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Wednesday, May 26, 2010

IGB urged not to include The Gardens Mall in REIT plan

PETALING JAYA: IGB Corp Bhd, which has in the past two to three years expressed an interest in restructuring the company’s assets into a real estate investment trust (REIT), may find it more worthwhile not to inject The Gardens Mall into the trust.

An analyst with a foreign investment bank said The Gardens Mall lacked the financial track record for a listing as it had only been operational for about three years.

“The Gardens Mall with the lack of a track record will lower the valuation of the REIT,” the analyst said.

He said management might be more interested in a REIT listing now compared with three years ago as it could have come to terms with the valuation of the properties under IGB. “Three years ago it was not very happy with the valuation but I suppose it has come to accept the market’s valuation so it’s more willing to list now,” he added.

On Monday, KrisAssets Holdings Bhd group managing director Robert Tan said following the company’s AGM that the company, which owns Mid Valley Megamall and is in turn about 75%-owned by IGB, was looking to list its properties in the 50-acre Mid Valley City into a REIT.

However, he said, The Gardens Mall was still not ready to be injected into KrisAssets although the mall was doing well since its opening in 2007.

Meanwhile, Standard & Poor’s Malaysia Sdn Bhd senior analyst Alexander Chia said in an email reply that the delay in restructuring IGB’s assets into a REIT was due to a drastic drop in market value of REITs in 2008 and early 2009 with poor market sentiment for REIT listing another obstacle.

He said the impending listing of Sunway REIT with an estimated asset value of RM3.7bil would make a difference to the staid REIT market, which had often been viewed as unexciting.

Chia added that the large and diversified portfolio of property investments of the Sunway REIT would help to attract more institutional investors’ interest and enhance liquidity of the REIT market.

By The Star

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