CapitaMalls Asia could raise RM864m from spin-off’s retail offering

CAPITAMALLS Malaysia Trust (CMMT) launched its retail offering yesterday as part of its listing on Malaysia’s main share market.

The real estate investment trust (Reit) has been spun off from CapitaMalls Asia and will contain the parent company’s three Malaysian malls.

It is offering 786.5 million units to institutional investors in Malaysia and overseas as well as Malaysian retail investors. The units will not be available to retail investors here.

About 719 million of the units will be offered to institutions, and the indicative price is RM1.10 (47 Singapore cents). There are 67.5 million units earmarked for Malaysian retail investors at a maximum price of RM1.08.

The price levels suggest CapitaMalls Asia could raise as much as RM863.8 million from the initial public offering (IPO).

The retail offering opened at 10am yesterday and will close at 5pm next Monday.

The institutional offering opened last Friday and will close next Wednesday.

CapitaMalls Malaysia Trust is expected to list on July 16.

CapitaMalls Malaysia Reit Management (CMRM) chairman Kee Teck Koon said in a statement that the listing of CapitaMalls Malaysia Trust will provide access to capital markets and accelerate the growth of its shopping mall business in Malaysia.

CMRM is the manager of CapitaMalls Malaysia Trust.

CMRM chief executive Sharon Lim said: ‘Going forward, the fragmented ownership of shopping malls in Malaysia presents opportunities for growth through acquisition.’

CapitaMalls Asia will retain a stake of 41.74 per cent in CMMT, but if an over-allotment option of up to 117.98 million units is exercised, its stake could go down to 33 per cent.

The Employees Provident Fund Board of Malaysia and Great Eastern Life Assurance (Malaysia) have signed up as cornerstone investors in the IPO. They will subscribe to an aggregate of 90 million units, or 11.4 per cent of the 786.5 million units being offered in total.

They have agreed to pay RM1.10 per unit or the institutional price, whichever is lower.

Bloomberg said the CMMT offering is set to become Malaysia’s second-biggest IPO this year while the Trust says it will become the largest ‘pure-play’ shopping mall Reit in Malaysia.

AmTrustee, which is the CMMT trustee, values the shopping mall portfolio at RM2.13 billion.

The assets are Gurney Plaza in Penang, The Mines in Selangor, as well as an interest in Sungei Wang Plaza in Kuala Lumpur. The portfolio has a total net lettable area of approximately 1.88 million sq ft.

At the indicative price of RM1.08, the retail offer will provide a forecast distribution yield of 6.9 per cent for 2011, said CMMT.

CMMT’s market capitalisation is expected to be about RM1.4 billion, it added.

The CMMT statement said that CapitaMalls Asia plans to have a Malaysia retail property fund to acquire and develop property, especially malls in the country.

CapitaMalls Asia lost two cents to $2.14 yesterday.

Source: Straits Times, 29 Jun 2010

BETTER late than never, one could say of Frasers Hospitality and Malaysia.

Having finally established a maiden property in the country, Fraser Place Kuala Lumpur is already proving a right fit. Occupancy rates at the 215 apartments have averaged 70 per cent in the six months since its soft opening in December, and are expected to exceed 80 per cent next month.

‘It’s been very, very encouraging,’ Frasers Hospitality chief executive Choe Peng Sum told BT in an interview.

The latecomer to Malaysia intends to play catch-up, and is already planning a second property – Fraser Residence Kuala Lumpur – which will also be located in the city’s golden triangle.

Both properties – the first sited in Jalan Perak and the second in Jalan Sultan Ismail – are a stone’s throw from the iconic Petronas Twin Towers, and a joint collaboration with Malaysian stock exchange-listed developer YNH Property.

Ultimately, Mr Choe sees Fraser establishing three properties under Fraser and another under Modena.

