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Thursday, September 2, 2010

PKNS picks RM10b projects for REIT plan

SELANGOR State Development Corp (PKNS) has identified 16 high-profile projects worth RM10 billion for future injection into its real estate investment trust (REIT), its chief said.

PKNS general manager Othman Omar said six of the projects have been confirmed. They are Datum Jelatek in Kuala Lumpur, PJ Elevated City, PJ Sentral Garden City and Kelana Sports City in Petaling Jaya, Selangor Science Park 2 in Sepang and the proposed Healthcare City.

Othman said the development site for the remaining 10 projects is expected to be finalised soon.

PKNS aims to launch a REIT soon and it plans to initially inject Menara PKNS in Section 7, Petaling Jaya, Kompleks PKNS and SACC Mall in Shah Alam, with net value of over RM270 million.

"We are excited about the REIT because the proposed injection is a strategic exercise which enables us to leverage on three prime assets to recapitalise," Othman said in an interview with Business Times.

He said the average yield expected from the three properties after a revision to the rental agreements is 7-8 per cent.

Othman said the ability to realise the latent value of PKNS properties will mean a capital gain of RM80 million, RM162 million in cash and a subsequent 30 per cent stake in Amanah Raya's Real Estate Investment Trust (ARREIT).

"Assuming that dividend yield holds constant at 8.5 per cent, we should be looking at RM16 million in additional revenue per year, which bodes well for our liquidity," he said.

PKNS hopes to complete the exercise by the fourth quarter of this year.

Othman said in the medium to long term, PKNS will work with its partners to build and strengthen the asset base of its REIT investments, and when viable, inject more high-profile projects in the Klang Valley to increase the profile and attract foreign investors and fund managers to the investment potential.

He added that with new projects in place, PKNS foresees ARREIT to grow above RM1.5 billion in the next three to four years.

"We are launching the REIT as part of our strategy to transform PKNS group-wide, and a key aspect of that strategy calls for a rationalisation of our assets.

"REITs allow us a ready and stable way to unlock the latent value in these properties and provide significant additional capital which will allow us to be more competitive.

"This is addition to the alternative revenue stream we hope to create in the form of dividends, and the diversifying of our portfolio into properties outside of the state," Othman said.

He is optimistic with the future prospects and development of the REIT industry.

"Malaysia's REITs market is poised with more potential given that it is still relatively limited in terms of diversity, and there remains a lot more areas in which we can explore.

"For example, Hong Kong has long included government premises and even urban car parks in its REITs, given its very real returns ability. Some 40 per cent of Japan's REITs are retail based, and its 25 per cent in Singapore. These are all areas we can look at," he said.

By Business Times

SunCity starts 1st Ipoh townhouse project

Sunway City Bhd (SunCity) has launched its first townhouse development in Ipoh called MontBleu Residence.

With gross development value of RM93 million, the project is located at Sunway City Ipoh and expected to be completed in September 2013.

"The development spans over 11.01 acres with standard intermediate built-up from 1,889 to 2,066 square feet," the company said in a statement today.

MontBleu Residence comprises 220 units of well-planned and modern three-storey townhouses with a 25 feet wide backyard garden.

Each unit consists of three-plus-one bedrooms and four bathrooms with selling prices starting from RM399,000 onwards.

"We believe that this development will be well embraced by the local community based on its strategic location and attractive design features.

"More importantly, it is located within the thriving township of Sunway City Ipoh which contains numerous facilities to provide residents withun surpassed convenience and comfort," said Suncity Managing Director (Property Development Division - Malaysia) Ho Hon Sang in the statement.

By Bernama

EduCity projects target for completion by 2011

JOHOR BARU: Education@Iskandar Sdn Bhd (EISB) plans to complete the ongoing education-related projects and facilities at EduCity in Nusajaya, Iskandar Malaysia next year.

Khairil Anwar Ahmad with a model of the sports complex in EduCity@Nusajaya, Iskandar Malaysia in Johor

Chief executive officer Khairil Anwar Ahmad said it was vital to have them ready by then to ensure the respective institutions would be able to operate at their premises as scheduled.

