KLCCP sees RM100m annual revenue from Lot C

KUALA LUMPUR: KLCC Property Holdings Bhd (KLCCP) expects to see an additional RM100 million a year in revenue from its Lot C development from the next financial year.

"It will add a net lettable area [NLA] of 840,000 sq ft of office and 140,000 sq ft of retail space. In terms of revenue, we expect some RM100 million a year when [Lot C] is fully tenanted," said Hashim Wahir, KLCC Group of Companies CEO, after the company's AGM on Wednesday, July 20.

Lot C, an extension of KLCCP's Suria KLCC mall, comprises an office tower to be known as Petronas Tower 3 and a retail portion. Petroliam Nasional Bhd (Petronas) will be master lessee of the office tower and is committing to a 15-year lease.

The retail portion will house up to 34 retail tenants, with some due to open for business at the new tower as early as September. It will be managed by Suria KLCC.

"About 22 tenants, which include Chanel and Cartier, have signed agreements. The concourse floor will be for banks and services," said Hashim, adding that KLCCP's next mixed development project will be on Lot D1, next to the Mandarin Oriental Hotel, spanning 1.4 acres.

The company has started the RM30 million to RM40 million refurbishment of Kompleks Dayabumi, which has a NLA of 650,000 sq ft, he said, and it is looking to redevelop City Point, a six-storey office cum retail annex of Dayabumi, after 2012.

Maybank Investment Bank said in a recent note that the redevelopment of City Point is expected to raise Dayabumi's total NLA by 45%. However, it noted that contribution from City Point will only come in after 2015.

Meanwhile, Hashim said there are no plans to acquire existing properties in the vicinity of KLCC — like Traders Hotel, for example, which enjoys a good occupancy rate — and inject them into KLCCP's portfolio.

The portfolio includes the Petronas Twin Towers, Suria KLCC, Mandarin Oriental Hotel, Menara Exxon Mobil and Menara Maxis. These carry an estimated book value of RM5.29 billion. Menara Exxon Mobil recently renewed its tenancy agreement with KLCCP, Hashim said. Such agreements are usually for 15 years and are subject to a rate review every three years.

Hashim said the company expects to continue paying more than 40% of its profit as dividends. However, analysts have commented that despite KLCCP's strong asset quality and Petronas' backing, its dividend yield is relatively low at just over 3% compared with the dividend yield of other large-cap real estate investment trusts of over 6%.

Hashim, however, has another take on the matter: "KLCCP is like a government securities type of investment, you are guaranteed [dividends] no matter what happens."

KLCCP's book value as at March 31, 2011 was RM6.32 per share. This compares to its closing price of RM3.33 on Wednesday.

For the FY11 ended March 31 KLCCP saw a net profit of RM919.36 million, down 18% from RM1.12 billion a year ago. Revenue rose 5% to RM926.38 million.

KLCCP recently proposed to change its financial year to correspond with the calendar year, rather than ending March 31 as is the case now.