SunREIT to give Putra Place a facelift

Financial details will only be revealed after deal is completed

PETALING JAYA: Sunway Real Estate Investment Trust (SunREIT) acquisition of Putra Place in Kuala Lumpur for RM519.95mil will likely lead to an overhaul of the property with analysts saying the property might not make an immediate bump in SunREIT’s earnings.

The purchase will also strengthen Sunway REIT‘s position as Malaysia’s largest trust.

JPMorgan Securities (M) Sdn Bhd said the management of the real estate investment trust would only release details on profitability and acquisition yield of the property once the deal was completed.

“The group stated that this is an asset with turnaround potential but some renovation works needed to be done. We believe that this has been a low yielding assets and hence not likely to be making earnings immediately, ” it said in a report.

The real estate investment trust, a 36.7% owned associate of Sunway City Bhd, won the bid at an auction held on Wednesday through its trustee OSK Trustees Bhd.

Commerce International Merchant Bankers Bhd (CIMB) put the property up for auction to recover loans given to property owner, Metroplex Holdings Sdn Bhd.

SunREIT told Bursa Malaysia on Thursday that it aimed to provide the unit holders with exposure to a diverse portfolio of authorised investments that will provide stable cash distributions with the potential for sustainable growth.

Sunway REIT up on Putra Place bid win

Sunway Real Estate Investment Trust rose to a seven-week high after winning the bid to buy Putra Place, a Malaysian shopping mall, hotel and office development in Kuala Lumpur, for RM513.9 million.

The stock climbed 1.9 per cent to RM1.08 at 9:32 a.m. in Kuala Lumpur trading, on course for its highest level since Feb. 10. — Bloomberg

Sunway REIT posts RM356m interim profit

Sunway Real Estate Investment Trust posted RM355.9 million pre-tax profit for the six months ended Dec 31, 2010, on the back of RM157.778 million revenue.

For the second quarter, the company registered RM45.2 million pre-tax profit on the back of RM85.333 million revenue.

In a filing to Bursa Malaysia, it said the better performance for the current quarter was contributed by the commencement of new tenancy terms pursuant to renewals at the Sunway Pyramid Shopping Mall about one million square feet of net lettable area achieved an average increase in rental rates of 17.1 per cent for the three-year term.

The stronger performance at Sunway Resort Hotel & Spa and Pyramid Tower Hotel during year-end holiday season further contributed to improved results for the current quarter.

On the prospect, it said, visitorships to Sunway Pyramid Shopping Mall registered strong quarter-on-quarter growth of 9.7 per cent, whilst Sunway Carnival Shopping Mall recorded moderate growth of 2.9 per cent due to the year-end mega sales campaign and festive and school holidays.

It said occupancy remain strong with Sunway Pyramid at 98 per cent, Sunway Carnival at 93 per cent and Suncity Ipoh Hypermarket at 100 per cent.

The Sunway REIT Management Sdn Bhd believes the Sunway REIT retail properties, especially Sunway Pyramid Shopping Mall, will be able to enjoy another year of solid performance in tandem with the expectation of continued robust domestic consumption, pursuit of lifestyle trends and thriving Sunway Integrated Resort City.

As for the hotel market, it said the Sunway REIT’s hotel properties would continue to perform well in line with the positive outlook for the industry.

In the quarter under review, the Sunway Resort Hotel & Spa and Pyramid Tower Hotel enjoyed strong occupancy (Sunway Resort Hotel & Spa: 70.8 per cent; Pyramid Tower Hotel: 86.3 per cent) and average daily rates (Sunway Resort Hotel & Spa: RM407; Pyramid Tower Hotel: RM258) in conjunction with the year-end school holidays and MICE (meetings, incentives, conferences and exhibitions).

Meanwhile, Sunway Hotel Seberang Jaya, a four-star corporate hotel, enjoyed steady performance as the domestic and global economy recover.

The office market, occupancy at both the Sunway REIT’s office properties, has been stable at 99.5 per cent for Menara Sunway and 97.0 per cent at Sunway Tower.

The occupancy for Menara Sunway and Sunway Tower is expected to remain stable and the rental rates are expected to increase moderately for the renewals in 2011. — Bernama

Sunway REIT records pre-tax profit for Q1

Sunway Real Estate Investment Trust (REIT) recorded a pre-tax profit of RM310.64mil for the first quarter ended Sept 30, 2010, on the back of RM72.45mil revenue.

In a filing to Bursa Malaysia, Sunway REIT Management Sdn Bhd, the manager of Sunway REIT said the retail properties of Sunway REIT continued to enjoy increased visitors during the period under review and occupancy remained strong with Sunway Pyramid at 99%, Sunway Carnival at 93% and Suncity Ipoh Hypermarket at 100%.

