This article first appeared in The Edge Malaysia Weekly on April 17, 2023 - April 23, 2023

THE Employees Provident Fund (EPF) is in the process of selling yet another retail asset in the Klang Valley previously occupied by hypermarket chain Giant, this time to grocery retailer NSK Trading Sdn Bhd for an estimated RM60 million. The pending sale of the outlet in Klang Sentral, Selangor marks the seventh Giant store sold over the past two months. 

Sources say that the sale of an eighth store — the Giant Hypermarket Kelana Jaya — is imminent, although details are sketchy at the moment. 

Last month, the EPF sold a portfolio of six retail assets located in the Klang Valley and Johor, worth a combined RM520 million, to Sunway Real Estate Investment Trust.

When contacted for confirmation, an NSK Trading Sdn Bhd representative declined to comment. The EPF, in an email response, told The Edge, “After due consideration, we are not able to comment on these matters at this point in time.”

A check online reveals NSK commenced operations at the new location on March 25, 2023. The store had operated as a Giant outlet until August last year. It is learnt that NSK is currently leasing the premises, pending approvals from the relevant authorities and the completion of the deal.

Industry sources anticipate that the EPF is likely to dispose of a “couple of other assets” by year end but add that the provident fund is also on the lookout for assets to purchase.

In 2021, The Edge reported that the EPF had identified at least seven assets located in Perlis, Kedah, Selangor, Kuala Lumpur and Negeri Sembilan that were up for sale. These assets included Bangunan KWSP in Jalan Raja Laut and Bangunan KWSP in Changkat Raja Chulan in Kuala Lumpur, and Bangunan KWSP Damansara Fairway in Petaling Jaya, Selangor.

In 2019, when Dairy Farm Retail Group — the operator of Giant — started to rapidly shut down stores, the EPF, which owned “about a dozen” buildings and shoplots that were occupied by the retailer, began to weigh the option of selling these assets.

When asked about the asset sales, the EPF was previously quoted as saying that in the ordinary course of managing its investments as a long-term strategic investor for the benefit of its members, it was always in the process of acquiring as well as disposing of assets, which included real estate.

It added that the decision to buy or sell real estate would also take into consideration the fund’s overall portfolio strategy and long-term health.

VPC Alliance Malaysia managing director James Wong tells The Edge that it was noticeable that EPF had been gradually selling the office buildings and hypermarkets in its property asset portfolio over the past few years.

He notes that the reason for the sale of its office buildings was because the EPF had consolidated and relocated to its new head office building in Kwasa Damansara. On hypermarkets, Wong says, “it does make sense to sell the hypermarkets in their portfolio given the fact that hypermarkets are now less popular among shoppers, with stiff competition from mid-sized grocers like 99 Speedmart, Jaya Grocer and so on.”

He is of the opinion that given the EPF’s investment in property only constitutes about 7% of its investment portfolio (as at September 2022), the provident fund should target to allocate 10% of its portfolio to property and infrastructure.

According to reports, allocations for real estate and infrastructure assets aimed at inflation hedging amount to 6% under its current Strategic Asset Allocation (2022-2024), down from 10% under its SAA in 2019. Real estate assets made up 6% of the EPF’s portfolio in 2021, up from 5% in 2019 and 5.5% in 2020.

Wong says some of the property assets that the EPF should consider investing in are warehouses, logistics and cold rooms (in the industrial building sector); private hospitals, wellness centres, senior housing with aged-care facilities and medical tourism (health) and toll road concessions and ports (infrastructure).

Last year, the EPF made its first significant domestic real estate investment in nearly a decade. It invested in the development of a 100% pre-leased logistics hub on 27 acres of freehold land that will be ready in 2Q2024. The property, which will be equipped with the Automated Storage and Retrieval Systems technology, is being developed in a 70:30 joint venture with Taiwan’s Ally Logistic Property Co Ltd, and is expected to have an estimated value of RM600 million to RM700 million based on a gross floor area of 1.8 million sq ft.

“EPF asset sales are timely, as the property market is seeing a recovery post-Covid-19, especially in the commercial sector. The properties sold have reached their respective peaks in terms of value and have served their purpose for the EPF over the years,” Laurelcap Sdn Bhd executive director Stanley Toh tells The Edge.

“Some of the properties sold require rejuvenation and judging from the profile of the purchasers, they are from the same industry and probably are the right people to turn around the asset and create synergy with their current portfolio,” he adds.

Toh believes that should the EPF want to re-invest the proceeds in properties, the logistics sector, warehousing, data centres and ports would be ideal.

“Of late, there has been a huge demand for data centres mainly due to the rise in data storage, availability of power supply and competitiveness in terms of cost in the country. The demand for warehousing, logistics and ports is still positive, albeit slower than the last couple of years. Nevertheless, well-located properties with good accessibility and connectivity to highways and ports are still highly in demand,” he adds.

Based on reports, available data and sources, The Edge has compiled a list of assets sold by the EPF since 2014. In total, the assets were worth at least RM4.33 billion, of which three assets in London were valued at more than RM3.18 billion.

Industry experts say that while the EPF has not put some of its assets up for sale, it would always consider a sale if the price is right. 

Meanwhile, in the email, The Edge also asked the EPF about its plans for the former EPF headquarters on Jalan Raja Laut, which is yet to be sold, as well as the status of the EPF building on Jalan Gasing, Petaling Jaya, which caught fire in February 2018.

It neither confirmed nor denied a question on whether a deal had been signed to lease the Jalan Gasing building, which has remained shut for five years, to be operated as a health and wellness facility.

According to sources, if the Jalan Raja Laut asset is not sold, one option would be to lease it out. 

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