The projects are the Newcastle University of Medicine (NUMed) and the Netherlands Maritime Institute of Technology (NMIT) campuses, a 12-storey apartment block of students hostel and a sports complex.

The RM300mil NUMed campus on 5.26ha is scheduled for completion next May, followed by the RM30mil MNIT campus on 2.83ha, the apartment block on 3.24ha (phase one) and the sports complex on 11.54ha by the end of 2011.

“At the same time, we’ll continue with our ongoing efforts to attract international educational institutions to set up their branch campuses at EduCity,’’ he told StarBiz.

Khairil said the company had signed agreements with Singapore-based Raffles Education Corp Ltd (REC) and the Management Development Institute of Singapore (MDIS), Singapore’s oldest non-profit professional institute for lifelong learning to set up faculties there.

The company and REC will jointly develop and build Raffles University on 26ha in EduCity.

He said apart from REC and MDIS, the company had recently signed a memorandum of understanding with an American cinematic art school to set up a creative school at EduCity.

It would be a partnership between the American school and a local private university.

Khairil said the EduCity creative school would focus on cinematography courses such as film production, script writing, editing, stage design, music, special effect makeup, wardrobe and costume design.

“The school will complement the Pinewood Iskandar Malaysia Studio (PIMS) in Nusajaya scheduled to open by early 2013,’’ he said.

Khazanah Nasional Bhd is investing RM400mil to build the region’s biggest independently-owned studio together with renowned international film production company Pinewood Shepperton plc.

Khazanah’s wholly-owned unit Beserah Venture Sdn Bhd will be involved in the project.

Pinewood has over 75 years of filming history and was involved in over 1,500 productions including international blockbusters like the James Bond and Harry Potter series, Batman Begins and The Da Vinci Code.

The NMIT, Khairil said, would start at its temporary campus in Menara Kotaraya here with the first intake of about 150 students of SPM school leavers next March.

He said the institute would start taking students from the region in the second year onwards when it moved to its permanent campus in EduCity by 2012. It has the capacity to enrol up to 2,500 students.

Khairl said NMIT courses are International Maritime Organisation accredited and its graduates could be employed by any international shipping company.

The institute will offer diploma, degree and master programmes in marine transport, shipping seafaring, maritime and logistics management.

NMIT is a collaboration between Maritiem Instituut Willem Barentsz, Maritiem Instituut de Ruyter and Maritime Intel Sdn Bhd (MISB), the operating company of NMIT. Malaysian and Dutch partners jointly own MISB.

“We are now negotiating with a top British engineering university for an engineering faculty and have also started looking at hospitality and business schools,’’ said Khairil.

He said if everything went well, the construction of the engineering faculty would probably start next year.

For the hospitality school, the company was keen to have the Australian vocational schools curriculum.

Khairil said the Australian hospitality school model would be able to produce workforce better suited for Iskandar Malaysia’s leisure and tourism sector.

He said courses offered were related to day-to-day operations such as customer relations, front office management, culinary, banquet, spas personnel, food and beverage staff and outdoor activities.

Khairil said the opening of Legoland Malaysia Theme Park, the Indoor Theme Park@Puteri Harbour and other leisure attractions in Iskandar would create job opportunities for the hospitality students.

The 123.42ha EduCity is being developed to be the leading knowledge hub in the region catering to the schooling needs of local and foreign students.

“By having foreign universities set up their campuses in EduCity, local universities and industries have much to gain from their presence,’’ he said.

Khairil said it would encourage them to share their expertise by working and collaborating with local public and private universities through joint-research opportunities and academician and student exchange programmes.

ISB is a wholly-owned unit of Iskandar Investment Bhd, which in turn is 60% owned by Khazanah, while the Employees Provident Fund and Kumpulan Prasarana Rakyat Johor each has 20% equity.