It also expects the properties to continue to perform well especially Sunway Pyramid supported by positive economic fundamentals and the thriving Sunway Integrated Resort.

It said this was also reflected in the rental reversions achieved whereby Sunway Pyramid renewed 278 tenancies with net lettable area of approximately 924,000 sq ft representing 87% of the total net lettable area due for renewal in financial year ending June 30, 2011 with total rent increase of 15.8% for the three year-term.

The current renewal also saw the entrance of new retailers/food and beverage concept such as Daiso from Japan, Coach and T-Bowl Concept Restaurant. – Bernama

Sunway REIT sets new industry benchmark

It makes Bursa debut with business model that adopts best practices, market disclosure and good corporate governance

PETALING JAYA: Sunway REIT, which made its debut on Bursa Malaysia on July 8, has set a new industry benchmark in the local real estate investment trust (REIT) market (M-REIT) by adopting best practices in its business model, market disclosure and corporate governance practices.

Sunway REIT is the largest in the country in terms of asset value at RM3.4bil. It has a total gross floor area of 8.1 million sq ft and a market capitalisation of RM2.4bil, which represents about 28% of the total market capitalisation of M-REIT.

The trust’s eight assets comprise Sunway Pyramid Shopping Mall, Sunway Carnival Shopping Mall, SunCity Ipoh Hypermarket, Sunway Resort Hotel & Spa, Pyramid Tower Hotel, Sunway Hotel Seberang Jaya, Menara Sunway and Sunway Tower.

According to Sunway REIT Management Sdn Bhd chief executive officer Datuk Jeffrey Ng, with three hotels in its portfolio, the management company has signed hotel master lease agreements with Sunway City Bhd’s subsidiaries, Sunway Resort Hotel Sdn Bhd and Sunway Hotel Seberang Jaya Sdn Bhd, to mitigate fluctuations in the hotel’s cyclical business.

“The rental-guarantee floor will ensure the minimum rental for Sunway REIT’s 1,190 hotel rooms. Meanwhile, there is no limit as to how high the rental can go when the hotel market turns for the better, which will on the overall benefit the REIT’s income streams,” Ng told StarBiz.

He said Sunway REIT was also the first local REIT to subject its IPO offer to a market price mechanism as well as allowed its asset valuation to be determined by the REIT’s prevailing unit price.

Before the international roadshow for Sunway REIT commenced last month, the REIT manager signed up reputable cornerstone investors including the Government Investment Corp of Singapore, The Employees Provident Fund, Permodalan Nasional Bhd, and Great Eastern Life Assurance (Malaysia) Sdn Bhd, which collectively have confirmed allocation of about 14% stake in the REIT.

It also adopted an over allotment or green-shoe option that came up to 87 million units that will function as a stabilisation mechanism during the one month “stabilising” period until Aug 8.

“We have also proposed for up to 50% of the management fees to be paid in Sunway REIT units and this practice shows that the management company is confident in the REIT’s performance. This should translate to about 10 million units a year,” Ng said.

To attract more global investors, Sunway REIT is working towards being included as an indexed REIT by the Brussels-based European Public Real Estate Association (Epra) and the National Assocation of Real Estate Investment Trusts (Nareit) of the United States.

According to Ng, institutional REIT investors including pension and insurance funds, track these global standard index and use it as a benchmark to guide their investment decisions.

“With RM1.56bil worth of free-float units, big global investors will be attracted to invest in Sunway REIT because of its liquidity. Once accepted as the benchmark indexed REIT for Malaysia, Sunway REIT will be in the global investors’ radar screen,” Ng pointed out.

Based on the institutional offer price of 90 sen a unit, Sunway REIT offers a yield of about 7.5% for institutional investors for the financial year ending June 30, 2011.

Retail investors can look forward to a distribution yield of 7.66%, which is higher than the 6.9% yield disclosed in the prospectus.

The IPO raised RM1.56bil (including the over allotment of 87 million units at RM78mil), of which 44% or RM680mil were subscribed by foreign institutional funds.

Ng said although Sunway REIT had a diversified asset portfolio, some 70% of its asset value and 67% of revenue would be from retail assets, which showed that Sunway REIT was a retail-focused REIT.

The three retail assets have total net lettable area of 2.4 million sq ft and asset value of RM2.4mil, making it the largest retail-focused REIT locally.

“Both the retail and institutional investors are looking at broader and longer-term investment horizon. Being a defensive REIT, unit-holders can look forward to a longer-term growth catalyst as well as low risk and stable yields.

As long as its cashflow remains strong, the dividend payout will be 100% of total net distribution income,” Ng added.

