YTL Group restructures property holdings

KUALA LUMPUR: The YTL group further restructured its property portfolio with the injection of a slew of assets into Starhill Real Estate Investment Trust (Starhill REIT), making it the first full-fledged hospitality REIT in the country.

In a filing with Bursa Malaysia on Tuesday, Dec 14, YTL Corp Bhd announced its proposal to dispose of four assets comprising hotels and resorts to Starhill REIT for a total indicative price RM472 million. Starhill REIT will pay for the assets with a combination of cash and Starhill Global Real Estate Investment Trust (Starhill Global REIT) convertible preference units (CPU) at S$1 (RM2.40) per CPU.

It said the properties involved are Cameron Highlands Resort (valued at RM50 million), Hilton Niseko in Hokkaido, Japan (RM222 million), Vistana Penang (RM100 million) and Vistana Kuala Lumpur (RM100 million).  

The vendors of the four properties are either direct or indirect subsidiaries of YTL Corp, namely YTL Land Sdn Bhd, Niseko Village KK, Business & Budget Hotels (Penang) Sdn Bhd and Prisma Tulin Sdn Bhd, which inked four separate conditional sale and purchase agreements on Tuesday with Mayban Trustees Bhd (as trustee for Starhill REIT).

According to the filing, the Bursa-listed Starhill REIT would lease the properties to the respective vendors/lessees for an initial lease period of 15 years with an option granted to renew for another 15 years. The lease payments for the properties are fixed and include a 5% step-up rate every five years.

YTL Corp said the disposals would enable the group to unlock and realise the fair value of the properties while ensuring the on-going business operations of the lessees were not disrupted and that the productive use of the properties was retained through lease arrangements.

"Upon conversion of the CPUs into units in Starhill Global REIT, YTL Corp's unit holdings will increase," YTL Corp added.

The move will position Starhill REIT as a hospitality REIT, something the group has been working on since early this year. YTL Corp owns 63.4% of Starhill REIT.

This is the second corporate exercise the group has undertaken recently. Last month, YTL Corp injected six parcels of land in Malaysia and Singapore into YTL Land & Development Bhd. YTL Land & Development entered into an agreement in a move by YTL Corp to park all its property development and projects under one roof.

The reorganisation involved land in Brickfields, Genting Highlands, Jalan Stonor, Jalan U-Thant, and Orchard Boulevard and Sentosa Cove in Singapore. Also included were six parcels of agricultural land in Bidor, Perak.

The acquisitions, amounting to RM476.05 million, have resulted in YTL Land & Development owning prime land in both Malaysia and Singapore.

The latest move leaves an effectively leaner YTL Corp to focus on its core businesses of ownership and management of regulated utilities and other infrastructural assets through YTL Power International Bhd, YTL Cement Bhd, YTL Land & Development, YTL e-Solutions Bhd and YTL Communications Sdn Bhd (60%-owned by YTL Power) among others.

YTL Corp said that the proceeds from the disposal of its hospitality related properties would be used by the respective vendors, as the case might be, for repayment of bank borrowings, payment of cumulative preference share dividends, redemption of preference shares, payment of special dividends and general working capital.

It also said the proposed disposal was expected to give rise to an estimated net gain on disposal of about RM15.54 million, which would translate into an increase in earnings per share by 0.87 sen. The figure is based on the weighted average number of ordinary shares in issue of 1.79 billion during FY2010 ended June 30.

The proposed disposals are expected to be completed by the second quarter of next year. The Singapore-based Starhill Global REIT, which is listed on the Singapore Exchange has 1.94 billion units in issue as at Nov 30.

Among the largest companies listed on Bursa Malaysia, YTL Corp's net profit in 1QFY2011 ended Sept 30, rose 34.4% year-on-year to RM278.9 million from RM207.51 million mainly due to the better performance of its multi-utilities business segment and higher profit recognition from offshore property development projects.

YTL Corp said it expects to achieve a satisfactory performance for FY2011 ending June 30, after taking into consideration the group's current level of operations and current market conditions. Its net assets per share stood at RM5.35 as at Sept 30.

Shares of YTL Corp rose 21 sen to close at RM8.49 on Tuesday, with turnover of 433,600 units. The counter has risen 16.3% year-to-date.