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Monday, March 19, 2012

Retail sector faces rising costs and prudent spending by consumers

PETALING JAYA: The local retail sector is expected to face challenging times this year as consumers continue to be prudent in their spending while retailers have to face rising cost of goods and operation.

DTZ Research's Property Times on Kuala Lumpur's fourth quarter 2011 report said the situation would affect rental rates, occupancy and future rental growth.

Another property consultancy, Knight Frank in its Second Half 2011 Real Estate Highlights report, said with the abundant supply of new suburban retail stock coming on stream in the medium term, “there is a note of caution that this high impending supply may have a detrimental impact on overall occupancy levels.”

Despite a marginal decline in the occupancy rate, Property Times said major developers were still optimistic and went ahead with a number of new retail projects.

The report revealed that new retail projects expected to be completed in the Klang Valley this year included Nu Sentral, Kuala Lumpur, with net lettable area of 700,000 sq ft; The Paradigm, Kelana Jaya (500,000 sq ft), Setia Alam Mall, Shah Alam (700,000 sq ft); and KL International Airport 2 (350,000 sq ft).

Those slated for completion in 2013 include IOI City Mall Putrajaya, Putrajaya (1.3 million sq ft); Sunway Velocity, Kuala Lumpur (800,000 sq ft); and The Strand Mall, Kota Damansara (300,000 sq ft).

Other future projects comprise the extension project of Suria KLCC by KLCC Property Holdings Bhd comprising a new 300,000 sq ft retail mall that will be integrated to the mall. Suria KLCC recently saw an extension of 140,000 sq ft in net lettable area.

The Naza group will also be developing two retail centres with over two million sq ft of retail space which will be part of its RM15bil KL Metropolis development at Jalan Duta.

Meanwhile, Pavilion REIT plans to add another 300,000 sq ft to its existing Pavilion shopping mall in Kuala Lumpur.

Property Times said one of the latest retail mall opening was that of KL Festival City Mall with approximately 450,000 sq ft of retail space that was completed in the fourth quarter of last year.

“With the completion of the mall and six others in the previous quarters, the retail stock in Kuala Lumpur now stands at 23.7 million sq ft, an increase of 7.4% from the preceding year,” the report said.

“Outside of Kuala Lumpur, the total stock in the rest of the Klang Valley stands at 22.5 million sq ft, a 3.7% increase from the previous year.”

It said during the period under review, retail centres in Kuala Lumpur recorded a slight decrease in average occupancy rate by 0.3 percentage point on a quarter-on-quarter basis and 1.3 percentage points to 90.7% on year-on-year basis.

Meanwhile, retail centres outside of Kuala Lumpur saw a decline of 1.1 percentage points quarter-on-quarter and 0.1 percentage point year-on-year in occupancy rate to 86.9%.

The decline was largely due to slow leasing rate in the newly-completed centres, it added.

The Knight Frank report said the three new shopping centres expected to open during the first half of this year Setia Walk in Puchong; Setia City Mall in Shah Alam; and Paradigm Mall in Petaling Jaya would add another 1.7 million sq ft to the existing retail stock in the Klang Valley.

During the second half year of 2011, there were eight retail property completions that added a total of 2.88 million sq ft of space to the market.

“The total cumulative figure for existing supply of retail space in the Klang Valley now stands at approximately 43 million sq ft,” the report added.

The new completions were that of Publika Mall @ Solaris Dutamas, 1 Shamelin, Kenanga Wholesale City, Southgate, Mines 2, KL Festival City, First Subang and Space U8.

There was one closure recorded during the period, namely Atria Shopping Centre, in Damansara Jaya. The 29-year-old mall, owned by OSK Property Holdings Bhd, will be redeveloped over four years into a new 450,000 sq ft mall and two 16-storey towers of SoFo Suites.

By The Star

Deadline for BRDB move

BRDB said in November last year that it was postponing the tender exercise for the Bangsar Shopping Centre and three other properties.

PETALING JAYA: Bandar Raya Developments Bhd (BRDB) has until the end of the month to say whether it is going ahead with the proposed sale of four of its properties or risk a query from the stock exchange, according to sources.

The Klang Valley-based developer had said in an announcement to Bursa Malaysia on Nov 22, 2011 that it was postponing the tender exercise for the properties Bangsar Shopping Centre, Menara BRDB, CapSquare Retail Centre and Permas Jusco Mall to the first quarter of this year.

Since no subsequent announcements were made about the tender, the company has to provide an update to investors by end-March, as per its own deadline.

In the November filing, BRDB had also stated that Ambang Sehati Sdn Bhd, its second largest shareholder, could raise its stake in the company, an exercise that may or may not result in a general offer.

Ambang Sehati, which has a 18.9% stake in BRDB, was the party that first proposed to acquire the four assets in a related-party transaction for RM914mil, before stiff opposition from minority shareholders forced the BRDB board to opt for an open tender instead.

