This article first appeared in The Edge Financial Daily on April 9, 2019

SUBANG JAYA: Sunway Real Estate Investment Trust (Sunway REIT) has received the green light from shareholders for its proposal to acquire three tracts of land which house Sunway College and Sunway University for RM550 million.

At an extraordinary general meeting yesterday, the proposed acquisition, which is expected to improve the trust’s earnings and dividend per unit, received 99.995% approval.

Upon completion of the acquisition, the REIT’s portfolio size will increase from about RM7.3 billion as at June 30, 2018, to RM7.8 billion.

Notably, the acquisition will be funded by Sunway REIT’s existing debt programmes which include a 35-year RM10 billion unrated bond programme and a seven-year RM3 billion commercial paper programme, which had a combined amount available for use of approximately RM300 million as at end of February.

A portion of the funding will be from its future financing facilities, including a RM10 billion perpetual note (perps) programme which has drawn some contrasting opinions from research houses. The first issuance of the perps programme is expected to be sometime in the second quarter of this year.

Asia Analytica Sdn Bhd recently wrote that the issuance is an avenue for Sunway REIT to circumvent its gearing limit, adding that it would make Sunway REIT increasingly vulnerable to any shortfall in property yields.