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Malaysia REITs Happenings (April 2021)

Too busy to run through the announcements made by Malaysia REITs? In this segment of Malaysia REITs Happenings, we will be summing up some of the key happenings in Malaysia REITs in April 2021.

Read More: Malaysia REITs Happenings (March 2021)

1) Proposed Renewal of 6 leases due for expiry on 29 June 2021

If you have read our latest post on Al-Aqar REIT FY20 performance, we have discussed the 6 leases which are due to expire on 29th June 2021. All these 6 properties are leased to KPJ Healthcare Berhad. On 4th April 2021, the management of Al-Aqar REIT has proposed to renew the leases with the following terms subject to the approval of respective shareholders of Al-Aqar REIT and KPJ Healthcare Berhad:

Rental TermRent Formula
1st Year5.75% per annum X the reasonable and fair market value of the Properties.
2nd and 3rd Year2% incremental increase x the rent for the preceding year.
1st year of every succeeding
rental term (Years 4, 7, 10
and 13)
(10-years Malaysian Government Securities + 200 basis points) x Open Market Value of the Properties, at the point of review subject to:
(a) a minimum rent of 5.75% per annum x prevailing Open Market Value of the Properties or the rent payable for the 1st year of the first rental term of the Properties, whichever is higher; and
(b) any adjustment to the rent shall not be more than 2.0% incremental increase over the rent for the preceding year which shall be in RM.
2nd & 3rd year of every
succeeding rental term
(Years 5, 6, 8, 9, 11, 12, 14,
15)
2% incremental increase over the rent for the preceding year which shall be in RM.

The renewal terms are favorable given the built in rental reversion on a annual basis. This will without a doubt contribute to the organic growth of Al-Aqar REIT.

2) Completed disposal of Quill Building 5 by Sentral REIT

Sentral REIT or formerly known as MQREIT has completed its disposal of Quill Building 5. This is a MYR 43 million property which was acquired back in March 2008. Quill Building 5 was disposed to Deriv Services Sdn Bhd for a consideration of MYR 45 million. The proceeds from the sale will be used to repay existing borrowings, asset enhancement initiatives, investments in other yield accretive properties and working capital purposes.

From our viewpoint, this disposal is a plus to Sentral REIT given that the property have been vacant since FY19. The proceed from the disposal would be better utilize to rejuvenate the assets of Sentral REIT.

3) Extension of time in regards to the proposed private placement by Al-Aqar REIT

To help you grasp the announcement by Al-Aqar REIT, let us us bring you back to the announcement dated 27 October 2020 where a proposal for a private placement was made. This would raise a total additional financing of MYR 50 million. Refer below for the breakdown of the funds intended utilization.

Details of utilizationMYR in mil
Repayment of Islamic financing30.0
Future Acquisition(s)15.3
Capital expenditure4.0
Defrayment of estimated expenses0.7
Total50.0

Source: Al-Aqar REIT announcement dated 27 October 2020

Since the proposed announcement, the private placement exercise has yet to taken place. As such, they have announced that Bursa Malaysia had granted Al-Aqar REIT an extension of time to 3 November 2021 to complete the implementation of the Proposed Private Placement.

Summary

We hope our new segment of Malaysia REITs Happenings will be value-adding to your REITs investment journey. Do let us know if we miss out on any key Malaysia REITs Happenings in April 2021.

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