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Monday, January 14, 2008

KL commercial properties at upturn of cycle

QCM CEO Chan Say Yeong reveals plans to accelerate the growth of properties in Quill Capita Trust.

STARBIZ: What's the demand for office and retail space in the Klang Valley and major towns in Malaysia? Are they still relatively cheap in terms of valuation, compared with other Asian cities in the region?

Chan Say Yeong

Chan Say Yeong: Generally, properties in Malaysia in strategic locations are still attractive in terms of price, especially in the Klang Valley, and the rental of office space has good upside if managed well. The Kuala Lumpur city centre office rental has been increasing steadily since 2003 with a projection that it will continue to rise till at least 2011 based on a Jones Lang LaSalle survey. The survey also noted that Kuala Lumpur commercial properties, especially offices, are at the early upturn of the property cycle.

How has QCT performed since its listing and is it growing at an expected rate?

As at Sept 3, 2007, OCT's real estate portfolio size has increased by about 78% to RM491mil from RM276mil (on the date of listing). It's a good start. We plan to distribute 6.23 sen per unit for fiscal 2007, from six sen before.

Can we expect more commercial properties in the REIT soon?

Well, we hope so. We are looking at a couple of commercial properties from our sponsors and third parties. We are currently in the process of discussion – working out the timing of injection and planning the valuation exercises.

The two properties recently injected into the REIT are in the city area and not from Cyberjaya. Why the decision to buy properties in a different location?

We want to have a good geographical spread of commercial properties across prime areas in Malaysia to reduce risk. Our long-term plan is to have about 70% to 80% of QCT's portfolio of properties located in the Klang Valley and about 20% to 30% in other states. It's a strategy that applies to our tenants as well. We have tenants from the oil and gas sector, automotive, logistic, banking, electrical and others. We have a well balanced tenant mix.

How can investors know which REIT is good?

Good REITS should have strong sponsors willing to fund and develop property projects so that the trust has a guaranteed pipeline of assets ready to be injected into the REIT when the properties are ready. Quill and CapitaLand have put in place a pipeline of assets to ensure that QCT gets to acquire quality office and retail properties to enhance the value of the REIT.

By The Star - Starbiz

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