If the hospitality player rues missing out on MARC Residences – jointly developed by a local company and CapitaLand in 2003 – it has decided to move on. ‘We had been looking for a property around the KLCC area and looked at the MARC but thought the price was rather high. We never knew it would climb up so high.

‘But this is exactly where we want to be.’

Johor is another possibility, but ‘probably still early days’.

The expansion is aggressive elsewhere. Frasers Hospitality will open 10 to 12 properties this year, and another 14 next year. Besides Kuala Lumpur, debuts are earmarked for Budapest, Doha, Dubai, New Delhi, Osaka, Bahrain, Chengdu, Suzhou and Tianjin.

‘While people may be more hesitant, this is the window we have to expand. Our type of business is adding more and more properties. It’s a numbers game, and every property is a testament to the next.’

Given the average 90 per cent occupancy rates enjoyed by its European properties – an area arguably suffering the greatest economic uncertainties – its contrarian approach isn’t entirely misplaced.

The pound and euro have also depreciated significantly in the past 12 months, although property prices have recovered. The company owns a third of the 35 properties it manages and any acquisition it makes is benchmarked against the weighted average cost of capital and internal rate of return (IRR). In Kuala Lumpur, it is aiming for double-digit IRR.

But its year-on-year compounded annual revenue growth of about 16 per cent is an indication of healthy customer support. Corporate customers make up about 85 per cent of all guests, half of them mid to long-term guests.

With 5,000 individual residences in 21 cities worldwide – and another 6,000 residences to be added by end-2012 – Mr Choe attributes Frasers’ ability to retain the increasingly discerning business traveller to brand consistency and high levels of service.

The grand opening of Fraser Place Kuala Lumpur was attended by Fraser & Neave chairman Lee Hsien Yang and officiated by Malaysia’s Tourism Minister Ng Yen Yen.

Source: Business Times, 25 Jun 2010

(SINGAPORE) Sunway Real Estate Investment Trust (Reit) plans to sell shares for 90-98 sen (S$0.38-0.42) each in an initial public offering in Malaysia, according to a sale document obtained by Bloomberg News.

The company, controlled by property and hotel group Sunway City Bhd, began offering the shares yesterday as it seeks to raise as much as US$515 million in what would be Malaysia’s biggest Reit IPO, according to the document. The sale is being managed by a group of banks led by Credit Suisse Group AG and RHB Capital Bhd.

The Malaysian property trust, which includes hotels and malls valued at RM3.7 billion, is set to be the biggest in the South-east Asian nation as it taps a resurgence in investor appetite for real-estate stocks amid an economic rebound from last year’s recession. The funds will be used for acquisition of properties, according to the term sheet. Sunway Reit will determine the final price of the shares on June 25, and the company will begin trading in Malaysia on July 8, according to the document. — Bloomberg

Source: Business Times, 15 Jun 2010

Kuala Lumpur: Living in an apartment in the middle of the city, but looking for a suntan by the sea? Just head to the rooftop.

Developer Bukit Kiara Properties (BKP) has come up with a unique feature for its latest condominium, the Vox Tower, in Kuala Lumpur’s posh suburb of Mont Kiara: A beach with real sand and palm trees, perched high up on the 37th floor.

It appears to be a first for the country, as developers keep trying to outdo one another with increasingly creative attractions to draw buyers.

Not too long ago, developer One KLCC completed One KL, a posh 35-storey condominium opposite the Petronas Twin Towers, which boasts a private pool in every unit.

One KL’s apartments come at a price, though: RM4.5 million (S$1.9 million) and more for the larger units covering 300 sq m to 350 sq m.

By comparison, a five-room HDB flat in Singapore is typically 110 sq m in size and costs up to $500,000.

BKP’s rooftop beach, which it calls the Versilica Sky Beach, is touted to be Malaysia’s first. It has recreational rooms, a bar, jet pool, lap pool, garden and terrace.

BKP’s group managing director N.K. Tong told The Sunday Times that the idea had come from a brainstorming session.

