PETALING JAYA: AmFirst Real Estate Investment Trust (AmFirst REIT), one of two Malaysian REIT to propose a rights issue late last year, is looking to grow its asset base by 20% over the next 15 months and may do this by acquiring Malaysian shopping malls assets managed by its Singapore-listed parent.
Lim Yoon Peng, chief executive officer of Am ARA REIT Managers Sdn Bhd (Am ARA), said while AmFirst REIT does not have legal priority over ARA Asset Management Ltd’s (ARA
Asset) properties here, AmFirst REIT is well-positioned to take advantage of any opportunities.
“Hypermarkets like Tesco, Giant and Jusco are considered commercial properties. There is no first right of refusal but I am first in the queue,” Lim told The Edge Financial Daily in a recent interview, adding that a deal could happen when ARA Asset decides to make an asset disposal in line with its exit strategy.
Singapore-listed ARA Asset, which owns 30% of AmFirst’s REIT manager Am ARA, is an affiliate of tycoon Li Ka-shing’s Cheung Kong Group. Malaysia’s AmInvestment Group Bhd owns 70% of Am ARA.
The malls mentioned could come from ARA Asset’s ARA Asia-Dragon Fund (ADF). “The fund usually keeps the properties for a period of between three and five years before
disposing them of for a profit. ADF will offer to sell these properties to third-party buyers or AmFirst (REIT),” Lim said. “I foresee that ADF may dispose of some properties within two to three years.”
Reportedly in talks to acquire up to 10 malls throughout Malaysia, ARA Asset’s portfolio here includes the 1 Mont’Kiara Mall and AEON Bandaraya Melaka shopping centre in Malacca. ARA Asset also owns the Klang Parade, Seremban Parade and Ipoh Parade malls.
The acquisitions were undertaken via the ADF, a private real estate scheme investing across Singapore, Hong Kong, China and Malaysia. According to ARA Asset’s latest annual report, the ADF has a committed capital of US$1.13 billion (RM3.55 billion).
Recent news reports, quoting unnamed sources, indicated that the ADF is acquiring the Citta Strip Mall in Ara Damansara for about RM245 million from Germany-based real estate fund SEB Asset Management and property developer Puncakdana Group.
“I believe the ADF is buying Citta to incubate the asset before disposing of the property within the next three to five years,” Lim said when asked on the news reports.
AmFirst REIT’s plans to acquire more properties coincides with the REIT’s plans to venture outside its comfort zone in the Klang Valley, Lim said.
Already, AmFirst REIT is eyeing commercial properties such as Grade A office buildings in Penang and Malacca, as it seeks to grow its real estate asset base by 20% before the end of its FY ending March 31, 2013.
“Both states are coming up and the economy is doing well. Valuations and asset purchases are driven by market rent,” Lim said.
The office buildings would form a crucial element in the manufacturing enclaves in both states, which have benefited from foreign direct investments, he added.
Lim also said AmFirst REIT’s potential acquisitions will still be centred on commercial properties and the group had no intention to venture into industrial assets.
AmFirst REIT’s asset base stood at RM1.16 billion as at Nov 30, 2011, according to data from its presentation slides.
Its portfolio of properties includes Bangunan AmBank Group, AmBank Group Leadership Centre, Menara AmFirst, Menara AmBank, Kelana Brem Towers and The Summit Subang USJ. In Nov 2011, AmFirst REIT completed the acquisition of two commercial towers, namely Prima 9 and Prima 10 in Cyberjaya.
These eight properties, with a collective net lettable area of 2.33 million sq ft, have occupancy rates of between 66% and 100%, according to AmFirst REIT.
The acquisition of the Prima 9 and Prima 10 was first announced in June prior to the announcement of AmFirst REIT’s renounceable rights issue in August.
AmFirst REIT had proposed to undertake the rights issue on the basis of three new rights units for every five existing units in the company.
The property trust had also planned to expand its approved fund size from 429 million units to 686.4 million units.
Based on an indicative 85 sen per rights unit, the proposed rights issue, to be finalised by March 2012, is expected to raise RM218.79 million. Of that, RM214.74 million will go towards the repayment of the company’s debt.
Following the completion of the Cyberjaya acquisition in November 2011, AmFirst REIT’s gearing ratio rose to 46.5%, just a shade below the 50% debt-to-total asset ceiling allowed by regulators.
Upon repayment of borrowings from the proceeds of the cash call, AmFirst REIT’s gearing will decline to some 28%, the company said, thus providing the property trust room to gear up to pursue other real estate acquisitions. Its gearing ratio will also decline with a larger asset base.
In a statement dated Nov 30, announcing the completion of its first investment in Cyberjaya, Lim said its proposed rights issue “will be a catalyst to drive AmFirst REIT’s asset acquisition strategy”.
While unit holders of REITs in Singapore had reacted negatively to rights issues, Lim seemed confident AmFirst REIT unit holders would not take the exercise badly.
“I don’t think AmFirst (REIT) unitholders will react negatively to the [proposed rights] exercise. This is because after we acquired Prima 9 and Prima 10 in Cyberjaya, our gearing rose to nearly 47%.
If we don’t do fresh capital raising, we cannot grow AmFirst (REIT) further,” Lim said, pointing out that the cash call would strengthen the REIT’s balance sheet, allowing further room for growth. “If there is negative market perception on AmFirst REIT’s growth prospects, our unit price could be affected.”
