This article first appeared in The Edge Malaysia Weekly on February 18, 2019 - February 24, 2019

AN estate agent may have been appointed to value not one but all three of the investment assets owned by the Social Security Organisation (Socso), sources say.

As it stands, only one of the three property investment assets, worth a total of RM1.29 billion, is currently providing Socso with recurring income. The investment assets are a piece of land bought at RM323 million and office buildings purchased for RM595.95 million and RM370.07 million in Kuala Lumpur and Putrajaya respectively.

Last Thursday, The Malaysian Insight reported that Putrajaya was reviewing a piece of land purchased by Socso at RM323 million last year after questions were raised over its failure to generate immediate income for the organisation. Socso had purchased the 1.87-acre parcel in Jalan Kia Peng, Kuala Lumpur, from Malaysian Resources Corp Bhd (MRCB).

The news portal quoted a high-ranking Socso official as saying that the Ministry of Human Resources’ Integrity Unit is reviewing the approval and governance process related to the investment. The article also said the decision was made by Socso’s previous investment panel and the current line-up is in the process of deciding what to do with the land.

When contacted by The Edge on whether it will continue to invest in property or consider selling its investment properties, Socso says, “Socso’s Investment Panel will discuss and decide on the matters. All processes have to follow proper procedure and good governance.”

It adds that as part of its operational process, the ministry is monitoring its strategic asset allocations in certain sectors to ensure that “they are in line with our risk profile”. “However, there is no specific investigation on the Jalan Kia Peng land,” Socso says, referring to The Malaysian Insight’s article.

On its plans for the said parcel, the organisation says the development plan is subject to direction from its board.

Socso tells The Edge that it has three investment properties and its investment strategy takes into account the long-term risk and return potential of each asset class. “The portfolio of these asset classes is optimised to closely match our long-term financial needs and obligations.”

Socso’s second investment property is Menara NU2 in KL Sentral, which it acquired from South Korea-owned Uptown Skyline Sdn Bhd for RM595.95 million. In justifying the investment, Socso says, “Menara NU2 is one of the most sought-after addresses in the KL Sentral area due to its multiple accesses and proximity to transport facilities in KL Sentral station as well as the conveniences of NU Sentral Shopping Centre.

“We are confident of the investment property’s potential to increase in value over time, especially with the building’s current full occupancy, accompanied by stable rental growth in the KL Sentral area, especially for MSC-status buildings like Menara NU2,” Socso adds.

It points outs that alternative assets such as real estate and private equities are relevant as well. “Alternative assets, which generally have a low correlation with other investment asset classes, provide good diversification benefits to our investment portfolio. The building enjoys full occupancy and receives good returns. Any decision, whether to keep or dispose of assets, depends on the decision by the board.”

Socso’s third investment property is Menara MRCB@Putrajaya in Precinct 2, Putrajaya, which it purchased for RM370.7 million. An initial 10% was paid in 2016 for the yet-to-be-completed office building and the balance was paid last year. “It is now officially registered under a new name, Menara Perkeso.”

According to documents from the Valuation and Property Services Department sighted by The Edge, Socso purchased the building from MRCB Putra Sdn Bhd, a wholly-owned unit of MRCB.

Socso says it is currently discussing with several agencies under the Ministry of Human Resources the lease arrangement for the building. “The building was purchased as a long-term real estate investment with a view to obtain potential rental returns and capital gains over the useful life of the asset. Given its strategic location, it could also be used as an operational asset to cater for Socso’s future expansion.” The building has a gross floor area of 526,075 sq ft and sits on an 1.84-acre parcel.

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