‘Most of the ideas that came from my staff had sun, sand and surf,’ he said. ‘Building a sky beach sounded really silly at first, but as we did more brainstorming, we found the idea quite possible after all.’

BKP did not want to reveal the cost of the Vox Tower, but the sky beach and rooftop facilities alone are estimated to cost between RM2million and RM3 million.

The sandy beach covers about 370 sq m, and sits next to a 20m by 3m lap pool.

The condo is selling well, but Mr Tong and his team have yet to figure out how and where to source for the sand, and which type of sand to use. To add a greater touch of reality to the idea of a sky-high beach, the team also plans to use salty chlorinated water in the pool.

The Vox Tower is one of four blocks in BKP’s Verve Suites project, and is expected to be ready by end-2013.

Prices range from about RM580,000 for a 43 sq m one-bedroom unit to RM1.8 million for a 130 sq m three-bedroom unit.

Mr Tong says BKP is targeting mainly local buyers who are ‘young at heart’ – and presumably, those who want a seaside visit without stepping out of their condo.

Source: Sunday Times, 13 Jun 2010

They will be listed in a property trust on Bursa Malaysia

CAPITAMALLS Asia plans to list its three Malaysian malls, worth nearly $1 billion, in a property trust on Malaysia’s main bourse – raising as much as RM995 million (S$426 million) in the process.

In a statement yesterday, it said that it has received approval from the Securities Commission of Malaysia to list CapitaMalls Malaysia Trust (CMMT).

The newly spun-off company will be listed on the main market of Bursa Malaysia.

CMMT will be Malaysia’s largest listed ‘pure-play’ shopping mall real estate investment trust (Reit) by market and property value if the listing goes ahead.

CapitaMalls Asia will offer 786.52 million units, and retain a stake of 41.74 per cent in CMMT.

If an over-allotment option of up to 15 per cent of the proposed offering – or 117.98 million units – is exercised, it will retain a stake of 33 per cent.

CapitaMalls Asia will hold 70 per cent of the Reit manager post-listing.

CapitaMalls Asia said the Employees Provident Fund Board of Malaysia and Great Eastern Life Assurance (Malaysia) have signed up as cornerstone investors to buy 90 million units at RM1.10 a unit or the institutional price, whichever is lower. At this price, the estimated distribution yield is 6.5 per cent for the eight-month period ending December this year and 6.8 per cent for next year.

The company said its decision to proceed with the listing depends on a number of factors. It has yet to price the offering.

Still, the listing could raise as much as RM995 million based on the cornerstone investors’ price.

The trust will hold the firm’s Malaysian malls: Gurney Plaza in Penang, Sungei Wang Plaza in Kuala Lumpur and The Mines in Selangor. This initial portfolio has a total net lettable area of about 1.88 million sq ft and is valued at about RM2.13 billion.

Some Malaysians have written off The Mines as a viable mall. But CapitaMalls Asia said it has introduced many changes and created an extra net lettable area of some 80,000 sq ft in the mall, with higher average rents and occupancy as a result.

Malaysia is a ‘key growth market’ apart from Singapore and China, said CapitaMalls Asia chief executive Lim Beng Chee.

He said there will be good opportunities for growth as the retail market there is fragmented.

Most of its rivals are owners of single malls.

CapitaMalls will be able to ‘recycle’ cash of some $200 million from the listing to acquire assets, Mr Lim said.

CMMT will be given a right of first refusal over retail properties in Malaysia that CapitaMalls Asia targets for acquisition.

This includes the Gurney Plaza Extension which would bump up its asset size by 11 per cent to 12 per cent.

CapitaMalls Asia plans to have a Malaysian retail property fund to acquire and/or develop retail property, primarily malls in Malaysia.

Yesterday, CapitaMalls Asia closed unchanged at $2.10.

Source: Straits Times, 12 Jun 2010

Optimism rises in wake of progress in S’pore-M’sia issues

PROPERTY companies owning large tracts of land in Johor can expect greater investor interest as Singapore and Malaysia resolve previously sticky issues.