Sunway REIT attracts huge foreign funds

Sunway Real Estate Investment Trust (REIT), the largest property trust in Asia excluding Japan since 2007, has attracted a significant amount of funds from foreign institutional investors.

Sunway REIT’s initial public offering (IPO) on Bursa Malaysia Main Market yesterday raised RM1.49bil.

Sunway REIT Management Sdn Bhd chief executive officer Datuk Jeffrey Ng said the property trust was 45% subscribed by foreign institutional investors.

“This (foreign stake) clearly reflects their confidence in the performance of the trust,” he said after the listing ceremony.

Sunway REIT posted a one sen discount over its offer price of 90 sen upon listing. The price opened at 89 sen and hit a high of 89.5 sen in early morning trade before closing at 88.5 sen with 72 million units changing hands.

Ng said the property trust was well subscribed by investors despite market volatility and current global economic conditions.

Upon listing, Sunway REIT had assets worth RM3.5bil and a free float of RM1.6bil.

On Sunway REIT’s yield, Ng said it was about 7.5, which was within the mean range of most REITs, and had the potential to improve over time.

Sunway Group chairman and founder Tan Sri Jeffrey Cheah said with the listing, he hoped to see more companies with deeper awareness and investments in the local REIT market.

“Hopefully, we can continue to gain positive momentum and support from investors and regulators,” he said.

Cheah said with Sunway REIT, investors could now look forward to owning properties in high-growth locations.

“We aim to provide unitholders with exposure to a diversified portfolio of authorised investments which can provide stable cash distribution and a potential for sustainable growth in terms of net asset value per unit.”

He added that Sunway REIT aimed to double its asset size in five to seven years.

The eight properties injected into the REIT are Sunway Pyramid Shopping Mall, Sunway Carnival Shopping Mall, SunCity Ipoh Hypermarket, Sunway Resort Hotel and Spa, Pyramid Tower Hotel, Sunway Hotel Seberang Jaya, Menara Sunway and Sunway Tower.

An OSK Research report said with its exposure to the retail, hospitality and office sub-sectors, Sunway REIT was a defensive trust that could offer unitholders long-term growth.

An analyst with another brokerage said Sunway REIT had a huge asset base and the trust could easily be leveraged up.

He said the trust had the capacity to get support from financial institutions to expand quickly by buying “ready” properties without reaching its internal gearing or statutory limit.

Sunway REIT unfazed by weak debut

The stock opened at a 1 sen discount to its offer price of 90 sen and closed at the same price of 89 sen

SHARES of Sunway real estate investment trust (REIT), Malaysia’s biggest property trust, opened lower on their listing debut yesterday, but management remained unfazed by the stock market’s recent weakness.

The stock opened at a 1 sen discount to its offer price of 90 sen and closed at the same price of 89 sen, although the market ended broadly higher.

Sunway REIT Management Sdn Bhd chief executive officer Datuk Jeffrey Ng said he was confident the REIT would perform well despite its disappointing start.

“Nearly half of our investors are foreign investors and we are heartened to see big corporations, both overseas and domestic, investing in us despite the volatile markets of the last two months,” he told reporters at a press conference after its listing in Kuala Lumpur yesterday.
The REIT also has cornerstone investors like Singapore’s investment firm GIC, Great Eastern Life Assurance Malaysia Bhd, Employees Provident Fund and Permodalan Nasional Bhd.

Cornerstone investors usually join large initial public offerings IPOs and unlike institutional investors, they have a confirmed allocation.

Sunway REIT is Malaysia’s largest REIT in corporate history and it is also the largest REIT IPO in Asia, excluding Japan, since 2007.

“We have started the ball rolling for other REITs and I believe they will also gain their momentum. Other new players who come in will have to match the qualities of the fundamentals and when they go out marketing,” Ng said.

Sunway REIT is made up of eight Sunway City Bhd’s properties in the retail and hospitality sector in Penang, Perak, Selangor and Kuala Lumpur, including the popular Sunway Pyramid shopping mall.

Sunway REIT falls below reference price

Sunway Real Estate Investment Trust (Sunway REIT) fell on its Malaysian market debut after raising about RM1.5 billion in Southeast Asia’s biggest initial public offering this year.

Sunway REIT’s units were trading at 89 sen each at 9.14 am local time, below its opening reference price of 90 sen.

Meanwhile, Jeffery Cheah, chairman of its parent company Sunway Holdings Bhd said the REIT aims to double its asset size in five to seven years.

“The whole purpose is to grow it,” Cheah told reporters in Kuala Lumpur today. – Bloomberg

Sunway REIT IPO well covered

Institutional book said to be 1.2 times oversubscribed

KUALA LUMPUR: The institutional segment of the initial public offering (IPO) of Malaysia’s largest real estate investment trust, Sunway REIT, had been “fully covered” at above 90 sen a unit, two sources with direct knowledge of the deal said.