By The Star

Banks to try and prevent speculation on property prices

PETALING JAYA: Bank Negara is engaging with banks on possible measures to curb excessive speculation on property prices while developers caution that it should not be imposed across the board to avoid dampening the property market.

Responding to queries on whether the central bank will be imposing a 80% loan-to-value ratio (LVR) for mortgages to avert the risk of a potential property bubble, the central bank said: “Bank Negara regularly engages with industry players as part of its surveillance and supervisory activity. The engagements cover a broad range of issues and areas that relate to developments on the ground, safety and soundness of the institutions and the overall system.”

Datuk Michael Yam ... ‘Bank Negara should not impose a mandatory LVR cap on loans.’

It added that to ensure prudent management of credit risk in the banks’ balance sheets, the central bank regularly engages with the industry on developments in the underwriting and selling practices of financial institutions.

The share of housing loans to total loans is about 26%, according to the central bank.

When contacted, banking industry players said it was likely that any measures to be introduced would be pre-emptive measures to target certain quarters of purchasers and would not be across the board.

The measures are believed to be targeted at the high-end and non-owner occupied house purchasers.

Currently Bank Negara does not impose any standard policy on mortgage loans but leave it to the banks to manage.

But following a rise of between 10% and 30% in the prices of landed houses in some parts of the Klang Valley (including Kuala Lumpur) and Penang in the past one year, banking sources said Bank Negara might be looking at discontinuing the 5:95 and 10:90 housing loan packages, and preferred banks to impose higher downpayment for property purchasers.

Tan Sri Leong Hoy Kum ... ‘We hope that any implementation of the 80% loan to value ratio will take into proper consideration the industry’s feedback and current market conditions.'

The bank sources concurred that over the longer term, there must be the flexibility to allow more relaxed loan quantum if the market needs it, especially if there is a recession.

OCBC Bank (Malaysia) Bhd head of secured lending Thoo Mee Ling said part of the rationale for the 80% LVR for mortgages could be to curb speculative property prices in the market currently.

“If it is implemented, home buyers will have to self-finance a higher amount than they do now. In the short term, coupled with entry costs such as legal, stamp and valuation fees, the property market will take a dive and it will subsequently dampen the mortgage business.

“In the long term, the measure would curb speculative property buying and promote a healthier property market. Therefore, both the banks and property market will become more resilient to any potential crisis,” she said.

Datuk Michael Yam, the president of Real Estate and Housing Developers’ Association Malaysia (Rehda), said Bank Negara should not impose a mandatory LVR cap on mortgage loans at this juncture as it would dampen buying sentiment with spillover effects on other related industries such as construction and building materials suppliers.

“The local banking industry is well regulated and banks are very prudent and stringent in their credit assessment of borrowers. Banks have, on their own initiative, cut down loan margins to borrowers and only those who are credible and can afford to repay their loans will be offered a higher loan margin.

“Banks also are very selective of what projects they extend loans to.”

Caution and prudence should be exercised when considering any measure for mortgage loans, said Yam, adding that it should not be across the board.

“It is better to leave it to market forces to decide as the banks’ stringent lending criteria is enough to ensure the quality of loans in the market,” he added.

Yam said that up to 90% of the country’s population are living in affordable houses priced below RM250,000, and the current low downpayment for property purchases has promoted home ownership among the lower to middle income group.

Mah Sing Group Bhd group managing director cum chief executive Tan Sri Leong Hoy Kum said a conducive financing environment was important to support the property industry, which was a significant engine of growth for the economy.

“We hope that any implementation of the 80% loan to value ratio will take into proper consideration the industry’s feedback and current market conditions.”

Leong said there was no property bubble at this juncture “as property price increases have not been across the board.”

“The properties which have been enjoying price appreciation are those with good concepts by branded developers, and sited in good locations.

“One must also take into account the construction cost, and also increasing price of good land in considering the prices of properties, which have gone up by 10% to 25% in the past 1½ years,” Leong added.