The biggest gainers may be the special economic zone of Iskandar Malaysia and Johor’s real estate sector.

Given the proposals for a new rapid transit line between Tanjung Puteri in Johor Bahru and Singapore, as well as increasing bus and taxi services and reducing the Second Link toll rates, many analysts felt that Johor property developers ‘could be back in play’.

Over the past two days, the bearish stockmarket sentiments notwithstanding, developers such as UEM Land and Tebrau Teguh which have large landbanks in Johor have seen a bigger spike in interest.

Government-linked UEM Land which owns an estimated 3,300 hectares in the southern state – much of it in key nodes in Iskandar – has been one of the most active counters, yesterday closing three sen up at RM1.33 after reaching an intra-day high of RM1.37.

The progress made on a number of outstanding two-decade-old issues including land owned by KTM in Singapore which will now be jointly developed by both countries’ state investment agencies, as well as Singapore’s commitment to a proposed wellness township in Iskandar, has raised optimism that development would now be speeded up rather than put on the back-burner.

‘Oh yes, Johor and Iskandar have become more attractive, especially if Temasek comes in and brings others,’ said CH Williams Talhar & Wong director Danny Yeo.

CLSA, which had previously written on improving Singapore-Malaysia relations, was also optimistic that ‘the pieces were falling in place very quickly’. It expects more Singaporeans to be living in Iskandar.

In a client note, Macquarie pointed out that with Singapore helping to drive part of Iskandar’s growth, Malaysia’s potential economic growth and move up the value-added chain would be greatly boosted.

The proposed rapid transit link between the two countries is expected to smoothen cross border movements when it is completed in 2018.

Property players around the Johor city area are already rubbing their hands in glee. ‘The South Key project just got better with the rail connection,’ declared CH William’s Mr Yeo. The promoters of the RM12 billion (S$5.1 billion) mixed development project on the former Majidi army campsite plan to launch the first phase involving three-storey shop lots in the coming months.

Sentiments have improved on the latest developments, Mr Yeo said, adding that with inflation likely to see a higher jump should the Goods & Services Tax be implemented next year, properties are a better hedge against inflation. ‘All that coupled with the recent rate hike will only push buyers to commit earlier rather than later in order to lock in rates.’

Even so, the momentum is only expected to pick up once more Singapore money starts to trickle in.

Source: Business Times, 27 May 2010

Khazanah, Temasek to jointly develop 200 ha site in Johor

(SINGAPORE) A huge 200 hectare site – the size of 374 football fields – will be set aside for a joint ‘wellness township’ that Singapore and Malaysia plan to build.

The township, in Johor’s Iskandar Malaysia zone, will be developed by a 50-50 joint venture set up by the Malaysian government’s investment company Khazanah Nasional and Singapore’s state investment company Temasek Holdings.

Singapore Prime Minister Lee Hsien Loong and his Malaysian counterpart Najib Razak said at a news conference after their retreat yesterday that the private sectors in both countries will be invited to take part in the project, which is expected to be launched within 12 months.

The idea of a wellness township was first mooted during an official visit to Singapore by Mr Najib in April last year. He said yesterday: ‘We agreed that there must be real and substantive progress on this development, and today’s meeting has defined the framework and concept.’

The project will offer holistic wellness services and facilities, such as alternative medicine and traditional healing.

During a closed-door retreat at the Shangri-La Hotel, the leaders also discussed the controversial water issue – in particular, the first water agreement between the two neighbours that is set to expire on Aug 31 next year.

Mr Lee said that the Skudai Water Works treatment plant in Johor, which Singapore has been using to extract water from the river, will be handed over to Malaysia ‘in good working order’ without any charge.

The idea of a third bridge linking the two countries – first floated when Mr Lee and Mr Najib met a year ago in Singapore – was also raised briefly during yesterday’s news conference, when a Malaysian reporter asked Mr Najib for an update on whether the project could take flight.

