KIP REIT Management Sdn Bhd has inked a deal to buy Aeon Mall Kinta City Shopping Centre in Perak for RM208mil.
KUALA LUMPUR: KIP REIT Management Sdn Bhd, the manager of KIP REIT, has formally inked a deal to buy Aeon Mall Kinta City Shopping Centre in Ipoh, Perak for RM208mil, a KIP REIT press release said.
The proposed acquisition is expected to be completed by the second quarter of next year.
The 21-year old four-storey building has a land area slightly less than 650,000 sq ft and a net lettable area (NLA) of 530,181 sq ft.
CBRE|WTW, formerly C H Williams Talhar & Wong Sdn Bhd, valued it at RM220mil on Aug 17, 2018, according to the release.
Aeon Co
. (M) Bhd has a 10-year lease on the building from Sept 29, 2015 to Sept 28, 2025 with the option for a further five-year extension that comes with an escalation in rent.
In a bursa filing, KIP REIT Management Sdn Bhd said over a five-year period between September 2015 and September 2020, the annual rent is about RM13.71mil. Inclusive of reimbursements, this adds up to an annual rental in 2018 of about RM16.3mil.
KIP REIT managing director Datuk Chew Lak Seong said despite the current market glut and volatile global conditions, the company is pleased with its first acquisition since its listing, taking into account its gross yield of 7.84%.
From Sept 29, 2020 to Sept 28, 2025, the rent shall be RM15.08mil a year, which translates to a gross annual yield of 7.25%. REITs generally go by net yield, however, said a source. Assuming outgoings of up to 25%, that 7.84% yield, after deducting outgoings would be reduced to an annual net yield of 5.88%, and the 2020-2025’s gross yield of 7.25% to 5.44%.
The acquisition will be funded entirely via bank borrowings, which would expand its gearing ratio to 40.7%, which is within the 50% threshold set by the REIT guideline.
It plans to enlarge its asset size to RM2bil within the next three years. The Kinta purchase has boosted the fund’s asset under management to a RM834.9mil. Its total asset under management as at September 2018 was RM614.93mil.
The fund would like to see an increase in total NLA to about 1.47 million sq ft, from 939,942 sq ft, previously.
Kinta City vendor is PGIM Real Estate Asia Retail Fund Ltd, a global real estate fund with US$69bil in AUM in the Americas, Europe and Asia-Pacific. The sale and purchase was inked with Kinta City Sdn Bhd via the fund’s trustee Pacific Trustees Bhd.
PGIM Real Estate also sold the SStwo Mall in Petaling Jaya, to DK Group. Prior to the sale of SStwo Mall and Kinta Mall, PGIM’s portfolio includes Setapak Central, Island Plaza in Penang and Seremban Prima, formerly known as Seremban Parade in Negri Sembilan.
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