Quill Group commences development of Quill Residences

This article first appeared in The Edge Malaysia Weekly, on April 29, 2019 - May 05, 2019.
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QUILL Group of Companies — the developer and manager of Quill City Mall, which forms part of the Quill City integrated development in Kuala Lumpur’s Golden Triangle — has no plans to close the mall. The group has, in fact, begun construction of the long overdue residential component of the development.

This lays to rest months-long talk that the mall, located in Jalan Sultan Ismail, will put up its shutters.

“The market is full of conjecture and speculation [about Quill City Mall] and there is no reason to believe [it],” group managing director Datuk Dr Jennifer Low Moi Ing tells The Edge in an email response.

Concerns that the mall may close are believed to be partly due to the downsizing of anchor tenant Aeon Co Bhd. According to a June 2018 RAM Ratings report, Aeon was to progressively hand over 81% of its tenanted net lettable area to the management. The situation may have been exacerbated by the tough retail market and the Employees Provident Fund’s decision in 2017 to scrap an earlier decision to buy the mall.

“The retail industry faced a very challenging year in 2018 and 2019 remains to be seen. All malls are fighting for the same piece of the pie, so to speak. Nonetheless, we have differentiated (ourselves) from the competition, having invested heavily in a 65,000 sq ft convention floor on Level 6 of Quill City Mall for concerts, events, exhibitions and banquets, all of which are gaining traction. This is particularly so in e-sports and virtual reality (VR) events, which are trending with millennials,” Low adds.

She says the mall will continue to offer the basics to meet the general grocery, entertainment and food and beverage demands of consumers, and that it is also making headway in new areas of online/offline shopping, co-working spaces, education and VR.

“Quill City Mall is in an excellent location and once the surrounding developments, including our Quill Residences — which is currently under construction — come on line, the community will grow into a significant market catchment where a strategic mall like Quill City would be able to meet its needs,” she says. “The mall is unequivocally here to stay.”

Quill Retail Malls Sdn Bhd (QRMSB) is the developer of the entire project, located within the 7.1-acre Quill City. According to Quill’s website, the residences will be housed in a 36-storey building while the office component will be a 40-storey block.

Documents sighted by The Edge show that QRMSB had at the end of last year submitted fresh plans for the development of the integrated building comprising serviced apartments and offices.

A search on the Companies Commission of Malaysia website shows that QRMSB is wholly owned by Quill Vision City Sdn Bhd, which in turn is equally owned by Low and Datuk Michael Ong Leng Chun. Low is group managing director while Ong is Quill Group’s group executive director.

Previously known as Vision City, the development was originally undertaken by RHB Daewoo Sdn Bhd and subsequently abandoned. In 2007, Quill Group bought the asset for RM430 million.

In mid 2013, it was reported that the EPF was planning to invest as much as RM1.2 billion in Quill City Mall, at a time when retail malls were mushrooming everywhere. At the time, many viewed the deal as a bailout for the financially stressed Quill Group. However, the EPF said it was an investment-driven decision with several conditions attached, and that it would not have to make any payments until all the conditions were satisfied. The conditions included the physical completion of the mall within three years according to the specifications agreed on. The EPF also wanted the mall to have an occupancy rate of 70% at an agreed sustainable minimum commercial yield over the long term.

In 2017, The Edge reported that the EPF had scrapped the plan to buy the mall from the Quill Group as the shopping centre did not meet the preconditions stated in the sales and purchase agreement.

It was reported that as part of the termination agreement, there may have been a payment of compensation or a fee.

Based on the latest available financials submitted to SSM, in the financial year ended Dec 31, 2017 (FY2017), QRMSB posted RM37.57 million in revenue compared with RM39.18 million in FY2016. It recorded a net profit of RM66.98 million in FY2017, against a net loss of RM35.25 million previously. Its total liabilities as at Dec 31, 2017, were RM678.35 million, of which RM55.32 million were current.

Meanwhile, in 2017, QRMSB issued a RM200 million Class A, RM70 million Class B, RM50 million Class C and RM30 million Class D sukuk under its RM350 million Sukuk Murabahah (2017/2024) facility. The issues were part of QRMSB’s plan to partly refinance the outstanding RM420 million MTN issued under its RM850 million bond facility established in 2013 to fund the development of the mall.

“We believe RAM’s adjusted valuation of RM750 per sq ft (or RM530 million, 2% lower than the previous RM595 million due to changes in the Mall’s NLA) is reasonable vis-à-vis recently transacted prices and the Mall’s recently assessed market value of RM830 million,” RAM Ratings says.

The report also says the mall’s total NLA was expected to shrink to 681,000 sq ft from 778,000 sq ft previously following the repositioning of the mall.

 

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