Responding, Mr Najib said that the third link – in addition to the Causeway and the Second Link – was envisaged as a ‘long-term project’.

‘Our immediate priority is to maximise the usage of the Second Link, so we don’t have any time frame with respect to the third link,’ he said.

During last year’s meeting with Mr Lee, Mr Najib proposed the construction of a bridge linking the eastern side of Johor – from Pengerang and Desaru – to Singapore in view of the increasing movements between both countries.

Source: Business Times, 25 May 2010

FRASERS Centrepoint Trust (FCT) said yesterday it is confident of maintaining historical revenue growth rates and is looking to buy malls in Malaysia to diversify its business.

FCT, which owns four suburban malls in Singapore, recorded compounded gross revenue growth of 7.5 per cent per annum since listing in 2006. During this period, distribution to shareholders rose by an average of 5.7 per cent per unit each year.

‘Looking at revenue trends and looking at rental reversions, in general, we think that this is quite a sustainable trend,’ chief executive Chew Tuan Chiong said when asked if growth was sustainable.

‘There was growth even during the downturn and right now, things are looking bright,’ he told Reuters in an interview.

He said rental income from existing malls could rise as rents at its properties are below the market average, although he added that FCT preferred to ‘put less pressure’ on tenants.

The property trust recently refurbished one of its malls called Northpoint, which is already benefiting from a higher stream of rental income. Rents at Northpoint have risen by about 20 per cent since the renovations, he said.

Most analysts have a ‘buy’ recommendation on FCT, favouring it over rivals such as CapitaMall Trust and Suntec due to the greater potential for rent increases.

FCT will also benefit from the likely injection of new properties by parent Fraser and Neave , a property, beer and soft drinks conglomerate.

OCBC, for example, predicts FCT could raise rents at Causeway Point, the trust’s largest property, to S$13-S$14 per square foot per month from S$11-12 psf/month through asset enhancement.

Mr Chew, who joined FCT in March this year, said the trust will buy malls with stable income streams from its parent company as well as seek acquisitions from third parties.

‘We are quite interested in Malaysia because we have very similar operations parameters,’ he said.

FCT already owns a 31 per cent stake in Hektar Reit, a Malaysian-listed Reit, and Mr Chew said the Singapore property trust is prepared to invest directly in Malaysian malls.

Mr Chew said FCT plans to stay focused on Singapore suburban malls as they command steady rents unlike swankier malls along the Orchard Road shopping belt that depend a lot on tourism. — Reuters

Source: Business Times, 7 May 2010

Senibong Cove homes on freehold land will cost 30% more than rivals’

AUSTRALIA’S Walker Corporation has unveiled a planned RM1.7 billion (S$734 million) waterfront project along Danga Bay to the Lunchoo River, which is expected to spur further investments on the eastern side of Johor.

Front Concept, a joint venture company between Walker and the landowner Iskandar Waterfront Sdn Bhd, would develop Senibong Cove on 208 acres of freehold land, ‘a stone’s throw’ from Singapore’s Safra Beach Club.

Previously mangrove/ marsh land, Front Concept has spent RM50 million on clearing and reclamation works and expects the first phase of 244 houses to be completed by early 2012, Walker Corp executive chairman Lang Walker said at a ground breaking ceremony in Johor yesterday.

Walker Corp holds a majority stake in the project which is to be modelled after the Gold Coast’s Hope Island Resort. Its gross development value upon completion is estimated at RM1.7 billion.

Senibong Cove would have a 100-berth marina, clubhouse, shopping and recreation club as well as homes and apartments and cost about 30 per cent more than conventional residential projects.

Even so, Mr Walker said prices had been kept affordable – an apartment is priced from RM290,000 while bungalows cost from RM1.8 million – and that more than 100 units worth nearly RM100 million had been sold even before the official launch.

