Al-‘Aqar Healthcare REIT to renew five lease agreements with KPJ Healthcare’s units

• The agreements are for the leasing of KPJ Perdana Specialist Hospital to Perdana Specialist Hospital Sdn Bhd; KPJ Kajang Specialist Hospital to Kajang Specialist Hospital Sdn Bhd; KPJ Sentosa KL Specialist Hospital to Sentosa Medical Centre Sdn Bhd; Kedah Medical Centre to Kedah Medical Centre Sdn Bhd; and Kuantan Care and Wellness Centre (Kuantan CWC) to Kuantan Wellness Center Sdn Bhd.

KUALA LUMPUR (June 27): Al-‘Aqar Healthcare REIT (Al-‘Aqar REIT) plans to renew five lease agreements between three- and 15 years with the subsidiaries and associated company of KPJ Healthcare Bhd, the company with which it shares a common major shareholder — Johor Corp.

The agreements are for the leasing of KPJ Perdana Specialist Hospital to Perdana Specialist Hospital Sdn Bhd; KPJ Kajang Specialist Hospital to Kajang Specialist Hospital Sdn Bhd; KPJ Sentosa KL Specialist Hospital to Sentosa Medical Centre Sdn Bhd; Kedah Medical Centre to Kedah Medical Centre Sdn Bhd; and Kuantan Care and Wellness Centre (Kuantan CWC) to Kuantan Wellness Center Sdn Bhd.

The lease renewals for 15 years involve three hospitals — Kedah Medical Centre, KPJ Perdana Specialist Hospital and KPJ Kajang Specialist Hospital — and will start from Oct 1, 2023 till Sept 30, 2038, according to Al-‘Aqar Healthcare REIT’s manager, Damansara REIT Managers Sdn Bhd, in a bourse filing on Tuesday (June 27).

The lease renewals of the remaining two hospitals — KPJ Sentosa KL Specialist Hospital and Kuantan CWC — are for three years from Oct 1, 2023 to Sept 30, 2026.

The rental rate was negotiated between the parties, with total gross rental for the first year of the contractual term amounting to RM14.07 million, derived based on the following: (a) 6.25% of the open market value for  Kedah Medical Centre, KPJ Perdana Specialist Hospital and KPJ Kajang Specialist Hospital; and (b) 6.00% of the open market value for KPJ Sentosa KL Specialist Hospital and Kuantan CWC.

For the rental rate for the subsequent terms, with each term comprising three years, there will be an incremental increase of 2.00% for the second and third year of the rental term, which are arrived at after taking into consideration the average of the 10-year consumer price index year-on-year movement of 2.00%.

Due to the common major shareholder, the proposed lease renewals, expected to be completed on or before Oct 1, 2023, are deemed as related party transactions.

JCorp owns a direct 35.51% stake in KPJ, and an indirect 9.48% stake. In Al-‘Aqar REIT, JCorp holds an indirect 38.47% stake. KPJ also has a 2.44% direct stake in Al-‘Aqar REIT, with an indirect 32.05%.

On Tuesday, KPJ Healthcare’s share price settled four sen or 3.64% higher at RM1.14, valuing the group at RM5.16 billion. Al-‘Aqar REIT was up one sen or 0.8% at RM1.26, bringing it a market capitalisation of RM1.06 billion.