MQREIT: No plans to go into property development yet

KUALA LUMPUR (Dec 8): MRCB Quill Management Sdn Bhd, the manager of MRCB-Quill Real Estate Investment Trust (MQREIT), says it has no plans to embark on property development activities as yet, despite the proposed liberalisation of the REIT guidelines by the Securities Commission Malaysia (SC) in July.

To recap, the SC had released a consultation paper seeking public feedback on proposed enhancements of the REITs guidelines, which included a proposal for REITs to acquire vacant land and also undertake property development subject to a cap of 15% of their total asset value.

However, MRCB Quill chief executive officer Yong Su-Lin said that such activities would not be on the cards for MQREIT for the moment.

“At this point, we are not looking at anything. But if we do come across anything, we will take into consideration the period that we need to build that building, versus what the returns are to the unitholders, whether their returns would be compromised,” she told reporters at a news conference in conjunction with the group’s extraordinary general meeting (EGM) yesterday.

MRCB Quill chairman Tan Sri Saw Choo Boon said MQREIT will be sticking to its core competency of managing properties in its portfolio.

“There are many construction [and development] companies around. It has to be a very good proposition before we would consider it,” he said.

Among the 10 properties under the group’s management are Quill Building 1 and Quill Building 4 in Cyberjaya, which houses the offices of courier giant DHL, the Quill Building 2 which houses HSBC’s data processing office in Cyberjaya, as well as Wisma Technip in Kuala Lumpur.

At the group’s EGM yesterday, its unitholders approved the REIT’s proposed acquisition of its 11th property, Menara Shell in Kuala Lumpur, for RM640 million, as well as its placements to fund the acquisition.

The addition of Menara Shell will bring MQREIT’s total asset value from RM1.6 billion to RM2.27 billion by the end of the year, pushing it up to the sixth-largest listed REIT in Malaysia from eighth position previously.

On whether the group would consider injecting Menara Celcom in Petaling Jaya, which is currently being constructed by one of MQREIT’s two sponsors, Malaysian Resources Corp Bhd (MRCB), Yong said the REIT will look into the potential of the exercise.

“MRCB did tell us that Menara Celcom in PJ is under construction and is targeted to be completed by [the] end of next year or early 2018. So once the building is ready and information is available, as a REIT, we will look at that asset.

The Edge weekly reported last month that The Quill Group of Companies, which is the other sponsor of MQREIT, is seeking buyers for QUILL 6, a 24-storey office building which serves as the headquarters of HSBC Bank Malaysia Bhd.

On whether the group would consider injecting QUILL 6, which is located in Lebuh Ampang, into MQREIT, Yong said she couldn’t comment at this juncture.

“Quill has given us some information. At the moment, we are still looking at it, because the REIT does have the right [of first refusal] from our sponsors Quill and MRCB. The decision to buy is still dependent on management and the board.

“So until we have done our analysis, it is very hard for us to comment at this point of time,” she said.

As for the outlook for the property market next year, Saw said it will still be challenging.

“Location is important. However, given the injection of new supply [of offices] and challenges the economy is facing, we will face some challenges in the property market [going forward],” he said.

MQREIT units settled unchanged at RM1.27 yesterday, valuing the REIT at RM839.95 million.

This article first appeared in The Edge Financial Daily, on Dec 8, 2016. Subscribe to The Edge Financial Daily here.