KIP REIT to acquire Setapak Central Mall for RM435m, plans unit placement to fund deal

PETALING JAYA (April 28): KIP Real Estate Investment Trust (REIT) has entered into a conditional sale and purchase agreement (SPA) to acquire Setapak Central Mall in Setapak, Kuala Lumpur, from Festiva Mall Sdn Bhd — a wholly-owned subsidiary of Singapore-listed Frasers Property Ltd — for a cash consideration of RM435 million.

According to its Bursa Malaysia announcement on Monday, the proposed acquisition involves a three-storey purpose-built shopping mall with a basement carpark situated at the intersection of Jalan Genting Kelang and Jalan Taman Ibu Kota, approximately 10km northeast of KL city centre. 

The mall has a net lettable area of approximately 514,777 sq ft across 228 tenancies, and recorded an occupancy rate of 99.89% as at Feb 28.

The mall, approximately 15 years old, holds a leasehold tenure of 99 years expiring on Nov 20, 2106, and carries a GreenRE Bronze certification. 

It is valued at RM435 million as appraised by CBRE WTW Valuation & Advisory Sdn Bhd on March 9.

Funding via placement

To partly fund the acquisition, KIP REIT proposes to place out up to 220 million new units — representing approximately 22.95% of existing units in issue — at an indicative issue price of RM0.84 per unit, expected to raise gross proceeds of approximately RM184.8 million. 

The balance of RM258.2 million will be funded through bank borrowings, implying a 40.6% equity and 59.4% debt funding mix.

Of the placement units, up to 40 million units are earmarked for KIP REIT's two substantial unitholders — Datuk Ong Choo Meng (30 million units) and Datuk Ong Kook Liong (10 million units) — who have provided irrevocable undertakings to subscribe. 

The remaining up to 180 million units will be placed out to independent investors.

Portfolio impact

The proposed acquisition will expand KIP REIT's total property value by approximately 26.1%, from RM1.66 billion to RM2.10 billion. 

Upon completion, Setapak Central Mall will constitute approximately 20.7% of KIP REIT's total property assets by value, making it the single largest asset in the portfolio.

KIP REIT's existing portfolio comprises 12 retail malls and hypermarkets across Malaysia, together with six industrial properties in Pulau Indah, Selangor; Cheras, KL; Pasir Gudang, Johor; and Bintulu, Sarawak.

The gearing ratio is expected to rise to approximately 42.85% following completion, from the current 38.79%, while the pro forma DPU — based on the assumption that the acquisition was completed on July 1, 2024 — is estimated at 5.21 sen, compared with a base DPU of 4.03 sen.

Pending approvals and risks

The proposals remain subject to unitholder approval at a unitholders' meeting to be convened, as well as Bursa Malaysia Securities Bhd's approval for the listing of placement units, approval from the Land Executive Committee of the Federal Territory of KL, and where required, a no-objection letter from the Ministry of Economy.

One disclosed risk involves an ongoing dispute between the vendor and Badan Pengurusan Bersama Zetapark over maintenance charges and sinking fund contributions, with a court appeal fixed for disposal on June 24. 

The SPA includes safeguards, including a RM10 million retention sum and an indemnity from Frasers Property (Singapore) Pte Ltd of up to RM15.1 million pending resolution of the dispute.

Barring unforeseen circumstances, the proposals are expected to be completed in the fourth quarter of 2026. UOB Kay Hian (M) Sdn Bhd has been appointed as principal adviser and placement agent.

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