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Monday, June 9, 2008

Magna Prima plans RM1b REIT

PROPERTY developer Magna Prima Bhd plans to set up a RM1 billion real estate investment trust (REIT) within the next five years.

The first asset to be sold to the REIT would be a retail mall, which will be built within the company's integrated lifestyle property development, Magna City Kuala Lumpur.

Chief executive officer Lim Ching Choy said the company plans to sell at least three assets to the REIT.

"The retail mall in Magna City will be the first asset that we are going to maintain for retained income and eventually, we will inject this asset into (the) REIT.

"We are building a few more, so our REIT asset will exceed RM1 billion," he told Business Times in an interview in Kota Damansara, Selangor.

Developers typically sell their assets to a property trust to raise funds that would be used to cut debt. In most cases, REITs are also owned by developers who want to maintain control over their assets.

Lim also said that the company may raise funds from a bond sale to finance the retail mall component of Magna City.

"We want to issue bonds to match our rental income, so that the long-term asset is funded by long-term corporate debt," he said.

Magna Prima expects revenue to increase to RM1.6 billion within four years, mainly from the Magna City project. It made RM26.6 million net profit on revenue of RM344.4 million in the year to December 31 2007.

Currently, 74 per cent of the company's income comes from property development and the rest is from construction.

It expects equal contributions from the two divisions within the next three years.

Magna Prima's construction arm is currently doing in-house jobs with a total contract value of RM647 million.

Magna Prima has also bought 90 per cent of a construction firm, Pembinaan Contamaju-Infocast Sdn Bhd (PCI) to beef up its construction arm.

Its wholly-owned subsidiary, Magna Prima Construction Sdn Bhd, is involved in the construction of Dataran Otomobil, Magna View and Metro Prima Kepong, while PCI will do new projects such as U1 in Shah Alam and Magna City.

Currently, Magna Prima has a total landbank of 32.8ha, small compared with large parcels owned by other developers.

"We have RM2.13 billion gross development value (GDV) on the 32.8ha land, which will sustain us in the next four years.

"We are focusing on high-density development, so our GDV value per acre is very high compared with other developers," he said.

Magna Prima has identified two parcels of land for next development projects - one is less than 0.8ha located within the Golden Triangle area in the city and another is more than 4ha land in the highly densed suburb in Klang Valley.

"We are at the land negotiation stage, and we expect to conclude it within two months' time," he said.

The GDV of each project is estimated to be more than RM1 billion.

Lim said the company plans to focus its property development activities in Klang Valley and has no immediate plans to venture abroad.

By New Straits Times (by Hamisah Hamid)

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