AmanahRaya REIT to buy two new assets

KUALA LUMPUR: AmanahRaya Real Estate Investment Trust (REIT), whose proposed disposal of Wisma AmanahRaya was barely approved by unit holders, is confident of sustaining its performance based on two new acquisitions in the pipeline.
AmanahRaya REIT unit holders voted on the proposed disposal of Wisma AmanahRaya at an EGM yesterday, with 52.7% voting for and 47.3% voting against.
AmanahRaya-REIT Managers Sdn Bhd acting principal officer Noorbaizura Hermeyney said unit holders were concerned about a possible decline in dividend due to the exercise as well as the timing of the disposal.
“Because it is a related party transaction and the building is yielding good income, they thought it would not be so viable to sell it at this juncture,” she said.
Independent, non-executive director Zulkifly Sulaiman said unit holders were apprehensive of the need to sell the property, which contributed 12.3% of its FY14 revenue, in order to develop the empty plot next to the office building.
“As a REIT company, we cannot develop properties. So we have to use a sister company to do it and that valuation is subjected to a licenced appraiser’s valuation. That value will also be approved by the Securities Commission before the transaction can take place ... Rest assured, the intention of doing that is actually to redevelop the whole place, so that we will come back with a much bigger building. It is purely enhancement of value,” he said.
Zulkifly said that the REIT manager intends to buy back the asset after the redevelopment is completed in two to three years’ time and it has the first right of refusal to do so.
However, the acquisition is subject to market conditions, pricing, valuation and unit holders approval at that time.
The 15-storey office building constructed on two pieces of land will be sold to Annex Sentral Sdn Bhd, a wholly-owned subsidiary of AmanahRaya Development Sdn Bhd for RM78 million.
The master lessee of the building is Amanah Raya Bhd, whose tenancy agreement ends in Aug 16, 2016. The property has contributed RM14.02 million to the gross rental income of the REIT for the past two financial years.
On its two new acqusitions, Noorbaizura said it should be completed “some time this year or early next year”.
“We are trying to complete it by end of this year. These are commercial assets, industrial assets to be specific. We expect about RM3.7 million yearly income coming in (from these two assets),” Noorbaizura said.
The properties are located in the southern part of Malaysia and costs about RM50 million for both assets.
Noorbaizura said the two assets are good investments based on the location, with good yield (above 6.5%), tenancy and capital appreciation. The current tenants of the assets are on six- and nine-year leases respectively.
She said the RM50 million acquisition cost will be funded via internal funds. It currently has some RM60 million in cash reserves.
The acquisitions, coupled with renewal of expiring leases and full year rental contribution from Wisma Amanah Raya Bhd on Jalan Semantan, are expected to sustain the REIT’s performance next year, despite the disposal of Wisma AmanahRaya on Jalan Ampang.
Meanwhile, Zulkifly said the disposal of Wisma AmanahRaya will have only a slight impact on its financial year ending Dec 31, 2016 (FY16) results as it will continue enhancing assets in order to obtain higher rental rates.
“Our building on Jalan Semantan, which is rented out to HELP University, will give us full year contribution next year. We just rented it out to them for the last four months,” he said.
Upon completion of the disposal by end-2015 and after acquiring the two new assets, AmanahRaya REIT will have 14 assets in its portfolio with a total value of RM1.1 billion.