Sunway REIT buys land from parent for Sunway Carnival mall extension

KUALA LUMPUR (June 20): Sunway Real Estate Investment Trust (REIT) has bought a tract of land measuring 143,225 sq ft (13,306 sq m) adjacent to its Sunway Carnival Shopping Mall in mainland Penang from its parent Sunway Bhd, for RM17.2 million cash.

In a filing with Bursa Malaysia today, the trust's manager Sunway REIT Management Sdn Bhd said the land is to facilitate its plans to increase Sunway Carnival's net lettable area. The extension will comprise a nine-storey shopping mall that also includes a six-storey parking bay above the retail space, and one floor for parking in the basement.

Sunway REIT had already signed the sale and purchase agreement earlier today, it said, with the land owner Commercial Parade Sdn Bhd — which is a wholly-owned subsidiary of Sunway. The 99-year leasehold land, located in Seberang Perai, is set to expire on Oct 21, 2092 and makes up 0.27% of Sunway REIT's total asset value of RM6.45 billion.

The trust said it expects the mall extension to enhance its earnings in the future, and thus create value for its unit holders "given Sunway REIT's proven track record".

Firstly, Sunway REIT gets to meet larger retail space requirements that international and regional retailers seek. It will also allow the trust to enhance its tenant mix, reduce the impact of economic cycles on overall rental income, and continually meet discerning shoppers' lifestyle, the REIT said.

Sunway REIT said the plan to enlarge Sunway Carnival also gives it an edge over the competition and will allow it to stay relevant to consumer preferences and the ever-evolving market trends.

The land's purchase consideration will be funded through its existing debt financing, Sunway REIT said. Up to March 31, the trust had net borrowings of RM2.08 billion, after deducting the RM82.26 million cash available. The net debt is equivalent to 0.52 times its unitholders' funds of RM3.998 billion.

Sunway REIT expects to complete the acquisition by the second half of this year. One of the authorities it needs approval from is Securities Commission Malaysia (SC), for the waiver to Clause 8.44(b) and (c) of the REIT Guidelines. By right, a fund is not permitted to conduct property development activities and acquisition of vacant land.

"Application to the SC for the proposed waiver is expected to be submitted within one month from the date of this announcement (June 20)," said Sunway REIT.

As at noon break, Sunway REIT was up by two sen or 1.24% to settle at RM1.63, bringing its market capitalisation to RM4.8 billion. Its 12-month historical distribution per unit yielded 5.82%. — theedgemarkets.com