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Monday, January 14, 2008

Quill Capita to manage assets worth RM750m

It is embarking on an aggressive plan that would see its real estate portfolio grow substantially in the near to medium term as more properties are injected

QUILL Capita Trust (QCT), a property trust that has been listed on Bursa Malaysia for a year, is going on an expansion trail that is projected to increase its portfolio of assets under management to at least RM750mil by year end.

QCT was listed on Jan 8, 2007, with four properties worth RM276mil under the Real Estate Investment Trust (REIT). All the properties are located in Cyberjaya with a combined net lettable area of 493,118 sq ft.

The REIT's manager, Quill Capita Management Sdn Bhd (QCM), recently placed two more properties into the trust, making it six properties in its stable.

QCM chief executive officer Chan Say Yeong said the two new additions - Wisma Technip, and the retailing and car park portion of Plaza Mont' Kiara – were acquired for RM125mil and RM90mil respectively, hence expanding QCT's net lettable area to 799,547 sq ft (excluding car park area).

Wisma Technip is one of the latest properties acquired and placed into Quill Capita Trust

Wisma Technip is a 100% occupied office building with a net lettable area of 233,021 sq ft, while the commercial shops are leased to food and beverage and retail tenants.

The car park lots of Plaza Mont'Kiara have a net lettable area of 73,408 sq ft with a 94.9% occupancy. The sale and purchase agreements for both properties were signed on June 8, 2007.

Chan said a placement of 151.44 million new units in QCT was concluded on Sept 3, which raised RM226mil, thus allowing the two properties to be purchased quickly.

Funds from the exercise allowed QCT to lower its gearing from to 0.17 from 0.31 and also gave the option to borrow up to RM400mil from financial institutions, which is preferred over selling more shares to raise funds.

In Malaysia, REITs are restricted to a gearing of 50% under the Securities Commission's guidelines.

Chan said QCT's recent acquisition and injection of two properties was just the start of an accelerated expansion plan to place more properties into the trust.

“Within five months from the date of QCT's listing, we bought two more yield-accretive properties with high occupancy and long-term tenancies,” he said, adding that the acquisition was in line with QCM's strategy to achieve better geographical spread of properties across the country to reduce risk.

Chan said the acquisitions were also in line with QCM's growth strategy to double QCT's asset size to at least RM560mil by end-2007.

“We have achieved this target and the REIT's performance (in terms of share price and investment return) has not disappointed investors,” he said.

QCT's share price closed at RM1.30 last Friday, representing a 54.7% rise its initial public offering price of 84 sen.

“We are now poised to fast track the growth of the trust,” Chan said, adding that there were several properties either from Quill Group of Companies (Quill) and CapitaLand or third party transactions that could potentially be injected into the REIT in the near to medium term.

Quill and CapitaLand are both significant stakeholders of the trust. The latter is one the largest listed real estate companies in Asia headquartered in Singapore.

Chan said other properties from Quill which could potentially be injected into the trust in time were the office tower Lot J at KL Sentral (350,000 sq ft), HSBC headquarters near Masjid Jamek (100,000 sq ft) and an integrated development, Vision City, located at Jalan Sultan Ismail (comprising 300,000 sq ft office space and 700,000 sq ft retail space).

He said Quill also had other properties in Cyberjaya that could be placed into the REIT.

“There's one property project due for completion soon, and also an office building in Petaling Jaya's Section 13 and a logistic centre in Subang that could be sold to the trust,” said Chan.

He added that QCM would be offered the first right of refusal on the commercial properties from Quill.

Moreover, Chan said, QCT could rely on CapitaLand to support the growth of the trust as it had a stake in the REIT.

In March 2007, CapitaLand announced the establishment of the Malaysia Commercial Development Fund with a target fund size of US$270mil.

The objective of the fund was to enable institutional investors (who park their money into the fund) the opportunity to invest in the Malaysian real estate sector.

Some of the properties from CapitaLand that could potentially be placed into the Reit are One Mont' Kiara (170,000 sq ft office space and 250,000 sq ft retail space), a property project in Hartamas area (500,000 office space and retail) and several property projects in Petaling Jaya.
On acquiring overseas property to enhance the REIT, he said it was unlikely.

“We will stay focussed on Malaysian properties because of their attractive valuations and rental, compared with other Asean countries,” he said, adding that foreign investors generally preferred investing in REITS with real estate portfolios that were within a specific country.

On the portfolio of investors in QCT, Chan said: “The trust has an equal balance of foreign and local investors.”

By The Star (stories by Danny Yap)

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