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Monday, April 14, 2008

Quill Capita Trust plans to expand real estate size

The strong commercial property market in Malaysia augurs well for real estate investment trusts (REITs) to expand their asset portfolio and increase their yield potential.

Quill Capita Trust (QCT), which was listed on the main board of Bursa Malaysia in January last year, has proven to be one of the fastest growing REITs in the country through proactive asset acquisition strategies.

Managed by Quill Capita Management Sdn Bhd, the trust looks set to continue its acquisition trail and expand its real estate size to RM750mil by the end of this year from RM549mil as at last December.

Quill Capita Management is 40% owned by Singapore's CapitaLand Financial Ltd through wholly owned unit CapitaLand RECM Pte Ltd, with Quill Resources Holding Sdn Bhd and Coast Capital Sdn Bhd each holding a 30% stake.

QCT is the first REIT listed outside of Singapore by CapitaLand Ltd.

CapitaLand has listed CapitaMall Trust, CapitaCommercial Trust and CapitaRetail China Trust on the Singapore Exchange Securities Trading Ltd.

According to Quill Capita Management chief executive officer Chan Say Yeong, QCT is confident of expanding its asset portfolio through the pipeline of projects by its sponsors, the Quill Group of Companies and CapitaLand, as well as through acquisitions from third parties.

Chan Say Yeong

“We have a strong pipeline of projects going forward and QCT is on track to hit an asset size of RM750mil by year-end under a plan to expand the number and geographical spread of local properties under its umbrella.

“Quill and CapitaLand have undertaken to grant a right of first refusal to the trust for any commercial building to be disposed or purchased by them. If they want to sell, they have to give the first right to QCT. And we won't stop at RM750mil. Quill and CapitaLand have a strong pipeline of assets and are currently developing some prime projects,” Chan added.

QCT currently has nine buildings in Cyberjaya, the Kuala Lumpur city centre, Mont' Kiara and other areas in Klang Valley after completing the acquisition of three more buildings from the Quill Group of Companies last month.

“Our assets have grown by another 17% to RM643mil from RM549mil as at Dec 31, 2007, and our asset base has diversified to other parts of the Klang Valley like Glenmarie and Petaling Jaya. This makes us more well spread geographically.

“We are also talking to some third-party vendors and, if we realise the acquisitions, we are quite comfortable of achieving RM750mil,” Chan said.

He said another potential pipeline for QCT's asset expansion programme was via Malaysia Commercial Development Fund (MCDF), a private equity fund with a fund size of US$270mil managed by CapitaLand.

“The fund can build up to RM2bil to RM3bil worth of assets over the next three to five years, and we have first right of refusal to those buildings,” he added.

MCDF, which was closed last March, has six ongoing projects in Kuala Lumpur worth a total gross development value of more than RM3bil. Upon their completion in the next three years, the projects will most likely be injected into QCT.

Since its listing, QCT has outperformed its forecast distribution per unit (DPU) and delivered total returns of 62% as at Dec 31, 2007.

One of QCT’s substantial unitholders is CapitaCommercial Trust, which owns a 30% stake. CapitaCommercial Trust chief executive officer Lynette Leong said QCT had been a successful platform for CapitaCommercial Trust to grow its investment in Malaysia.

“The strong distribution growth and above average total returns have been achieved through the implementation of its acquisition growth strategy, pro-active asset management and prudent capital management,” Leong said.

She said Malaysia's REIT market, which was still relatively untapped, had room to grow.

“The Kuala Lumpur office market exhibits continued strength, with limited supply and businesses still expanding,” Leong said.

By The Star

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