By The Star

AmanahRaya REIT assets to grow 40pc

Malaysia's fourth largest Real Estate Investment Trust (REIT), Amanah Raya Real Estate Investment Trust (ARREIT), expects its assets to grow 40 per cent to RM1.8 billion next year from RM1 billion currently.

Amanah Raya Bhd (ARB) group managing director Datuk Ahamd Rodzi Pawanteh said this year it would increase the total asset value to RM1.3 billion, with the injection of three properties owned by the Selangor State Development Corporation (PKNS).

"This will be our fourth injection and the final acquisition for this year since our inception with RM340 million in 2007," he told reporters at the signing ceremony of REIT agreements between Amanah Raya Bhd and PKNS today.

Ahmad Rodzi said the total acquisition price for the properties, Menara PKNS, Kompleks PKNS and SACC Mall, was RM270 million, to be satisfied via a combination of consideration units to PKNS and cash.

Upon completion of the Sales and Purchase Agreement (SPA) and Share Agreement, PKNS is expected to own approximately 30 per cent of ARREIT, whilst ARB’s ownership will be approximately 33 per cent, he explained.

He said that in respect of the Malaysian REITS market share, ARREIT expects to be the third largest in terms of REIT's property value after the completion of the exercise.

"We are going to be number three, behind Sunway REIT and Capital Mall REIT," said Ahmad Rodzi.

ARREIT was the first government-linked company REIT listed on Bursa Malaysia in February 2007.

Asked if ARREIT was looking at venturing into the overseas market, he said, it would only be possible when it had a sufficient REIT's asset base.

In conjunction with the property acquisition, both parties also entered into separate lease agreements for each of the three properties, whereby PKNS would lease the properties from ARREIT for a period of 12 years.

This will ensure 100 per cent occupancy of the properties and provide immediate rental income to ARREIT, upon completion of the acquisition exercise.

Meanwhile, PKNS general manager Othman Omar said the organisation was very excited over the exercise.

"We believe is a win-win transaction for all parties, underpinned by mutually beneficial commercial objectives," he added.

PKNS, he said, would be able to unlock the market value of the three properties to be injected into ARREIT.

"At the same time, it will also gain additional exposure to ARREIT’s existing portfolio of 15 property assets, via our future ownership of approximately 30 per cent of ARREIT," Othman said.

He also highlighted that PKNS would earn recurrent income from its investment in ARREIT, which it viewed as a high-quality Bursa Malaysia-listed real estate investment trust, with strong growth potential.

By Bernama

Asian REIT market cap up by a quarter in first half

HONG KONG: Asia's total market capitalisation for real estate investment trusts (REITs) rose by a quarter in the first six months to US$69 billion (US$1 = RM3.14), global property services firm CB Richard Ellis said yesterday.

However, the weighted average dividend yield for Asian REITs contracted to 6.86 per cent in the first half of 2010 from 8.06 per cent during the same period last year, US-based CBRE said in a statement.

"The fortunes of Asian REITs still remained mixed. During the first half of the year, some markets have seen strong growth in IPO (initial public offering) and acquisition activity and others have witnessed delisting applications, mergers and consolidations," said Andrew Ness, executive director at CBRE Research Asia. "REITs in Japan, Taiwan, South Korea and Hong Kong outperformed their respective stock markets, all of which suffered downward adjustments in the second quarter amid concerns over the pace of the global economic recovery," Ness said.

Acquisitions in the market totalled US$5.7 billion during the first half of 2010, surpassing the US$4.2 billion recorded for the whole of 2009, with Japan being the most active market for asset purchases, CBRE said.

Singaporean and Malaysian REITs were active buyers of office, retail, industrial and healthcare assets, while REITs in Hong Kong, Taiwan, South Korea and Thailand remained inactive, it said.

While a few REITs were delisted, South Korea, Singapore and Thailand saw new listings, such as Cache Logistics.

REITs invest in mainly commercial property and pay rent collected from their properties to shareholders as a dividend and also usually offer returns that are higher than yields of government bonds.

By Reuters