Sunway REIT to buy RM500 mil worth of retail assets from EPF

TheEdge Mon, Mar 20, 2023 03:00pm - 1 year View Original


SUNWAY Real Estate Investment Trust (Sunway REIT) is expected to sign a deal to buy six retail assets worth a combined RM500 million from the Employees Provident Fund (EPF). The assets are currently leased to grocery store retailer Giant.

The parties may ink a deal as early as this week, according to sources, who say five of the stores are in the Klang Valley and one in Johor. Of the six stores, one has ceased operations.

The stores in the Klang Valley have been identified as Giant Superstore Ulu Klang, Giant Hypermarket Bandar Kinrara, Giant Hypermarket Putra Heights, Giant Hypermarket Klang and Giant Hypermarket Subang Jaya, USJ, which is adjacent to Mydin USJ and ceased operations late last year. The store in Johor is Giant Hypermarket Plentong.

Sunway REIT CEO Datuk Jeffery Ng Tiong Lip did not respond to calls or WhatsApp messages from The Edge requesting for confirmation on the planned purchase. The EPF too did not respond to questions sent by The Edge.

Details of the deal remain sketchy. While the purchase of the retail assets is expected to boost Sunway REIT’s recurring income stream, it is understood that their leases will expire in five years. As for the former Giant USJ site, sources say Sunway REIT has the option of leasing the space out to another retailer or redeveloping the site.

Over the past few years, Hong Kong-based DFI Retail Group, which operates Giant through GCH Retail (Malaysia) Sdn Bhd, has shut down dozens of its loss-making stores and retained the better-performing ones. On Feb 23, DFI sold its food business in Malaysia, including Giant, to Macrovalue Sdn Bhd. The new owners plan to transform the hypermarkets into Giant Malls (see ­“Giant hypermarkets to be replaced by Giant Malls” on Page 22).

A REIT expert, who declined to be named, says the purchase by Sunway REIT appears to be a sound real estate plan, as the assets are well located and valuations will rise in the long term.

“It’s a pure real estate play and they are likely to be buying for the long-term value. As these assets are well located, if the [existing] tenants leave, they can always be easily replaced with new ones. Also, because of Sunway REIT’s skill sets in operating malls, they can always enhance the assets and increase revenue too,” he tells The Edge.

Once these purchases are completed, they will add to Sunway REIT’s total asset value, which stood at RM9.4 billion as at Dec 31, 2022. On Dec 29, the trust entered into an agreement to sell the Sunway Medical Centre (Towers A and B) for RM430 million to Sunway Bhd. This disposal is expected to be completed in the first half of 2023.

Excluding the medical centre, the Sunway REIT portfolio includes five retail malls, six hoxtels, five offices, two industrial properties and one educational asset.

In the financial year ended Dec 31, 2022 (FY2022), Sunway REIT recorded a revenue of RM651.45 million and a net property income of RM500.24 million. Its earnings per unit was 9.58 sen, while distribution per unit came in at 9.22 sen. Total liabilities stood at RM3.9 billion, with borrowings totalling RM3.5 billion.

In 2019, The Edge reported that the EPF owns “about a dozen” buildings and shoplots, which are or were occupied by GCH Retail.

DFI came into possession of many of these outlets when it entered the Malaysian market in 1999 through the acquisition of Giant from the Teng family. Part of the deal included the acquisition of the properties, including TMC outlets in Bangsar, Ulu Kelang and Plentong, which were placed under Hartanah Progresif Sdn Bhd, a wholly-owned subsidiary of Dairy Farm.

In December 2005, GCH Retail decided to divest itself of all the buildings it owned at the time. Hartanah Progresif was sold to the EPF for RM382 million with a guaranteed net yield of 7.5% a year, equivalent to RM32 million. GCH Retail had also entered into a separate long-term lease agreement of 10 to 15 years for the properties. They comprised four hypermarkets, four supermarkets and 42 small shoplots and hostels as well as three pieces of vacant land.

Hartanah Progresif was later renamed Kwasa Properties Sdn Bhd by the EPF. A search on the Companies Commission of Malaysia’s website shows that Kwasa Properties is involved in property investment, with earnings derived mainly from rental income. In the financial year ended Dec 31, 2021, Kwasa Properties posted a net profit of RM38.51 million on the back of RM55.06 million in revenue. At end-2021, Kwasa Properties had total liabilities of RM588.57 million, of which RM60.75 million were current, and total assets of RM600.67 million. It also has RM10.45 million in accumulated profits.

The EPF has been disposing of some of its assets over the past few years. It sold Bangunan KWSP in Changkat Raja Chulan, Kuala Lumpur, to TIME dotCom Bhd for RM62 million in January 2022; and Bangunan KWSP Damansara Fairways in Petaling Jaya to LKL International Bhd for RM24 million last month.

The EPF is understood to have sold the Giant Hypermarket in Section 18, Shah Alam, in 2020 for some RM15 million.

In January, Reuters reported that the EPF was looking to sell education assets worth more than RM500 million. The assets are held by its Alpha REIT, which is winding up the international airports in Penang and Subang.

 

The content is a snapshot from Publisher. Refer to the original content for accurate info. Contact us for any changes.






Related Stocks

LKL 0.115
REIT 810.050
SUNREIT 1.510
SUNWAY 3.500

Comments

Login to comment.