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COMMERCIAL PROPERTY | Tony Chua, Singapore

CapitaMalls Malaysia to acquire East Coast Mall for S$125.84mn

The mall, with occupancy rate of 97%, and with a 7.1% forecast property yield for 2011 seen to produce income and geographical diversification for CMMT portfolio.

CapitaMalls Malaysia REIT Management Sdn. Bhd. (“CMRM”), the manager of CapitaMalls Malaysia Trust (“CMMT”), is pleased to announce on Tuesday that AmTrustee Berhad, the trustee of CMMT, has entered into a conditional sale and purchase agreement on CMMT’s behalf to acquire East Coast Mall in Kuantan, Malaysia, for RM310.0 million (S$125.84mn). Including the acquisition fee and expenses, the total acquisition cost is about RM330.0 million. The mall has been independently valued at RM330.0 million.

East Coast Mall has a nearly-full occupancy rate of 97.0%, with a forecast property yield of about 7.1% for 2011. Based on CMMT’s closing price of RM1.17 on 13 June 2011, CMMT’s implied property yield for 2011 is about 6.4%. As such, this acquisition is yield-accretive to CMMT unitholders.

East Coast Mall is a four-storey shopping mall with one basement car park level and 1,170 car park lots, with a net lettable area (“NLA”) of more than 440,000 square feet (“sq ft”). Opened in April 2008, East Coast Mall is the newest shopping mall in the city. It is strategically located in the heart of Kuantan city centre and is part of a mixed development called Putra Square – which also comprises the 519-room Zenith Hotel and Sultan Ahmad Shah International Convention Centre, which has a seating capacity of 6,000 people. Due to its location in Putra Square, East Coast Mall enjoys shopper traffic from hotel guests and visitors to the Convention Centre. Kuantan is the capital and largest city of the state of Pahang, with a population of more than 600,000 people. It is a commercial centre that is widely considered as the social, economic and commercial hub for East Coast Peninsular Malaysia due to its strategic location. In addition to being the administrative and commercial capital of Pahang, Kuantan is also well-known for its beaches and has a thriving tourism industry.

CMRM intends to fund the acquisition through a combination of debt and equity, the latter of which will be raised via a proposed placement of up to 298,971,000 new CMMT units to parties to be identified, at a price to be determined by way of bookbuilding. The number of new units represents up to 20.0% of CMMT’s existing 1,494,859,000 units, as authorised by unitholders at the unitholders’ meeting on 10 March 2011.

The proposed acquisition of East Coast Mall and placement of new CMMT units are subject to the approvals of the Securities Commission of Malaysia and Bursa Malaysia Securities Berhad (“Bursa Securities”) for the proposed issuance of the new placement units, as well as the subsequent listing of and quotation for the new units on the Main Market of Bursa Securities.

The proposed acquisition and placement are expected to be completed by the last quarter of 2011.

Mr Kee Teck Koon, Chairman of CMRM, said, “With East Coast Mall strategically located in the heart of Kuantan city centre and part of the Putra Square development, this proposed acquisition provides CMMT the opportunity to penetrate into the retail sector in the East Coast of Peninsular Malaysia. It will enhance CMMT’s income and geographical diversifications, and further strengthen CMMT’s position as the largest “pure-play” shopping mall REIT in Malaysia.”

Ms Sharon Lim, CEO of CMRM, said, “East Coast Mall is an established modern family lifestyle mall. Given its market leadership in Kuantan, East Coast Mall has been able to attract a variety of established Malaysian and international retailers such as Carrefour, Padini, Parkson, Sony Centre, Golden Screen Cinemas and Starbucks, just to name a few. As such, East Coast Mall has become a popular destination among the people in Kuantan, and attracts a secondary catchment market from nearby towns in the neighbouring state of Terengganu.”

“Based on CMMT’s closing price of RM1.17 yesterday and loan-to-value ratio of 35.0%, this acquisition will benefit our unitholders as it will be yield-accretive. We intend to fund this acquisition partly through equity, which includes placing out new CMMT units. This placement will add to the number of CMMT units in circulation, increasing trading liquidity in our units. It will also enable CMMT to attract even more local and international institutional investors, enlarging our unitholder base.” 

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