Thursday, August 21, 2008

CapitaLand Going Ahead With 2nd Malaysian Reit

Source : The Business Times, August 21, 2008

Latest offering will comprise 3 malls worth RM2b: chief investment officer

CAPITALAND will list its second Malaysian real estate investment trust (Reit) this year, barring unfavourable market conditions, the company's chief investment officer Kee Teck Koon said yesterday.

Mr Kee: CapitaLand will time the launch of the Reit 'so it can capture the imagination of investors'

The Reit will initially comprise three shopping malls worth RM2 billion (S$849 million), he said. CapitaLand will gauge market sentiment to ensure the launch is timed 'so it can capture the imagination of investors'.

At a news briefing after the topping-out ceremony for Kuala Lumpur's Tower D, which is owned jointly by CapitaLand and Malaysia's Quill Group, Mr Kee said that the listing plan for the second Reit has not changed. 'The intention is very clear,' he said.

Penang's Gurney Plaza and two malls in the Klang Valley - Mines Shopping Fair and Sungei Wang Plaza - will form the Reit's initial core assets. Mr Kee would not say who CapitaLand's local partner in the Reit would be.

The company's reservations about market sentiment are warranted. The last three listings on Bursa Malaysia have debuted below their offer price. In the latest, shares of Perwaja Steel yesterday opened 10 sen short of the RM2.90 offer price before closing at RM2.48.

Although Malaysian Reits are seen as defensive, interest among foreign investors has been dampened by relatively high withholding tax.

Still, some investors continue to be attracted to local real estate because its comparative pricing ought to allow for greater capital appreciation down the road.

For example, the Malaysia Commercial Development Fund (MCDF) - a US$270 million closed-end private equity investment fund launched jointly by CapitaLand and Maybank in March 2007 with a gross development value of US$1 billion - is fully invested, CapitaLand Commercial chief executive Wen Khai Meng said yesterday.

CapitaLand 'may consider subsequent funds' focused on residential, commercial and retail segments, he said.

MCDF provides a pipeline of projects to be injected into Quill Capita Trust - a commercial Reit jointly listed by Quill and CapitaLand in January 2007 with an initial fund size of RM276 million, which has grown to over RM800 million.

Tower D in the KL Sentral area will allow them to further leverage on strong demand for commercial property and is likely to be injected into the Reit.

To be completed by January, the Grade A building, which has a net lettable area of 355,000 square feet, has a confirmed tenancy rate of 65 per cent and is expected to be fully tenanted by March.

The 29-storey office block with a six-storey retail podium has attracted several multinational and big local companies as tenants, said Quill director Michael Ong.

Rental rates are around RM6 to RM7 per square foot and a number of tenants have signed three-plus-three-year leases, he said.

CapitaLand, through MCDF, owns 40 per cent of Tower D developer Quill Realty.

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