Whatever the case, there is a need for AmFirst REIT to improve earnings. For the 1H ended Sept 30, net profit fell 8% to RM18.95 million from RM20.59 million a year earlier as revenue declined 2% to RM46.18 million.
Lim Yoon Peng, chief executive officer of Am ARA REIT Managers Sdn Bhd (Am ARA), said while AmFirst REIT does not have legal priority over ARA Asset Management Ltd’s (ARA
Asset) properties here, AmFirst REIT is well-positioned to take advantage of any opportunities.
“Hypermarkets like Tesco, Giant and Jusco are considered commercial properties. There is no first right of refusal but I am first in the queue,” Lim told The Edge Financial Daily in a recent interview, adding that a deal could happen when ARA Asset decides to make an asset disposal in line with its exit strategy.
Singapore-listed ARA Asset, which owns 30% of AmFirst’s REIT manager Am ARA, is an affiliate of tycoon Li Ka-shing’s Cheung Kong Group. Malaysia’s AmInvestment Group Bhd owns 70% of Am ARA.
The malls mentioned could come from ARA Asset’s ARA Asia-Dragon Fund (ADF). “The fund usually keeps the properties for a period of between three and five years before
disposing them of for a profit. ADF will offer to sell these properties to third-party buyers or AmFirst (REIT),” Lim said. “I foresee that ADF may dispose of some properties within two to three years.”
Reportedly in talks to acquire up to 10 malls throughout Malaysia, ARA Asset’s portfolio here includes the 1 Mont’Kiara Mall and AEON Bandaraya Melaka shopping centre in Malacca. ARA Asset also owns the Klang Parade, Seremban Parade and Ipoh Parade malls.
The acquisitions were undertaken via the ADF, a private real estate scheme investing across Singapore, Hong Kong, China and Malaysia. According to ARA Asset’s latest annual report, the ADF has a committed capital of US$1.13 billion (RM3.55 billion).
Recent news reports, quoting unnamed sources, indicated that the ADF is acquiring the Citta Strip Mall in Ara Damansara for about RM245 million from Germany-based real estate fund SEB Asset Management and property developer Puncakdana Group.
“I believe the ADF is buying Citta to incubate the asset before disposing of the property within the next three to five years,” Lim said when asked on the news reports.
AmFirst REIT’s plans to acquire more properties coincides with the REIT’s plans to venture outside its comfort zone in the Klang Valley, Lim said.
Already, AmFirst REIT is eyeing commercial properties such as Grade A office buildings in Penang and Malacca, as it seeks to grow its real estate asset base by 20% before the end of its FY ending March 31, 2013.
“Both states are coming up and the economy is doing well. Valuations and asset purchases are driven by market rent,” Lim said.
The office buildings would form a crucial element in the manufacturing enclaves in both states, which have benefited from foreign direct investments, he added.
Lim also said AmFirst REIT’s potential acquisitions will still be centred on commercial properties and the group had no intention to venture into industrial assets.
AmFirst REIT’s asset base stood at RM1.16 billion as at Nov 30, 2011, according to data from its presentation slides.
Its portfolio of properties includes Bangunan AmBank Group, AmBank Group Leadership Centre, Menara AmFirst, Menara AmBank, Kelana Brem Towers and The Summit Subang USJ. In Nov 2011, AmFirst REIT completed the acquisition of two commercial towers, namely Prima 9 and Prima 10 in Cyberjaya.
These eight properties, with a collective net lettable area of 2.33 million sq ft, have occupancy rates of between 66% and 100%, according to AmFirst REIT.
The acquisition of the Prima 9 and Prima 10 was first announced in June prior to the announcement of AmFirst REIT’s renounceable rights issue in August.
AmFirst REIT had proposed to undertake the rights issue on the basis of three new rights units for every five existing units in the company.
The property trust had also planned to expand its approved fund size from 429 million units to 686.4 million units.
Based on an indicative 85 sen per rights unit, the proposed rights issue, to be finalised by March 2012, is expected to raise RM218.79 million. Of that, RM214.74 million will go towards the repayment of the company’s debt.
Following the completion of the Cyberjaya acquisition in November 2011, AmFirst REIT’s gearing ratio rose to 46.5%, just a shade below the 50% debt-to-total asset ceiling allowed by regulators.
Upon repayment of borrowings from the proceeds of the cash call, AmFirst REIT’s gearing will decline to some 28%, the company said, thus providing the property trust room to gear up to pursue other real estate acquisitions. Its gearing ratio will also decline with a larger asset base.
In a statement dated Nov 30, announcing the completion of its first investment in Cyberjaya, Lim said its proposed rights issue “will be a catalyst to drive AmFirst REIT’s asset acquisition strategy”.
While unit holders of REITs in Singapore had reacted negatively to rights issues, Lim seemed confident AmFirst REIT unit holders would not take the exercise badly.
“I don’t think AmFirst (REIT) unitholders will react negatively to the [proposed rights] exercise. This is because after we acquired Prima 9 and Prima 10 in Cyberjaya, our gearing rose to nearly 47%.
If we don’t do fresh capital raising, we cannot grow AmFirst (REIT) further,” Lim said, pointing out that the cash call would strengthen the REIT’s balance sheet, allowing further room for growth. “If there is negative market perception on AmFirst REIT’s growth prospects, our unit price could be affected.”
Whatever the case, there is a need for AmFirst REIT to improve earnings. For the 1H ended Sept 30, net profit fell 8% to RM18.95 million from RM20.59 million a year earlier as revenue declined 2% to RM46.18 million.