‘The main advantage is JB’s proximity to Singapore, which means we can easily tap into an international market which offers enormous possibilities. The sector factor is JB’s huge waterfront area, almost all of which is undeveloped.’

He said he had initially been keen on the waterfront land along Lido Beach, but legal encumbrances on the land put paid to that plan, while Singapore was not an option because of the exorbitant land prices.

Johor chief minister Ghani Othman expressed delight at the ’signature development’ on the eastern side of Iskandar Malaysia, the special economic corridor which the government hopes to transform into a growth engine.

In the past, the focus has been on the western side of Danga Bay to Nusajaya where Middle East investors have come in on many proposed key projects. Dubai’s Limitless, for example, entered into a joint venture with UEM Land at Puteri Harbour to build an exclusive waterfront precinct estimated at over RM1.5 billion in gross development value and which was to be completed in 2013.

Even so, Johoreans say progress is slow, mainly because of the debt crisis which hit the Middle East and Dubai in particular.

But the state has been putting up infrastructure to assist investment flow. Upon completion of the Eastern Dispersal Link in the first quarter of 2012, Senibong Cove can be reached by car in about 15 minutes from JB’s central business district as well as the new CIQ complex.

Other waterfront developments are also in the pipeline. Another mega project along Lido Boulevard by privately held Central Malaysian Properties will be launched in a few months. CMP’s shareholders include Kumpulan Prasarana Rakyat Johor, a wholly-owned state agency which also has a stake in Iskandar Waterfront.

Source: Business Times, 15 Apr 2010

GIC could be major shareholder in proposed venture with RM3b assets

SUNWAY City (SunCity), which counts the Government of Singapore Investment Corporation (GIC) as its second largest shareholder, could list Malaysia’s biggest real estate investment trust (Reit) by mid-year. It has already identified eight size- able assets to be injected into the trust.

A combination of hotels, retail and offices would be injected into the Reit whose assets are valued at over RM3 billion (S$1.3 billion). These include the popular Sunway Pyramid Shopping Mall and Resort Hotel & Spa, the Pyramid Tower Hotel, Menara Sunway, Sunway Carnival Mall, Sunway Hotel Seberang Jaya, SunCity Ipoh Hypermarket, and Sunway Tower.

Its listing, previously delayed because of the global financial crisis, is expected over the next few months.

SunCity and its subsidiaries are proposing to dispose of their entire interest in the assets to a Reit for a consideration to be determined later, the company said in an announcement to the exchange on Wednesday.

In a report yesterday, Hwang-DBS said it expects the disposal to be satisfied by a combination of cash and units in the Reit and that SunCity, whose biggest shareholders are Jeffrey Cheah Fook Ling (40 per cent) and GIC (21.3 per cent), would likely want to own a third of the Reit.

GIC is also expected to be a major shareholder in the Reit, given its 48 per cent ownership of prized assets Sunway Pyramid and Sunway Resort Hotel, which were acquired during the Asian financial crisis of the late 1990s when the then debt-laden group invited the Singapore investment agency to be a partner.

Hwang-DBS said SunCity management was aiming for a 6-7 per cent yield – versus the sector’s 8.5 per cent – justifying it on grounds that the Reit would be the biggest in Malaysia. Moreover, it has a strong pipeline in place, given that the group owns numerous other properties.

Malaysia has eleven Reits with YTL group’s Starhill Reit currently the largest with assets exceeding RM1 billion. However, despite better returns than fixed deposits – some Reits returned yields of up to 5.5 per cent last year – investors have been slow to warm to their potential.

In any event, SunCity’s proposed Reit would help promote the vehicle as an investment option and at the same time help it unlock value and improve return on assets.

SunCity is expected to receive net proceeds of about RM560 million after paying about RM750 million of Reit asset-related debts, which could be used for land bank acquisitions and the development of new investment properties, said Hwang- DBS, which has upgraded the stock to a ‘buy’.

Source: Business Times, 9 Apr 2010