WCT paving the way to its first REIT

SHAH ALAM: WCT Holdings Bhd wants to have at least four shopping malls and two hotels in its portfolio by the first quarter of 2018, as it explores the possibility of setting up its first real estate investment trust (REIT) to raise recurring income.

WCT’s upcoming mall projects include Gateway@ klia2 with 350,000 sq ft of net lettable area (NLA), which is on track to open in May, a mall in Taman Yarl near Overseas Union Garden, Kuala Lumpur (1.7 million sq ft of NLA) and Paradigm Johor Baru in Kemayan City (1.3 million sq ft of NLA), which is slated to open in mid-2016.

The three properties will bring the group’s total NLA to five million sq ft, which director Kenny Wong Yik Kae said is “sizeable”.

“Of course we still have to work hard to ensure that we are ready for a REIT,” he told reporters after the group extraordinary general meeting  yesterday.

Currently, its recurring income portfolio consists of its maiden retail project, Bukit Tinggi Shopping Centre in Klang and Paradigm Mall in Petaling Jaya, with a NLA of 1.7 million sq ft.

For comparison, IGB REIT’s Mid Valley Megamall and The Gardens Mall have a total NLA of 2.5 million to three million sq ft.

However, Wong acknowledged that WCT is still relatively new in owning and operating malls. “We are less than two years [in the mall segment], so we have a market share to fight for.”

The group’s corporate and finance head Chong Kian Fah said the share of operating profit from its recurring income segment is expected to grow to between 30% and 35% by early 2018 from 15% currently, with the opening of the new Paradigm Mall KL in OUG.  About 15% of the group’s net profit comes from its recurring income business, 30% from property development and the rest from construction.

For construction, the group’s outstanding order book as at Sept 31, 2013 stood at RM2.7 billion, said Chong. This includes civil works at the Tun Razak Exchange in Kuala Lumpur and the Ministry of Interior office in Doha, Qatar, he said.

WCT is tendering up to RM5 billion of construction jobs, of which the majority are in Malaysia, Wong said.  

On its property business, he said WCT plans to launch residential projects this year.

“Every year, we try to launch about RM1 billion worth of property projects and we target to hit about RM700 million to RM800 million sales,” said Wong.

He expects the Gateway@klia2 project to generate annual revenue of RM70 to RM80 million to offset losses for the first three years of operations due to depreciation and project costs of about RM600 million.

“Hopefully we will start to make profits from the third year [of operations] onwards, with a bottom line of about RM15 million to RM20 million per year,” Wong said.

On the possible delay of klia2, he said everything is governed under the concession arrangement.

“But we are one of the affected parties in the sense that we are the builder of Gateway@klia2. Our mall has been ready since July and we are waiting for the official opening of the main terminal,” he said.

Chong said the company’s target is to achieve a tenancy of 85% to 90% when Gateway@klia2 opens. To date, it has achieved 80%.


This article first appeared in The Edge Financial Daily, on February 12, 2014.