Tropicana to dispose of mall, office block

KUALA LUMPUR: CapitaMalls Malaysia Trust (CMMT) is looking to acquire Tropicana City Mall and an office block from property developer Tropicana Corp Bhd, according to sources.

The price is expected to be between RM550 million and RM650 million for both the mall and office block.

This will be the fifth mall to be acquired by CMMT, which is substantially controlled by Singapore-based CMMT Investment Ltd.

CMMT is managed by CapitaMalls Malaysia REIT Management Sdn Bhd, which in turn is a joint venture between CapitaMalls Asia Ltd and Malaysian Industrial Development Finance Bhd.

Both CMMT and Tropicana declined to comment on the transaction.

A spokesman for CapitaMalls Malaysia REIT Management only said as part of normal business development, it regularly holds discussions with other parties and evaluates possible opportunities.

"As and when there are any material developments, we will make the appropriate announcements."

According to Tropicana's latest annual report, the three-storey shopping mall was completed in 2008, with 436,447 sq ft of net lettable area (NLA) and its value stood at RM441.44 million as at September 2012.

The adjacent 12-storey office tower was completed two years later and has 101,246 sq ft of NLA valued at RM61.68 million.

At current prices, the mall is valued at RM1,011 per sq ft (psf) while the office block is valued at RM609 psf.

Assuming the entire transaction is done at between RM550 million and RM650 million, the valuations will be higher.

An analyst said the proceeds from the disposal will go directly into the books of Tropicana and enhance its balance sheet.

A property consultant said the disposal of the shopping mall will benefit Tropicana as CMMT is an experienced retail mall operator.

"There is keen competition among malls in the area as there are four others in the vicinity and at least another mall coming up," said the consultant.  

An analyst said it is possible for CMMT to acquire the Tropicana City Mall and office space as it has been looking around to acquire more shopping malls.

"The acquisition may not be entirely funded by CMMT," she said.

On the gearing ratio of CMMT upon the possible acquisition, the analyst said: "The current gearing ratio is still below its 50% benchmark."

The investment trust company pared down its gearing ratio to 28.2% as at end-July, edging down slightly from 28.8% in the first quarter this year due to the larger asset base.

Another CMMT analyst said the gearing ratio is not an issue for the company, as it is possible to propose a rights issue to pare down borrowings.

On the acquisition move, he said this depends on the valuation of assets.

"We are not sure if the yield [of the mall] is good. If it is a decent yield equity position, it should be a positive move."

The analyst said with CMMT's experience in the market, it will improve the yield if it is low.

For the first six months ended June, CMMT registered a net profit of RM150.1 million on a turnover of RM148.94 million.

For the corresponding period last year, its net profit was RM167.26 million on a turnover of RM142.78 million.  

It attributed the increase in revenue to higher gross rental income on the back of higher rental rates from new and renewed leases.

During an AGM in April, shareholders were given a mandate for CMMT to issue new units provided they do not exceed 353.6 million units or 20% of the existing fund size of the real estate investment trust (REIT). The company is still in the midst of completing the exercise.

CMMT is a REIT that invests in income producing real estate, primarily retail assets in Malaysia.

Its shopping mall portfolio comprises Gurney Plaza in Penang, Sungai Wang Plaza in Kuala Lumpur, The Mines in Seri Kembangan, Selangor and East Coast Mall in Kuantan, Pahang.

This article first appeared in The Edge Financial Daily, on August 20, 2013.



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