Thursday, June 26, 2008

CapitaLand Invests RM595m In Sungei Wang

Source : The Business Times, June 26, 2008

Acquisition enables creation of pure-play Malaysian retail Reit by year end

CAPITALAND has acquired its third Malaysian retail asset, buying nearly 62 per cent of the total retail area of Sungei Wang Plaza, located in the Kuala Lumpur city centre, for RM595 million (S$250 million).

The acquisition from a private entity called Sungei Wang Plaza Sdn Bhd includes the car parks and was done through an asset securitisation structure, which would see Sungei Wang held by a special purpose vehicle called Vast Winners, according to a CapitaLand statement yesterday.

In the heart of KL: Sungei Wang Plaza's eclectic mix of shops continues to attract locals and tourists despite the emergence of newer flashier malls

Property consultants said that the deal was a positive sign for the local market, and while they expected CapitaLand to add value to Sungei Wang Plaza, the company was also gaining from a solid cash-flow acquisition.

'They're buying into a good stream of cash flow,' Zerin Properties chief executive Previndran Singhe told BT, adding that there is still upside in the complex, particularly with CapitaLand's expertise in mall management.

In the media statement, CapitaLand Retail chief executive Pua Seck Guan said much the same, noting that through CapitaLand's proactive management and by leveraging on its retail real estate management expertise, 'there are tenancy remixing opportunities to create significant value at Sungei Wang'.

CapitaLand had already acquired Gurney Plaza in Penang and Mines Shopping Fair in Selangor. With the Sungei Wang Plaza acquisition, it has now accumulated assets totalling about RM2 billion. This puts it on track to establish a proposed pure play Malaysian retail Reit by year end, Mr Pua said.

Of the three, Sungei Wang Plaza, which roughly translates to river of money, is the cream of the crop. Located in the city's Golden Triangle at the Bukit Bintang shopping district, its annual visitors surpass 24 million, while its occupancy is close to 100 per cent. It is also easily accessible as it is located next to a monorail station, and according to some, enjoys one of the highest rentals on a per square foot basis in the city.

Despite the emergence of newer, flashier malls, the long-established plaza continues to attract locals and tourists who like its eclectic mix of shops.

In Malaysia, CapitaLand has a listed commercial Reit - QuillCapita - via a joint venture with local partner Quill Group. However, that Reit is more of a pure-play commercial Reit because it prefers not to take on retail malls which require shopping centre management skills.

On the asset securitisation structure, CapitaLand said that Vast Winners has issued three tranches of senior medium-term notes - Classes A, B, and C - as well as a tranche of subordinated Class D medium- term notes.

Its wholly owned subsidiary Gain 888 Investments has fully subscribed for the Class D notes in the principal amount of RM338 million, while the senior medium-term notes were fully taken up by a Malaysian financial institution, which has asked not to be identified.

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