Quill 6 close to being sold, will not be injected into MQREIT

QUILL 6, a 24-storey office building on Lebuh Ampang, Kuala Lumpur — where HSBC Bank Malaysia Bhd has its headquarters — will not be injected into MRCB-Quill Real Estate Investment Trust (MQREIT) as its owner, the Quill Group of Companies, is seeking buyers for the property, according to sources.

They say speculation is rife in the real estate fraternity that the group is close to finalising a RM190 million sale — below the group’s asking price of RM220 million.

Industry sources tell The Edge that MQREIT, which has the right of first refusal, is not keen on purchasing the asset. MQREIT was previously listed as Quill Capita Trust before its tie-up with Malaysian Resources Corp Bhd (MRCB). As a result, MQREIT has two sponsors — Quill Group and MRCB.

One source says MQREIT’s concerns about Quill 6 could be similar to those raised by other parties who had decided not to pursue the purchase of the building, such as the possibility of the lessee, HSBC Bank, vacating the premises at an earlier date and the limited parking space.

“The number of parking bays may be sufficient for a single tenant. But in the event that HSBC Bank decides to vacate the premises, the building may have to take in multiple tenants, which may give rise to parking problems,” the source adds.

Meanwhile, valuers and real estate agents contacted by The Edge confirm that the building has been on the market for several months now and viewed by several potential buyers.

The Grade A, green building is an annex to the older 19-storey HSBC Bank block and located opposite Wisma Hamzah Kwong Hing.

At press time, The Edge had yet to receive a response from Datuk Dr Jennifer Low, co-founder and group managing director of the Quill Group. The group, which is also involved in retail and healthcare, is helmed by Low and its group executive director, Datuk Michael Ong. The business model of its property venture is to design, build, lease and divest. Low and Ong also hold a combined 17.7% stake in MQREIT.

According to a fact sheet on Quill 6 seen by The Edge, the building sits on 0.297 acre or 12,938 sq ft of freehold land. It has a four-level basement and a net lettable area (NLA) of 185,354 sq ft. The building, with a total built-up of 265,000 sq ft, offers 92 parking bays.

The gross rent this year, including the parking space, is RM6.67 psf and is expected to be RM7.48 psf in 2019.

It is understood that the 15-year tenancy agreement with HSBC Bank will expire in 2022. Sources say the bank has the option to extend the tenancy for another two terms of three years each until 2028.

The Quill Group says it currently earns a net yield of 6.1% from the property, with the potential to increase it to 6.92% by 2019.

In 2007, it was reported that Quill 6 cost RM70 million to build, excluding the cost of the land, and that HSBC Bank was signing a 15-year lease. It was also reported that the cost of construction was RM100 million.

Sources say the actual NLA of the building, according to Malaysian valuation standards, is 155,000 sq ft, thus the property is priced at RM1,420 psf, based on the asking price of RM220 million.

At this price, it is similar to what Kumpulan Wang Persaraan (Diperbadankan) paid to acquire the Integra Tower @ The Intermark in Kuala Lumpur last year. The pension fund had bought the 760,715 sq ft office building with 850 parking bays from a private real estate fund managed by BlackRock for RM1.065 billion. Industry experts say that including the profit guarantee, the deal would have worked out to RM1,360 psf.

Currently, MQREIT owns six properties in Cyberjaya, Selangor — Quill Building 2, which is occupied by HSBC Bank; Quill Building 1, Quill Building 4 and Quill Building 8, which are tenanted by DHL Express; Quill Building 3, which is tenanted by BMW; and Quill Building 5, which is occupied by IBM Malaysia.

Other assets include Wisma Technip, part of Plaza Mont’Kiara and Platinum Sentral — all located in Kuala Lumpur — as well as the Tesco building in Jelutong, Penang. A soon-to-be-added asset is Menara Shell in Kuala Lumpur.

The Quill Group recently sold the 10-storey Quill 18 in Cyberjaya to Pelaburan Hartanah Bhd for RM450 million.

The group is also involved in BMW and Rolls-Royce dealerships through Quill Automobiles Sdn Bhd, healthcare through Quill Orthopaedic Specialist Centre and retail via Quill City Mall in Jalan Sultan Ismail, Kuala Lumpur.

This article first appeared in The Edge Malaysia on Nov 7, 2016. Subscribe here for your personal copy.