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Monday, November 19, 2007

Quill Capita plans to buy properties from sponsors

Quill Capita Trust, a property trust partly owned by CapitaLand Ltd of Singapore, plans to buy two yield-accretive assets from its sponsors in the next three to six months to grow the trust, its manager said.

"We are looking at a couple of properties and they will come from our sponsors. We are currently in the process of discussion, working out the timing of injection and planning the valuation exercise," Quill Capita Management Sdn Bhd chief executive officer Chan Say Yeong told Business Times in an interview. He did not elaborate.

Quill Capita Trust's gearing came down to 0.7 per cent after completing a share placement in September that raised RM226 million.

This means it can buy around RM400 million worth of properties via borrowing before it needs to sell more shares. Gearing of a real estate investment trust (REIT) cannot exceed 50 per cent under the Securities Commission's rules.

The trust, with the backing of sponsors Malaysian property developer Quill Group and CapitaLand, has put in place a pipeline of assets that will ensure its future supplies of good quality purchase. Quill Capita Trust owns the first right of refusal to buy the properties developed by its two sponsors.

Some potential acquisitions may include the office tower known as Lot J at KL Sentral that is being jointly developed by Quill Group and the Malaysian Commercial Development Fund, a US$250 million (RM845 million) fund which CapitaLand has set up together with Malayan Banking Bhd to help finance its projects.

With 350,000 sq ft of net lettable areas, Lot J is currently under construction with a 2009 target completion.

Quill Group is also constructing an annexe building in Kuala Lumpur for lender HSBC Bank Malaysia. The project, due to be completed in 2010, is leased long-term to HSBC and may be put into the trust at some point.

In addition, CapitaLand's development fund has also invested in a project called One Mont Kiara together with Aseana Properties Ltd, that will build two blocks of office towers and a retail podium.

The development fund also has another project in nearby Hartamas, near the High Court, comprising office towers and retail units.

Meanwhile, Quill Group continues to build on several developments in Cyberjaya, with one project expected to be completed soon. Quill also has an office building in Petaling Jaya's Section 13 and a logistic centre in Subang that may be sold into the trust.

Further in the future, Quill may have the Vision City development that it bought from RHB Group ready for the trust.

"When choosing which REIT to buy, investors should look at which sponsor is serious about the property trust business." Chan said.

He said a REIT investor should hold a longer term view and pick those with sponsors that are willing to put in money to develop projects, so that the trust is guaranteed a pipeline of assets.

Quill Capita Trust, which was listed in January this year, has almost doubled its asset size to RM524 million so far, from RM276 million at the time of listing.

This is helping it to pay better dividends to sharehoders.

The trust now expects to distribute 6.23 sen per unit for fiscal 2007, from six sen before.

By New Straits Times (By Chong Pooi Koon)

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