Pavilion Reit shines on debut with 16% gain

SHARES in Pavilion Real Estate Investment Trust (PReit) posted a smart 16 per cent gain on debut yesterday, closing at RM1.02 each amid brisk trading volumes.

The trust, partly owned by the Qatar Investment Authority, had priced the institutional portion of its RM710 million (S$291 million) initial public offering at 90 sen each. The retail portion of the offer was priced at 88 sen.

The premium was in stark contrast to the broader market which fell 0.2 per cent amid continuing worries over the eurozone’s financial health and could illustrate investor caution amid a preference for safe and reasonably yielding stocks. At RM1 a share, according to HwangDBS Vickers Research in a pre-IPO report, the trust offers a distribution yield of 5.8 per cent.

The trust is the sole premium retail Reit in Malaysia with its most valuable asset being Pavilion KL – 1.3 million square feet of net lettable area – which is valued at RM3.4 billion.

The trust also manages Pavilion Tower – a 20-storey office tower with 167,700 sq feet of net lettable area – which is valued at RM128 million.

Pavilion KL is one of the most popular complexes in the city. With a diversified tenant base comprising everything from supermarkets (Parkson) to high-end fashion outlets (Prada, Gucci), it boasts an occupancy rate of 99 per cent. Average rental rates are around RM17 per sq foot for retail space and RM6 per sq foot for office space.

HwangDBS said that the trust’s growth would be driven by positive rental conversions from expiring leases. Around 67 per cent of leases are due to expire in 2013 which the research firm said ‘would lift our FY13 revenue forecast by 4 per cent year-on-year – assuming a 5 per cent rental hike – to RM325 million.’ But growth for next year would be ‘marginal’ as only 5 per cent of the leases are slated to expire.

The trust is expected to use 93 per cent of its gross proceeds to part finance its purchase price of RM3.3 billion which would give it a gearing after listing of some 20.1 per cent, well below the required 50 per cent limit. That was positive, HwangDBS said, because ‘it suggests that it could borrow up to RM1 billion to fund future acquisitions.’ The research house set its target price at RM1.

The initial public offering of Pavilion Reit will be the fourth largest in Malaysia this year after those of Bumi Armada Bhd, MSM Malaysia Holdings Bhd and UOA Development Bhd.

The demand by investors for shares exceeded supply by over 40 times for MSM and Bumi Armada’s offerings. In Pavilion’s case, it was by 26 times.

The largest retail REIT in the country offers premium of 12 sen

Pavilion Real Estate Investment Trust (REIT) made a commendable debut on the Main Market of Bursa Malaysia to close at RM1.02, offering a premium of 12 sen over its institutional price of 90 sen.

Pavilion REIT opened at RM1.03 with 15.7 million unit shares traded.Pavilion REIT Management Sdn Bhd
chief executive officer Philip Ho said he was quite happy with the opening price.

Pavilion REIT Management or the manager principle activity is to manage and administer Pavilion REIT. The manager is 51%-owned by Urusharta Cermerlang Development Sdn Bhd and the remaining 49% owned by Urusharta Cemerlang Project Corp Sdn Bhd.

Pavilion REIT seeks expansion

PAVILION Real Estate Investment Trust (Pavilion REIT), the largest retail REIT in Malaysia, is eyeing more local assets to spur growth.

Pavilion REIT Management Sdn Bhd chief executive officer Philip Ho said the trust is seeking opportunities to expand its assets in Penang, Johor and the Klang Valley.

Ho said Pavillion REIT will evaluate any financially viable investment opportunity that comes around.

“As a retail real estate investment trust, our duty is to acquire malls and build up the portfolio,” he told reporters after its listing ceremony here.

Ho said the company’s trustees had signed three rights of first refusal (ROFR) to acquire Farenheit88, the Pavilion Mall’s extension, and a mall in USJ Subang Jaya.

With an appraised value of RM3.54 billion, Pavilion REIT is currently made up of two assets – Pavilion Mall and Pavilion Tower.

The mall, which contributes 96.4 per cent to the appraised value, has 1.3 million sq ft of net lettable area.

It boasts of about 450 retail tenants, making it the largest premium retail fashion mall in Malaysia.

Pavilion REIT yesterday fetched a 13.3 per cent premium over its offer price on its debut on Bursa Malaysia.

It opened at RM1.03, 13 sen higher than its institutional price of 90 sen, with 15.7 million unit shares traded.

Ho said the listing provides the company with direct access to capital markets, thereby strengthening its financial capacity to seize new opportunities in the country.

“We are committed to enhance unitholders’ return and value, both through the organic growth of our existing portfolio as well as visible growth via acquisitions,” he added.