The roughly US$500mil IPO, Malaysia’s largest so far this year, comes amid a faltering market for new offerings as investors fret about further financial troubles in Europe and its impact on the global economic recovery.

The IPO also comes ahead of a host of offerings by Petroliam Nasional Bhd and MISC Bhd, scheduled for the second half of this year.

“The book is fully covered. It’s oversubscribed by about 1.2 times now,” said one of the sources, who asked not to be named because he is not authorised to speak to the media.

“All the local funds are in and we’re still getting international orders. It’s quite an achievement, given the current market conditions,” the source said.

But Sunway REIT may have to price its IPO at the lower end of its indicated range because of deteriorating market conditions, said the sources.

The company last week set the indicative price range for the sale of 1.6 billion units of the REIT at between 90 sen and 98 sen per unit.

This means the IPO could raise RM1.44bil to RM1.57bil.

The global market for IPOs, which had shown signs of a resurgence early in the year, faces a spate of delays and downsizings, underscoring difficulties for mega deals such as Agricultural Bank of China’s IPO.

Sunway said earlier this month it had secured four cornerstone investors who would take 14% of the IPO.

Sunway REIT will have a market capitalisation of RM2.4bil to RM2.6bil when it is listed on July 8.

The IPO, comprising an institutional tranche of 1.5 billion units, more than 90% of the total, and a retail portion of 134 million units, is expected to be priced on Friday.

The REIT will house eight properties, comprising shopping malls, office towers, and hotels with a combined market value of about RM3.7bil.

Credit Suisse and RHB Investment Bank are the joint global coordinators of the deal. The banks, along with CIMB, HSBC, JPMorgan and the investment banking arm of Maybank are joint bookrunners. — Reuters

Sunway REIT to be Bursa’s largest

It may attract certain classes of investors with a defensive strategy

PETALING JAYA: Sunway Real Estate Investment Trust (REIT), which is slated for listing on July 8 on the main board of Bursa Malaysia, is set to become the largest REIT on the local stock exchange with a fund size of 2.78 billion units.

However, according to a report by OSK Research, Sunway REIT’s initial public offering (IPO) would be at a premium to other Malaysia REITs.

“Based on the Sunway REIT’s net asset value per unit (NAV/unit) of 97 sen upon listing, its price over NAV (P/NAV) was estimated to be at about 1x (based on the assumed IPO price of RM1/unit for the institutional offering).

“This is about what the other REITs are currently trading at on average,” said the report.

The REITs’ dividend yield was only expected at about 6.7% (based on forecast dividend per unit (DPU) of 6.7 sen), which was below the average 8.5% for other REITs, it added.

It said this could imply that Sunway City (SunCity) would be selling the properties to the REIT at a high valuation benchmark.

“Having said that, the low yield offered by Sunway REIT and the premium to be paid for those properties could be justifiable given that the trust will be the largest in Malaysia, with the largest free float of about RM1.6bil vis-à-vis any given REITs, and the unique prospects of those properties, which offer a relatively more defensive investment and yet potentially attractive long-term growth,” the report noted.

It added that Sunway REIT might potentially attract certain classes of investors with a defensive investment strategy, such as pension and insurance funds. “This has been proven by the fact that Sunway REIT very recently secured four large cornerstone investors (at 98 sen/unit) which collectively hold about 14% stake in the trust,” it said.

The investors are a Singapore sovereign wealth fund, the Employees Provident Fund, Permodalan Nasional Bhd and Great Eastern.

The report said a trading buy opportunity in SunCity with an adjusted price target of RM4.52 would be the biggest beneficiary of the deal if the properties were to be disposed off at such valuations.

“Based on conservative estimates, this will add a further 69.8 sen/share (or a maximum 99 sen, depending on the response to the book-building process for the institutional offering) to SunCity’s net asset, bringing it to about RM5.32/share,” it said.

It further added that pegging this against 0.85x to 0.90x (P/NTA), which is the average that its peers were currently trading at, the reseach house estimated that SunCity might likely trade in the range of RM4.52 to RM4.79 as the listing of Sunway REIT got closer to realisation.

HwangDBS Vickers Research said in a report that Sunway REIT’s yield looked “rich” at 6.9% versus the sector’s 8.5%, while rising interest rate environment could force yields higher.

However, the report said, the REIT should help SunCity unlock its investment properties’ value and lead to more efficient allocation of resources to boost return on average asset.

The report maintained a “buy” call on SunCity and target price of RM4.70, assuming no discount for property investment and 30% discount for property development.