets.

Meanwhile, in the nine months ended March 31 this year, Malton posted a net profit of RM56.08 million on the back of revenue of RM544.22 million. The two largest contributors were property development and construction, with revenue of RM291 million and RM389.09 million respectively and operating profit of RM20.21 million and RM20.46 million respectively.

Based on the latest filing with the Companies Commission of Malaysia, Bukit Jalil City developer, Pioneer Haven, posted revenue of RM485.51 million and net profit of RM53.62 million in the financial year ended June 30 last year. Accumulated profit was RM90.57 million while total liabilities stood at RM762.26 million, of which RM180.77 million were non-current liabilities.

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