CapitaLand going ahead with 2nd Malaysian Reit

August 21, 2008
CapitaLand going ahead with 2nd Malaysian Reit
Latest offering will comprise 3 malls worth RM2b: chief investment
officer
By PAULINE NG IN KUALA LUMPUR

CAPITALAND will list its second Malaysian real estate investment
trust (Reit) this year, barring unfavourable market conditions, the
company's chief investment officer Kee Teck Koon said yesterday.

The Reit will initially comprise three shopping malls worth RM2
billion (S$849 million), he said. CapitaLand will gauge market
sentiment to ensure the launch is timed 'so it can capture the
imagination of investors'.

At a news briefing after the topping-out ceremony for Kuala Lumpur's
Tower D, which is owned jointly by CapitaLand and Malaysia's Quill
Group, Mr Kee said that the listing plan for the second Reit has not
changed. 'The intention is very clear,' he said.

Penang's Gurney Plaza and two malls in the Klang Valley - Mines
Shopping Fair and Sungei Wang Plaza - will form the Reit's initial
core assets. Mr Kee would not say who CapitaLand's local partner in
the Reit would be.

The company's reservations about market sentiment are warranted. The
last three listings on Bursa Malaysia have debuted below their offer
price. In the latest, shares of Perwaja Steel yesterday opened 10 sen
short of the RM2.90 offer price before closing at RM2.48.

Although Malaysian Reits are seen as defensive, interest among
foreign investors has been dampened by relatively high withholding
tax.

Still, some investors continue to be attracted to local real estate
because its comparative pricing ought to allow for greater capital
appreciation down the road.

For example, the Malaysia Commercial Development Fund (MCDF) - a
US$270 million closed-end private equity investment fund launched
jointly by CapitaLand and Maybank in March 2007 with a gross
development value of US$1 billion - is fully invested, CapitaLand
Commercial chief executive Wen Khai Meng said yesterday.

CapitaLand 'may consider subsequent funds' focused on residential,
commercial and retail segments, he said.

MCDF provides a pipeline of projects to be injected into Quill Capita
Trust - a commercial Reit jointly listed by Quill and CapitaLand in
January 2007 with an initial fund size of RM276 million, which has
grown to over RM800 million.

Tower D in the KL Sentral area will allow them to further leverage on
strong demand for commercial property and is likely to be injected
into the Reit.

To be completed by January, the Grade A building, which has a net
lettable area of 355,000 square feet, has a confirmed tenancy rate of
65 per cent and is expected to be fully tenanted by March.

The 29-storey office block with a six-storey retail podium has
attracted several multinational and big local companies as tenants,
said Quill director Michael Ong.

Rental rates are around RM6 to RM7 per square foot and a number of
tenants have signed three-plus-three-year leases, he said.

CapitaLand, through MCDF, owns 40 per cent of Tower D developer Quill
Realty.