AmFIRST to acquire Mydin store in Penang

KUALA LUMPUR (April 14): AmFIRST Real Estate Investment Trust (AmFIRST REIT) is expected to make its first investment in the north through the acquisition of a retail asset in Seberang Prai, Penang — owned by established multi-format retailer Mydin Mohamed Holdings Bhd — for an estimated RM250 million.

It is understood that the store, located in Jalan Baru, Bukit Mertajam, is currently at the tail-end of construction and is likely to commence operations in the third quarter of this year. An online article had indicated that this store will be a Mydin Wholesale Hypermarket.

A source told The Edge Financial Daily that the purchase by AmFIRST is a move by the REIT to balance its portfolio of commercial assets which is made up predominantly of office space.

“AmFIRST may look for other similar deals,” the source said referring to this retail asset which is under construction.

This purchase, should it materialise, will bring AmFIRST’s assets under management to an estimated RM1.57 billion from RM1.32 billion as Dec 31, 2014. The parties may sign a deal as early as this week.

The agreement for the mall with some one million sq ft in gross floor area will be a sale-and-leaseback with Mydin signing a long-term lease of over 20 years with the new owner. It is understood that Mydin will operate a hypermarket as well as manage the mall. The Edge Financial Daily was unable to determine the rental that AmFIRST will be paid.   

Generally, the yield derived by retail assets is between 5.5% and 6.5%, and the yield provided by this new asset is expected to be within this range.

AmFIRST’s senior vice-president finance Panneer Selvam Narayanan could not be reached while Mydin managing director Ameer Ali Mydin declined to comment when contacted.

According to a source, AmFIRST will finance the purchase via borrowings. As at Dec 31 last year AmFIRST’s borrowings were at RM491 million and its gearing was at 36.2%.

The purchase of Mydin Wholesale Hypermarket would make it the second retail asset to be held by the trust after The Summit in Subang USJ in Selangor.

The commercial assets held by the group are predominantly office buildings. Bangunan AmBank Group, AmBank Group Leadership Centre in Kuala Lumpur and Prima 10 in Cyberjaya enjoy full occupancy.

Other buildings held by the trust include Menara AmFIRST and Wisma AmFIRST in Petaling Jaya, The Summit Subang Office and Hotel, Prima 9 in Cyberjaya and Kompleks Tun Sri Lanang in Melaka which is also known as Jaya 99. The overall occupancy of the portfolio was 84.7% as at Dec 31, 2014.  

In the nine months ended December 2014 AmFirst’s net income was RM30.23 million, down from RM37.64 million in the previous corresponding period. This was achieved on the back of a lower gross revenue of RM81.2 million from RM84.48 million a year ago.

The decline was attributed to lower occupancy rate at The Summit Retail in Subang USJ at 74% from 87% earlier as the mall was undergoing refurbishment and had relocated some tenants. This refurbishment and rebranding exercise of The Summit Retail is expected to be completed in the first quarter of 2016.

AmFIRST also saw property expenses in the nine months increase by 10.2% to RM29.96 million as a result of the hike in electricity tariff and annual assessment in Kuala Lumpur effective from Jan 1 last year.

This article first appeared in The Edge Financial Daily, on April 14, 2015.