Ambang Sehati is the private investment vehicle of Datuk Mohamed Moiz Jabir Mohamed Ali Moiz, BRDB's chairman.

However, what may be of more interest is the identity of the owner or owners behind a 23.6% block of shares in BRDB held in an omnibus account by Credit Suisse.

The ownership of this stake is crucial, the Minority Shareholder Watchdog Group has pointed out, as it could be the deciding factor in whether the proposed sale gets the green light from shareholders.

This is on the basis that the 23.6% block amounts to 30% of total disinterested shareholders of BRDB, and in turn may comprise 50% of the votes of shareholders who actually turn up to vote on the matter. The sale would only require a simple majority to be passed.

Under Section 69(0)(8) of the Companies Act, Bursa Malaysia and the Securities Commission (SC) have the power to direct companies to disclose the identity of the beneficial owners of substantial blocks of shares in the company.

The act also empowers the affected issuer itself, in this case BRDB, to request for details on the beneficial owners from a trustee, in this case Credit Suisse.

Be that as it may, sources told StarBiz that BRDB might have hit a wall in trying to determine the owner of the block of shares.

One of the sources, who requested anonymity because of the sensitivity of the matter, said this was because the block was held in offshore accounts by Credit Suisse's Singaporean and Swiss associates, whose banking secrecy laws prevented the disclosure of information on account holders.

A BRDB spokesman also confirmed in an email to StarBiz that the company had done its part to ascertain the owner of the block of shares but cannot probe further due to the legal limitations.

Nonetheless, there would be no need to complete the task if the proposed sale falls through, which is the likely scenario, a source added.

BRDB had also said last year it would appoint an independent valuer to evaluate its assets for the proposed sale, but it has yet to make another announcement regarding this.

Ambang Sehati had originally proposed to acquire the four assets to enable BRDB to “monetise these assets and achieve a more efficient utilisation of its capital", adding that the latter's shares have been trading at a significant discount to its net asset value.

BRDB shares closed four sen higher last Friday at RM2.34, which was a 36.4% discount to its net assets per share of RM3.68 as at Dec 31, 2011.

For its financial year ended Dec 31, 2011, the developer achieved a 20.8% increase in revenue to RM191.66mil from RM158.63mil in the previous corresponding period, and RM38.6mil in net profit, up 50.2% from RM25.71mil previously.

By The Star

PKNS to inject some assets into REIT

SHAH ALAM: The Selangor State Development Corp (PKNS), a diversified group, will be injecting some of its existing assets worth around RM900 million into a private real estate company (PREC).

The private real estate company is being set up by PKNS to acquire new and existing assets of the corporation, in a bid to streamline its operations, reduce cost and improve the performance.

PKNS general manager Othman Omar said the first round of asset injection will involve its existing properties in Kuala Lumpur and Selangor, which will be carried out in phases.

The properties are Menara Worldwide and Wisma Yakin in Kuala Lumpur; Menara PKNS in Petaling Jaya; Kompleks PKNS in Shah Alam, Bangi and Kuala Selangor; De Palma Hotels in Ampang, Shah Alam, Kuala Selangor and Sepang; as well as SACC Mall and the Shah Alam Convention Centre.

"PREC will upgrade and transform these properties into better yielding assets for higher recurring income.

We may inject some of the new and existing properties into a real estate investment trust (REIT) in the next few years to benefit from the REIT tax incentives.

"There is no real pressure for us to go into a REIT yet. We will weigh the benefits before embarking on a REIT," Othman told Business Times.

Business Times first reported that PKNS planned to launch a REIT in 2010. It had identified 16 high-profile projects worth RM10 billion for injection into its REIT.

Othman said PREC will also acquire the retail, office and hotel components within PKNS' new development projects.

By Business Times (by Sharen Kaur)

Sale of Seremban Parade not done deal

SEREMBAN: THE Seremban Parade has not been sold.

Last June, tycoon Li Ka-Shing's Cheung Kong Group had emerged as the winning bidder of the three shopping complexes put up for sale by TMW Asia Property Fund.

The sale of the other two shopping complexes - Klang Parade in Selangor and Ipoh Parade in Perak - have been completed.

Together, all three malls were reported to have been sold for an estimated RM450 million.

According to sources, the sale of the Seremban Parade to ARA Asia Dragon Fund, an affiliate of Cheung Kong, was not completed as certain conditions were not met.

It is unclear what the price tag is for Seremban Parade, which is reported to have a net lettable area of 316,847 sq ft sitting on 1.97ha land.

The German-based TMW had acquired the three assets in 2005 from the Lion Group for RM340 million.

TMW is managed by Pramerica, the real estate investment management business of Prudential Inc from the United States.

It would be safe to assume that as a fund, TMW would want to make money from the investment it made seven years ago.

Pramerica's other retail properties in Malaysia include Kinta City Shopping Centre in Perak, Island Plaza and 1Avenue in Penang and SSTwo Mall in Selangor.

By Business Times (by Vasantha Ganesan)