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Friday, January 18, 2008

SunCity to launch RM3.7bil REIT

It is yet to decide between Malaysia and Singapore

PETALING JAYA: Sunway City Bhd (SunCity) is on track to list the country’s first integrated resort real estate investment trust (REIT) this year but is still undecided between Malaysia and Singapore.

Property investment managing director Ngeow Voon Yean said the company had appointed RHB Investment Bank and Goldman Sachs global joint coordinators for the REIT’s initial public offering (IPO) exercise.

CIMB and UBS Investment Bank have also joined the panel of joint book runners for the IPO exercise.

Ngeow Voon Yean

“We are waiting for our consultants to compile all the necessary details on the IPO structure and the asset valuation before deciding on the venue for the listing,” Ngeow told StarBiz yesterday.

SunCity’s REIT, with assets valued at RM3.7bil, is touted to be the largest in the country and will see the group inject a host of its prime properties into the REIT.

Among the assets to be injected are the Sunway Pyramid Mall and its annexe – totalling 1.7 million sq ft of net lettable space; the 4.8ha Monash University campus, Sunway University College, Sunway Carnival Mall in Penang and Tambun Hypermarket in Ipoh.

Other investment-grade properties to be included are the Sunway Resort Hotel & Spa, Sunway Pyramid Hotel and Menara Sunway.

The investment bankers will kick off the structuring process of SunCity, studying the viability of injecting the company’s investment properties into a REIT and the plan to grow the REIT with the injection of other and future developments.

Ngeow said the floatation would streamline the group’s businesses, allowing the company to focus its attention on property development while divesting long-term yield properties to the REIT. The process is designed to also enhance SunCity’s earnings visibility.

“The outlook for the retail, hospitality and commercial segments is encouraging and SunCity’s assets, backed by its integrated resort development concept, will allow the REIT a diverse yet synergistic earnings base,” Ngeow said.

“By unlocking the value of our assets, SunCity will be in a stronger cash position to expand into the property development business, both locally and abroad. We will also look into developing properties for future injection into the REIT.”

He said SunCity’s track record in investment assets would contribute to the continued growth of the REIT.

The REIT offering is also part of the company’s strategy to maximise shareholders’ value through asset restructuring.

“Setting up the trust will create value for our shareholders through the realignment of assets within the tax efficient REIT structure.”

An analyst with a local brokerage said SunCity provided the best exposure to REIT play, given its reasonably heavy reliance on property investment income and undemanding valuation.

Presently, property investment contributes 40% of the company’s revenue with property development making up the balance.

In a recent research note, Aseambankers said the REIT’s listing would be timely, given the rising capital value of commercial properties in Malaysia.

Moreover, SunCity’s diversification into emerging countries like India, Cambodia and soon, Vietnam and China, will also help it broaden its earnings base and provide new avenues for growth.

SunCity can look forward to a bullish financial year ending June 30, 2008 (FY08), with encouraging sales from the conclusion of en bloc sales of RM171mil for Sunway South Quay condominiums and RM219mil from Sunway Palazzio.

Sales in the first-half of the financial year totalled RM924mil, achieving 68% of its FY08 sales target of RM1.35bil. It also has unbilled sales of RM1.2bil.

By The Star (by Angie Ng)

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