Al-Salam REIT to acquire Mydin in Terengganu for RM155m

KUALA LUMPUR (Oct 4): Al-Salam Real Estate Investment Trust (REIT), via its trustee Amanahraya Trustees Bhd, is planning to buy the Mydin hypermarket in Gong Badak, Terengganu, for RM155 million.

In a filing with Bursa Malaysia yesterday, Al-Salam REIT said Amanahraya had on Monday inked a conditional sale and purchase agreement with Mydin Wholesale Cash and Carry Sdn Bhd for the acquisition.

The purchase consideration and the expenses relating to the proposed acquisition will be fully funded via bank borrowings and/or debt financing to be secured by Al-Salam REIT.

The proposed buy is conditional upon the execution of a leaseback agreement with Mydin Mohamed Holdings Bhd (MMHB) for the hypermarket’s lease for 30 years on a triple net lease arrangement.

A triple net lease is a lease agreement on a property where the tenant or lessee agrees to pay all real estate taxes, building insurance, and maintenance on the property in addition to any normal fees expected under the agreement.

On completion of the proposed acquisition, the property will be leased to MMHB for 30 years with a 5% rental increment every two years.

The double-storey hypermarket, with 796 parking bays, is located at the northern development corridor of Kuala Terengganu, near the exit off the East Coast Highway 2.

Al-Salam REIT’s manager, Damansara REIT Managers Sdn Bhd, said the proposed buy is a good opportunity for the REIT to expand its portfolio of properties that could provide a stable and sustainable income stream.

Further, it said the triple net lease arrangement minimises Al-Salam REIT’s exposure to increases in property operating costs, and other property administrative activities. The proposed buy is expected to be completed in the first quarter of 2018.

A diversified Islamic REIT, Al-Salam REIT’s portfolio, primarily in Johor, includes Komtar JBCC, Menara Komtar, @Mart Kempas, 22 KFC and Pizza Hut restaurant outlets, five non-restaurant properties, and a college building. Its shares closed unchanged at RM1 yesterday, with a market capitalisation of RM585 million.

This article first appeared in The Edge Financial Daily, on Oct 4, 2017.

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