- Maiden foray into prime industrial property in a strategic location
- Long tenure lease structure to enhance stability of income stream
- Portfolio value increases by 4% to RM6.52 billion
Bandar Sunway, 11 January 2017 – Sunway REIT Management Sdn. Bhd., the Manager of Sunway Real Estate Investment Trust (“Sunway REIT”), is pleased to announce that RHB Trustees Berhad, as trustee of Sunway REIT (“Trustee”), has entered into a conditional sale and purchase agreement (“SPA”) with Champion Edge Sdn. Bhd. to acquire an industrial property at Section 23, Shah Alam, Selangor for a total purchase consideration of RM91.5 million.
Property Description
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Property description |
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A two–storey office with an annexed one-storey factory with mezzanine floor a three-storey office with an annex one-storey warehouse and an integral two-storey office with a two-storey factory cum warehouse with an adjoining M&E building and other ancillary buildings (“The Property”)
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| Title details | : | H.S.(D) 132499, Lot No. PT 65, Section 23, Bandar Shah Alam, Daerah Petaling, Negeri Selangor Darul Ehsan
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| Tenure | : | Leasehold – 99 years (expiring 30 May 2098) |
| Land area | : | 62,587.34 square meters |
| Category of Land Use | : | Industrial |
| Purchase price (RM million)
| : | 91.5 |
The Property is strategically located in the prime industrial hub of Shah Alam, Selangor and is predominantly occupied by established multinationals, logistics and manufacturing companies. The Property is easily accessible to the Kuala Lumpur city centre through major roads and expressways such as Federal Highway, ELITE Highway and Shah Alam Expressway (“KESAS”) as well as close proximity to Kuala Lumpur International Airport and Port Klang, the largest sea gateway in the country.
The lease of the Property is structured on a triple-net-lease basis (where all costs and outgoings in relation to the Property are borne by the Lessee) through a novation of an existing lease agreement. The lease has a remaining duration of approximately eighteen (18) years which shall expire on 31 December 2034 (“Initial Term”).
The initial term will automatically be extended for one further term of five (5) years (“Renewal Term”) on the same terms and conditions. The Lessee has the option to notify the Lessor in writing, not less than 18 months prior to the end of the Initial Term if they do not wish to renew the lease. The renewal term may also be extended to more than five (5) years to a tenure of not exceeding fifteen (15) years.
Based on the initial year’s annual rental of RM5.6 million, this translates into an initial acquisition yield (based on net property income) of 6.12%. Thereafter, the net property yield is expected to increase to 6.73% upon the next rent review in 2019.
Sunway REIT’s property value will increase by 1.4% to RM6.52 billion, from RM6.43 billion as at 30 June 2016, upon the completion of the acquisition of the Property. The Property will be classified alongside with the defensive income portion of Sunway REIT’s asset portfolio as “Others” segment.
The asset portfolio composition for the “Others” segment will increase from 5.0% to 6.4% upon completion of the proposed acquisition based on property value as at 30 June 2016. The proposed acquisition will be fully funded by its existing debt programme.
In line with Sunway REIT’s investment strategy, the proposed acquisition is part of the diversification strategy to strengthen income stability. In 2015, Sunway REIT has expanded its investment strategy to invest in long tenure stable income producing assets such as industrial properties, logistics warehouses, data centres amongst others.
These assets shall not exceed 15% of total asset value. Sunway REIT will remain retail focused within a diversified asset portfolio spanning across key high growth states in Malaysia.
Dato’ Jeffrey Ng, CEO of Sunway REIT Management Sdn. Bhd., said, “We are pleased to announce that Sunway REIT is making its maiden foray into the industrial property sub-sector. Under the prevailing challenging operating environment, investment in this property offers stable income stream regardless of economic and market condition.
The proposed acquisition is backed by a long lease and tenanted by a reputable tenant, hence, able to offer Sunway REIT a resilient rental income stream and contribute positively to its earnings and distributable income.”
He added, “Sunway REIT’s asset will increase to 15 upon the completion of the proposed acquisition and reinforces its position as the second largest REIT in Malaysia with a property value of RM6.52 billion. We are on track to meet our target of RM7 billion by FY2017.”
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